Invest in Egypt

Invest In Egypt

Pharmaceuticals

Pharmaceuticals

Invest in Egypt

Contents
Pharmaceuticals: Sector Overview

Competitive Strengths and Capabilities

Sector Drivers

Leading Opportunities in a Dynamic Market

Pharmaceutical Outlook

opportunities

Strong Policy support

Success Stories

Pharmaceuticals

Invest in Egypt

Pharmaceuticals

Invest in Egypt

Pharmaceuticals

Overview
The pharmaceutical sector in Egypt is one of the oldest strategic sectors in the country,
founded in 1939 with the establishment of the Misr Company for Pharmaceutical
Industries.
The Egyptian pharmaceuticals and cosmetics sector is considered the largest in the
region with regards to growth capacity and expansion during the coming five years
compared to similar sectors in neighboring countries
The industry has enjoyed a period of considerable development in recent years. There is
a strong domestic production sector and, while the majority is destined for the domestic
market and imports play an important role, Egypt has emerged as a leading exporter of
pharmaceuticals to Arab, Asian and Eastern European markets. Public production,
represented by the state-owned holding company HOLDIPHARMA, accounts for around
one-tenth of sales by value and nearly two-tenths by volume.
Investments in Egypt's pharmaceutical industry currently stand at EGP 26 billion, with
the industry employing a total of 39,500 professional staff and production workers.
Large multinationals, including GlaxoSmithKline (GSK), Sanofi-Aventis and Novartis are
among the top manufacturers of pharmaceuticals in the domestic market. Other leading
multinational companies active here include Pfizer, Bristol-Myers Squibb, Servier, Eli
Lilly, AstraZeneca and Otsuka.
Foreign participation in the local production of under-license pharmaceuticals is of
major importance to both the Egyptian economy and local consumers, supplying a
significant portion of domestic demand at a fraction of the import cost. Locally owned
Egyptian companies producing generic products also play a key role in the domestic
market with the Egyptian International Pharmaceutical Industries Company (EIPICO)
being ranked as the leading manufacturer in the domestic market and the largest Arab

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Pharmaceuticals

pharmaceutical company overall. A top company on the Cairo and Alexandria Stock
Exchange (CASE), EIPICO is also one of Egypt's 100 largest exporters.
Pharmaceutical prices in Egypt are based on a cost-plus formula, allowing for a profit
margin of 15% on essential drugs, 25% on non-essential drugs and 40% or more on overthe-counter products. The formula, managed by the Ministry of Health and Population,
guarantees positive returns for all companies operating in Egypt.
Providing the political situation stabilizes and the economy continues to perform well,
the Egyptian pharmaceutical market at retail prices is expected to rise by a double-digit
CAGR in US dollar terms between 2011 and 2016.
Espicom1 estimates that the market increased by nearly five times between 1995 and
2010. And went from EGP 18.23 billion in 2011 to EGP 20.33 billion in 2012; a +11.5% in
local currency terms. The countrys pharmaceuticals market is ranked 13th in BMIs
proprietary Risk/Reward Ratings (RRRs) for the region.
Projected Pharmaceutical Market, 2011-2015
Value USD billion
% GDP
% Health Expenditure
Per capita (USD)

2011
4.7
2
31
54

2012
5.4
2
31
61

2013
6.2
1.9
30.8
69

2014
7
2
31.6
77

2015
8
2
32.3
86

Source: ESPICOM

Espicom Business Intelligence is a UK-based company with a 30-year pedigree providing business
intelligence on Medical Devices, Pharmaceuticals & Healthcare and Therapeutics across global markets.

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Pharmaceuticals

Competitive Strengths and Capabilities

Highly effective Workforce, Egypt produces more doctors and pharmacists than any
other country in the Middle East. Egypts workforce is the largest in the Arab world and
the second largest in the MENA region, after Iran. Egypts pharmaceutical workforce
offers the highest quality of performance standards and simultaneously promotes cost
efficiency in the form of low labor costs and a large pool of highly trained professionals.
The industry currently employs a total of 39,500 professional staff and production
workers.
Increase in Investment Appeal, Egypt is looking to further solidify its stronghold by
increasing investment in the sector and expanding production capacity. Pharmaceutical
production increased in 2009, reaching EGP3.5 billion. The Ministry of Investment
announced plans to build 76 new pharmaceutical plants, bringing the national total to
180, in order to help meet its target of USD1billion in exports by 2015. Investments in
Egypt's pharmaceutical industry currently stand at EGP 26 billion.
Largest drug-manufacturing base in the MENA, Egypt has the largest drugmanufacturing base in the Middle East and North Africa (MENA), accounting for 30% of
the regional market. With a 75% market share, the private sector dominates
pharmaceutical production. The total value of the Egyptian pharmaceutical market is
USD 1 billion annually. Local manufacturers of generic drugs supply 52% of the market,
while research-based multi-national companies account for the balance, either through
"under licensing"' local manufacturing or direct imports.

