Developing economies’ market share of the global pharmaceutical industry will likely soar by a significant 25 per cent by 2015 as healthcare spending from both the government and private sector gathers steam, says the chief executive of Dubai-based Newbridge Pharmaceuticals.
In the recent past years – particularly during the global financial slump of 2007-2009 – much attention has been given to emerging markets as the world experience what some analysts describe as a “
tectonic shift” in the geographical structure of global economies.
Joe Henein, CEO and President of
Newbridge Pharmaceuticals, said this major shift in focus from West to East has likewise been noticeable in the pharmaceutical industry where about 15 years ago European countries, the US and Japan account for a massive portion of the global pie.
During that time, he said, markets such as Brazil, Russia, India, China, Turkey and other developing economies in the Middle East and Asia represent a meagre three per cent of the worldwide pharmaceuticals business.
“Today and in the next four-five years, 50 per cent of the growth in most of the pharmaceutical companies will come from this group [of nations], which will add another $160 billion (Dh587bn) [to] the total pool of the pharmaceutical industry by 2014. [Eventually] this group will represent 25 per cent of the industry by 2014,” he said.
According to Henein, the pharmaceutical industry in the Middle East and North Africa (Mena) region, including Turkey, is currently valued at around $35bn with the Mena alone contributing about $15bn to the coffers.
Henein believes that the region will continue to post double-digit average growth of around 12 per cent annually in the next five years, a figure that proves to be impressive when compared to the three-per-cent rate forecast for the US and European markets.
Healthcare trends in the Mena region
A major factor that influenced an uptrend in the Mena pharmaceutical industry has been the regional governments’ allocation of huge sum for social infrastructure spending, including healthcare and education, says Newbridge Pharmaceuticals’ CEO.
In an earlier Alrroya.com article, an official of Bahrain-based investment firm Investcorp puts the value of the region’s ongoing and planned infrastructure projects at a whopping $3 trillion despite the cancellation of some plans in Dubai.
Saudi Arabia further raised this figure following King Abdullah’s March 18 announcement of a $130bn government allotment to boost national wages and employment, education and healthcare systems, as well as the residential property sector.
“Healthcare is a [main focus] for the governments in this region and this [has been reflected in] the increasing number of hospitals being built as well as the number of [government-backed] healthcare outlets. There is a lot of direct government spending towards this sector,” Henein said.
Recent government mandates requiring companies to provide private health insurance to their employees have also contributed significantly to the growth of the pharmaceutical industry in the region, Henein added.
“This automatically provided a positive input to the pharmaceutical industry because the number of patients covered by private insurance has increased,” he said.
The region’s rapidly growing population has also offered a captive market for the industry. According to the US-based
Population Reference Bureau, population in the Mena region is expected to skyrocket by over 62 per cent from 432 million in 2007 to 700m by 2050, even exceeding Europe’s population in that year.
And with this growth also comes an anticipated increase in the number of elderly people requiring treatment for debilitating chronic ailments.
Quoting figures from management consulting firm
McKinsey & Company, Henein said global healthcare and pharmaceutical spending is expected to increase by a massive 240 per cent in the next 25 years because of the prevalence of diabetes, cancer and cardiovascular diseases.
Pharmaceuticals attract private sector investment
Aside from government spending, another factor that has been driving growth in the regional pharmaceutical industry is direct investment from the private sector, Henein explained.
An example of this private sector involvement is Newbridge Pharmaceuticals, a joint venture between US-based life sciences merchant bank
Burrill & Company and the life sciences arm of the National Technology Enterprises Company, a
Kuwait Investment Authority -mandated fund.
The company, which specialises in in-licencing, acquiring, registering and commercialising of therapeutics approved by US, European and Japanese drug regulatory authorities, made a significant head start last September – barely three years since it was established – after it raised $12m as part of its Series B scheme to finance its projects.
Asked if the company has plans to raise more capital in the near-term, Henein said their response will be dictated by market conditions.
“We are [planning] to launch Series C [financing] sometime next year, but we are open to moving that earlier if we immediately [reach] a serious transaction [where we will] need to raise more capital. [Otherwise], we have a timeframe next year and the majority of the [Series B] money is being spent on acquiring more assets to increase our portfolio,” he said.
While Newbridge promotes itself as a regional expert in the licencing, acquiring of commercial rights and marketing of therapeutics, Henein hinted at the company’s future endeavour to also get into manufacturing.
“We will remain committed to our core expertise, but in order to create more value to the company, we need to integrate into two directions: forward into manufacturing… and [eventually] establish our own products,” he said.
Henein said the company may opt to initiate this venture alone or with a partner, an indication that outlook for the future of the pharmaceutical industry in the region remains healthy.
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