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Pharmaceuticals

Sector Drivers

Egypts Value Proposition

Investor Benefits

Labor Force

With an average of 11 000 annual

graduates from pharmacy schools,
Egypt provides a large pool of skilled
labor to draw from.

Large potential talent supply

with the skill sets necessary
for a healthcare business to
succeed.

Labor Costs

Wages in Egypt are considered the

lowest in the MENA region. The
average wage in the pharmaceutical
sector is comparatively low at a
minimum wage of LE 1500 per
month.

Unique opportunities to
minimize costs while
offering high-quality
services.

Diversity of
Opportunities

Egypt offers significant opportunities

for investment in primary, secondary
and tertiary care centers, clinics
Provides a wide range of
catering to the growing global medical options for players looking
tourism sector, medical equipment and to enter the market.
supplies distribution, and
pharmaceuticals distribution.

High Healthcare
Expenditures

In 2011/2012, government expenditure

on health reached EGP 23.8 billion
Presents market
compared to EGP 20.3 billion in
opportunities for
2010/2011.
investment at all levels of
This increase in public healthcare
the value chain.
expenditure will also increase total
healthcare expenditure in Egypt.

Low Insurance
Penetration Rates

There are few providers of health

insurance in Egypt, and penetration
rates remain very low by comparison
to Brazil and Turkey.
Insurance covers only 56% of total
population, with most insurance
covered by public-sector companies
and a few private firms.

Strong need for additional

providers. This presents a
significant market
opportunity.

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Pharmaceuticals

Leading Opportunities in a Dynamic Market

The Egyptian pharmaceutical industry has enjoyed a period of considerable
development in recent years. There is a strong domestic production sector and, while
the majority is destined for the domestic market and imports play an important role,
Egypt has emerged as a leading exporter of pharmaceuticals to Arab, Asian and Eastern
European markets.
Public production, represented by the state-owned holding company HOLDIPHARMA;
accounts for around one-tenth of sales by value and nearly two-tenths by volume. There
are a number of leading local private producers, some of them involved in
biotechnology, which are strengthening their capabilities; Minapharm Pharmaceuticals,
for example, acquired 95.0% of the share capital of the German ProBioGen in June 2010.
Some leading multinational producers also manufacture in Egypt, including AstraZen.
Today, Egypt has the largest drug-manufacturing base in the Middle East and North
Africa (MENA), accounting for 30% of the regional market. With a 75% market share, the
private sector dominates pharmaceutical production.
Pharmaceutical companies operating in Egypt fall into three categories: public sector
companies (12 companies are affiliates of Holdipharma previously known as Drug
Holding Company D.H.C), private sector Egyptian companies and multinational
companies.
Before the 1990s, the sector was dominated by state-owned companies but this has
changed with the introduction of privatization program that has allowed the private
sector to take the highest share of the production in the domestic market.
As of Dec. 2012, the Pharmaceutical industry consisted of 680 companies with total
investments of USD 3.87 billion, with 64% Egyptian shares and 36% foreign shares. 671
companies operating inland with total investments of USD 3.73 billion, and 9 companies
operating in free zones areas with total investments of USD 144.65 million, according to
GAFI DB.

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Pharmaceuticals

Outlook
Experts agree that, the Egyptian pharmaceutical industry is very positive: Rapid
population growth and expansion in healthcare coverage and expenditures are key
growth drivers, as are an increasing awareness of health issues and the modernization
of the healthcare industry.
Egypt's exports of pharmaceuticals have grown steadily in recent years, topping USD
270 million in FY 2011/2012 compared to USD 238 million in FY 2006/2007.
In April 2008, Novartis became the first multinational drug producer operating in Egypt
to add its local facility to its global supply chain. In addition to making 123 products for
local consumption, Novartis Egypt will now supply the company's global operations with
treatments for ocular and hormonal conditions.
Egypt is the largest consumer of pharmaceuticals in the MENA region with an annual
increasing pharmaceutical spending reaching about USD 2.48 billion, by the end of 2009,
and experts forecast to continue rising to reach about USD 4.24 billion by 2014 at a
compound annual growth rate (CAGR) of 11.4%, although Egypt's pharmaceutical
expenditure per capita is still one of the lowest in the region.
Annual production is recorded to be EGP 15 billion in 2009. In 2010, the market size has
reached USD 4.1 billion at retail prices or USD 48 per capita which represents 1.9% of
GDP and 30.6% of health expenditure.
Egypt has the largest drug manufacturing base in the MENA region accounting for
around 30% of the regional market. Local production covers around 93% of the market
with 7% made up of highly specialized pharmaceuticals not produced locally.
Multinational corporations account for about 30% of local sales through domestic
manufacturing, and about 35% through licensing agreements, while the remaining ratio
represents generic medicines produced by local companies.

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Pharmaceuticals

This industry has a good potential for the future with investments keep increasing. The
number of pharmaceutical factories has increased from 90 factories in 2006 to 120
factories in 2010 with other 70 plants that are under construction.
Large multinationals as GlaxoSmithKline (GSK) is the leading company in the Egyptian
market with 9% of the market share. Sanofi-Aventis and Novartis are also among the top
multinational manufacturers in the market. Furthermore, multinationals like Pfizer,
Servier, and Bristol- Myers are active players in the pharmaceutical industry in Egypt.
Holdipharma, the state owned producer, contributes with 1700 types of medicine,
42.1% of them are sold in cheap prices, with LE 1.3 billion as new investments every
three years, bearing LE 0.5 bn. annual losses because of its low prices. The total capital
of Holdipharma and its affiliates is about LE 2 billion, with a cumulative growth rate over
the last five years 50%.

Opportunities
-

The government's plans to introduce a basic health insurance that will extend its
benefits to more Egyptians.

The growing health and pharmaceutical expenditure.

The ability to open new markets in Africa through bi or multi-lateral agreements

like the COMESA for Egyptian medicine.

It's expected that the industry will witness an increase in its value through the coming
three years to reach USD 8 billion in 2015 with an average CAGR of 14.3%. However, it
will keep a consistent percentage of the GDP ranging from 1.9 - 2.0 %.This increase is
accompanied with the increase in health expenditure to form 32.3% of the market value
in 2015. Moreover, per capita share is anticipated to increase to be USD 86 in the same
year.
The Pharmaceutical industry in Egypt is rising, stimulated by many factors like the
increasing size of the market and the entrance of new investors to the market. The

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Pharmaceuticals

government seeks more liberalization for the industry with less control over prices and
more privatization for the sector. This industry faces many challenges like the rising
competition with international producers and poor healthcare system in Egypt.
However, many specialists have positive expectations that Egypt would become one of
the leading countries in that field.

Strong policy support

The Egyptian Drug Authority (EDA) is the pharmaceutical regulatory body of the
Egyptian Ministry of Health (MOH) and it is committed to supporting initiatives which
help promote its goals of protecting people's health by regulating safety and quality of
pharmaceutical products, regulation & legislation of pharmacy practice, availability of
high quality medicines at affordable prices, strategic planning & policy making for the
sector, setting standards of pharmaceutical services for both hospital & community,
cooperation with relevant international organizations (such as the WHO) in order to
improve standards of pharmaceutical products and practices.
In January 2012 the Egyptian Ministry of Health and EDA announced the launch of new
Pharmaco vigilance (PV) guidelines for Marketing Authorization Holders (MHAs). These
laws make the reporting of adverse drug effects compulsory for firms and are part of a
wider increase in focus on regulatory activity in the field of PV in Africa, which help
combating soaring rates of drug counterfeiting.

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Pharmaceuticals

Success Stories
VACSERA
VACSERA (Holding Company for Biological Products & Vaccines) is a vaccine
producer, comprising five subsidiaries, and manufactures blood and biotech
treatments as well as being the sole local producer of a variety of vaccines. The
company also has a solid R&D infrastructure. BMI estimates its annual revenue to be
in the region of USD 45-65 million.
Misr Pharmaceuticals
Originally established in 1939 as the first pharmaceuticals company in Egypt, Misr
Pharmaceutical Industries is one of the government-owned pharmaceutical firms in
Egypt, and part of Holdipharma. Misr exports to a number of countries in the region,
as well as in Africa and Romania in Europe. The company employs around 1,750
individuals.
Misr is engaged in production and wholesale trade in pharmaceuticals, as well as
some research and development of new drugs. The company mostly produces
medicines in a powder, syrup, ampoule and tablet forms, although some of its
output is generated as creams and vials. Most sales are in the human medicines
segment, with animal health representing the remainder. In FY08/09, Misr posted
EGP155.9 million in net revenue.
Amoun Pharmaceutical Company (APC)
APC is one of the leading domestic drug makers in Egypt, with five branches in the
country manufacturing human and veterinary pharmaceuticals products and
nutritional supplements. Following the sale of two factories to GSK Egypt in the
1990s, Amoun was the first Egyptian drug firm to gain ISO 9001 certification, and

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Pharmaceuticals

now operates a large modern plant in El-Obour City. It was also the first private drug
company founded in the country to import and distribute drugs.
APC was established as a drug import and distribution firm in 1976 and currently
operates three facilities, which produce cardiovascular drugs, analgesics, vitamins,
antihistamines, antirheumatics, gastrointestinal drugs and antipyretics, as well as
food supplements. APC exports to 19 countries in Africa, Europe and the Middle
East, and has sister companies in the US, Romania, Russia and Kenya. Amoun works
as a contract manufacturer for German Merck and Rowa, and French Leurquin, as
well as for Sanofi-Aventis (for some veterinary products).
Egyptian International Pharmaceutical Industries Co (EIPICO)
EIPICO started production in 1985 and now claims to be the largest domestic drug
manufacturer in Egypt, with a 10-12% total drug market share by volume and nine
manufacturing plants in the country. It exports medicines around the world,
accounting for 20% of Egypts total pharmaceuticals exports. The company also owns
majority shares in Egyptian International Ampoules Company (EIACO), which produces
some 800mn units annually.
Additionally, EIPICO holds a 30% share in the Saudi Arabia-based Universal for
Pharmaceutical Production, having invested EGP27.7 million. EIPICO has its own R&D
laboratories, which are included under its Quality Sector category of activities. This
category also includes its chemical control and Biotechnology Centre. The
Biotechnology Centre was inaugurated in 2001 to produce raw materials, extract
useful compounds from natural sources, and to conduct preclinical and clinical trials
for drug efficacy and bioequivalence as well as other detailed research using
pharmacology. This centre is considered as separate to the operations of the main
body of EIPICO, and has its own budget and staff. The drug production facilities are
GMP certified, which adds respectability to the companys standing as an exporter to
the EU.

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Pharmaceuticals

EIPICOs 2010 financial results show revenue increasing from EGP1.0 billion (USD 180
million) in 2009 to EGP1.1bn (USD195 million) in 2010. In 2010 net income rose 14% to
EGP326 million (USD 55 million). After the re-opening of the Egyptian stock market in
March 2011, EIPICOs share price slumped to EGP33.24, though it has since recovered
to EGP37.21.
South Egyptian Drug Industries (SEDICO)
SEDICO started production in 1990 and its facilities are GMP certified. The company
manufactures a variety of insulins, in addition to the non-traditional dosage forms
such as the soft gelatin capsules, lyophilized products, gels, sprays and effervescent
tablets. Products launched in the first quarter of 2007 include magnabiotic injections
(amoxicillin and clavulanic), bromurex and ultracillin vials. The company focuses on
generics, but also has three patented medicines all skin treatments containing
Jojoba oil as the active ingredient. The 24% share of SEDICO is owned by Akzo-Nobels
Organon, one of the companies for which SEDICO provides contract manufacturing
services. SEDICO is engaged in the production of some biotechnology products, in
partnership with foreign players. In 2009, the company posted EGP345.7 million in
sales, as a result of higher production levels (which reached a record EGP398.8mn).
Income before tax came in at EGP65.7million, with income after tax reaching EGP51.1
million. Exports were worth EGP15.2 million.
Medical Union Pharmaceuticals (MUP)
First established in 1984 through the cooperation of the medical professionals
syndicates union data, MUP was listed on the Egyptian stock exchange in April 1997
and has since gone on to become one of the largest domestic drug makers in the
country with a market share of 4.4% of the domestic market in value terms in 2010.
It is believed to produce 60 million units of drugs in various pharmaceuticals forms.
The company predominantly produces generic and licensed drugs with its most
important partners listed as Schering Plough and Kline Smith Beecham, although

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Pharmaceuticals

both of these two companies have since merged and no longer exist under these
names. According to its 2010 annual report the companys biggest shareholder is the
Arab Company for Drug Industries and Medical Devices (ACDIMA) which holds 40%
of the companys shares. The next biggest shareholder is the Industrial Investment
Company which holds around 10% of the companys equity.
MUPs sales grew from EGP456.5 million (USD 77.4 million) in 2005 to EGP780.9
million (USD 131.5 million) in 2010 at a CAGR of 11.3% in local currency terms. In the
same time period, net profit doubled from EGP84.2 million (USD 14.3 million) to
EGP167.1 million (USD 28.1 million). However, the company issued a sales guidance
note in September 2010 that forecast sales of EGP700 million for 2011, down 10%
on the previous year. The Egyptian financial year runs from July 1 to June 30 so the
latter half of FY 2011 is also likely to have been impacted by the effects of the
revolution.
GlaxoSmithKline (GSK)
GSK operates in Egypt through its 91%-owned subsidiary GSK Egypt, which employs
around 1,500 staff. The subsidiary, established in 1990, principally manufactures
ethical drugs, but also markets and distributes other pharmaceuticals products and
toiletries. GSK was listed in Egypt in 1985 and has a market capitalization of EGP1.55
billion (USD 266.45 million).
The company has more than USD 100 million of investments in Egypt. According to
IMS Health data for September 2009 MAT, GSK ranked first in Egypt, with an 8.7%
value share of the market. GSKs main activities in Egypt are manufacturing,
packaging, marketing, selling and distributing GSK products. GSK Egypt also imports
and distributes a range of its parent companys products that are not manufactured
in Egypt. In addition, GSK Egypt manufactures a range of products under license
from other pharmaceuticals manufacturers.

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GSKs production capacity in Egypt equates to approximately 107 million medicine

units per year. The factory, laboratories, warehouse and head office are in El-Salam
City, Cairo. GSK Egypt also has scientific and sales offices in Mohandessin, Nasr City,
Alexandria, Tanta, Mansoura and Souhag. Company officials claim that about 90% of
the subsidiarys production is sold in Egypt, with the remaining 10% being exported
to other MENA markets. This indicates the retention of a significant share of the
local Egyptian market, despite profit slides suffered by the firm, resulting from
turbulent market conditions, relating to currency devaluation and tight price
controls.
During Q4 2008, GSK acquired BMSs mature products business in Egypt for USD 210
million, giving it a 9% market share in the country. The strategic move consolidated
GSKs ambitions to increase its portfolio and presence in emerging markets such as
Egypt. With GSK reporting revenue for its emerging markets division of US$4.2bn in
2008, the acquisition of a high-value portfolio from BMS will boost future sales.
In 2009, the proportion of its white pill/Western markets sales to total sales fell
from 36% to 30%, as the company aims to diversify its presence. Emerging markets
represented GBP 66 million, or some 14% of the companys total sales in 2009.
Sanofi-Aventis
Sanofi-Aventis is among the five largest pharmaceuticals companies in Egypt. It
operates in Egypt through its affiliate, Sanofi-Aventis Egypt, which operates a plant
and four offices in the country, employing more than 800 people. The companys
manufacturing capacity is 50 million boxes and 20 million packs per annum. The
company markets the following medicines in Egypt: Plavix, Aprovel (irbesartan),
Tritace (ramipril), Actonel (risedronate), Depakine (sodium valproate), Amaryl
(glimepiride), Lantus, Eloxatin (oxaliplatin), and Taxotere (docetaxel), among a
number of other products. Sanofi- Aventis has also provided the vaccines used in
mass polio immunization programmes in the country. In 2009, the company posted

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Pharmaceuticals

EUR 29.31 billion in global sales, up by 6.3% y-o-y. Markets other than those in
Europe and the US accounted for around 26.7% of the companys total sales.
Pfizer
Pfizer, the world's largest pharmaceuticals company, operates in Egypt through its
100% owned subsidiary Pfizer Egypt. The company was established in 1961 and was
one of the first foreign-owned companies to commence operations in Egypt. It now
employs around 800 people. The company specializes in manufacturing and
distributing chemicals, pharmaceuticals and animal health products. Its main
pharmaceuticals product areas are antibiotics, cardiovascular preparations, antiallergy treatments and anti-infectives. Pfizer recently acquired compatriot Wyeth,
which also has operations in Egypt. The company deals in prescription and consumer
health products.
Novartis
Novartis operates in Egypt through its subsidiary Novartis Pharma, established in
1962. It is based in Cairo and manufactures, markets and sells patented
pharmaceuticals, OTCs, generics and animal healthcare products. Leading product
areas are analgesics, cardiovascular treatments and ear, nose and throat
preparations. Novartis employs approximately 1,120 individuals.
In 2009, Novartis posted USD 44.3 billion in global net sales, up from USD 41.5 billion
achieved in the previous year. Sales of Voltaren (excluding OTC sales) reached USD
797 million, up by 1% y-o-y in local currency, driven by solid performance in
emerging markets, including those in Africa. In 2009, net sales in
Asia/Africa/Australasia rose to USD 8.09 billion, thus representing 18% of the total,
up from 17% in the previous year (or USD 7.14 billion).