HIKMA PHARMACEUTICALS SHOWCASES ANOTHER GROWING

UNCLAS SECTION 01 OF 03 AMMAN 002648

SIPDIS

SENSITIVE
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STATE PASS TO USTR
STATE ALSO PASS TO NATIONAL SCIENCE FOUNDATION
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E.O. 12958: N/A
TAGS: ECON ETRD TSPL KIPR TBIO JO
SUBJECT: HIKMA PHARMACEUTICALS SHOWCASES ANOTHER GROWING
SECTOR IN JORDAN

REF: A. AMMAN 1305

B. AMMAN 1019

C. 05 AMMAN 9748

SENSITIVE BUT UNCLASSIFIED. PROPRIETARY INFORMATION.
PROTECT ACCORDINGLY. NOT FOR DISSEMINATION ON THE INTERNET.


1. (SBU) SUMMARY: Jordan's $330 million pharmaceutical
industry is a bright spot in the nation's industrial
development and one of the front-runner sectors in the
leadership's strategy of export-led economic growth. Hikma
Pharmaceuticals and its parent, the Hikma Group, is the
shining star among the constellation of 18 pharmaceutical
companies in Jordan. Like the rest of Jordan's industry,
Hikma is a generic-drug firm, producing drugs that are
off-patent. But Hikma offers value added through novel
delivery systems, developed with a strong R&D base. Hikma
boasts U.S. FDA approval for virtually all of its
manufacturing plants - stretching from Saudi Arabia to
Algeria to Portugal and the United States, where it owns
West-ward Pharmaceuticals. Hikma, which just acquired
majority control of Saudi and Italian drug firms, listed on
the London Stock Exchange (LSE) last November and will list
on the Dubai exchange this month.


2. (SBU) With access to 34 markets, Hikma is one of the
leading pharma companies in the Middle East and North Africa
(MENA) region, and the 12th largest generic-drug company in
the world. Hikma is primed to take advantage of the rise in
generic sales worldwide, as more than 30 major drugs come off
patent in the next five years. However, for the dream of
novel drug development to be realized in a major way, Jordan
needs to move to a higher plane of R&D infrastructure,
develop advanced life sciences education and research, and
undergo cultural shifts in areas such as government and
philanthropic support for research. END SUMMARY.

Next Stop: NASDAQ
--------------


3. (SBU) Hikma (Jordan) CEO Mazen Darwazeh, who is proud of
the recent LSE listing for a capitalization of $1.2 billion,
would like some day to be on the NASDAQ. For now, the costs
are prohibitive, he told Econoff - three times the cost of
listing in London. (He cited Sarbanes-Oxley requirements as
a costly inhibitor to a NASDAQ listing.) The LSE and Dubai
market capitalization will allow Hikma to pursue new growth
opportunities in areas such as injectable drugs - a major
earner in 2005 in the U.S. and in European markets - and to
build on its strength in the MENA region.


4. (U) Hikma Group Chairman Samih Darwazeh began as a small
drug-store owner 27 years ago in Amman. His is among a
prominent group of Palestinian business families who made it
in Jordan, and whose businesses are positioned to take off
under Jordan's liberalized economic policy structure. As
Samih put it, it took over a quarter century to gain a strong
foothold in MENA's "fragmented market." Hikma in the next
few years will seek to expand its 140-product base to reach
the MENA region's youthful population and rapidly growing
health care markets, especially in the GCC countries, a
proposition made more profitable by the region's lower tax
base compared to Europe and the U.S. From a small family
business, Hikma has grown to have over 700 employees in
Jordan, with 1100 more employees throughout the world,
including 302 in the U.S., according to CEO Mazen. Overall
employment in the pharmaceutical sector in Jordan is close to
5,000. Note: Pharmaceutical company jobs are considered more
prestigious by Jordanians than jobs in other export
industries, such as garments or marble stone. In this sense,
pharmaceuticals present a concrete picture to Jordan's trade
and investment leaders of where they want to go with
industrial growth, and explains in part the current
fascination with science-technology development. End Note.


5. (SBU) Hikma is an example of Jordan's success in the
pharmaceuticals industry in the region. Last year, total
pharmaceutical production in Jordan was $330 million, of
which domestic-targeted production accounted for only 15

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percent. With exports of $280 million in 2005,
pharmaceutical products account for 8 percent of all of
Jordan's exports. Over the last 50 years, Jordanian firms
developed major inroads into the Iraqi market, for example.
This situation quickly reversed in 2003 when drug exports to
Iraq dropped by 75% to less than $10 million. Jordan's major
drug markets now are Saudi Arabia, Algeria, Iraq, and Sudan.
But many of the generic-drug firms have licensing agreements
with small factories throughout the MENA region, bringing
Jordan's generic-drug manufacturing know-how to partnerships
that gain market access to other countries. Hikma has a
respectable 3.5 percent share of the entire Saudi market, and
is ranked number 6 and the leading generic-drug firm there.
In Algeria, Hikma boasts a 3.2 percent market share; it is
the 7th ranked company and second-largest generic firm.

One of Few Arab Firms in MENA with FDA Approval
-------------- --


6. (SBU) The company's ability to master the rigorous U.S.
FDA approval process has been one advantage. Hikma factories
first secured FDA approval in 1994; Israel's Teva
Pharmaceuticals was the only other generic-firm in the region
to do so. Up through an investors meeting at the end of
March, Samih Darwazeh was touting Hikma as the "only Arab"
firm with FDA approval in MENA, a claim that Hikma CEO Mazen
thinks will not last the year, as a few other mature MENA
pharmaceutical companies complete the FDA approval process.
This past January, Hikma succeeded in securing FDA approval
for a Saudi-based cephalosporin plant of its wholly-owned
Subsidiary, Jazeera Pharmaceutical Industries. Other
companies in Jordan are looking to follow suit with FDA
inspections, although one informed observer remarked to
Econoff that the majority of Jordanian firms will have to
overcome a contrary culture - so oriented are they to
short-term profits over a long-term strategy. According to
Samih Darwazeh, Hikma's attention to quality makes it the
"partner of choice for multinationals" in the MENA region.

Licensing Agreements - Wave of the Future?
--------------


7. (SBU) A case in point is Hikma's licensing agreement with
Eli Lilly to market the brand Cialis (tadalafil) for erectile
dysfunction. Hikma places the drug throughout its markets in
the MENA region, although Lilly still manufactures the pills
and continues to hold the data exclusivity-registration
rights. Hikma pays Lilly a royalty on its Cialis sales.
Most Jordanian companies would not have the sales force or
marketing tools to handle this type of drug placement. They
would just prefer to follow their short-term success models:
secure the manufacturing rights and bring the drug molecule
to the markets they already have, according to a PhRMA
observer.


8. (SBU) However, the number two pharmaceutical company in
Jordan - Dar Al Dawa - reportedly has a similar licensing
arrangement with Novartis, and observers expect more such
deals in the future. It remains to be seen if these
licensing deals can cross over to a generic manufacturing
scheme by which originator companies share their formulae and
processes in return for some control of their drugs' market
access even beyond the patent life.

Hikma R&D and Jordan's R&D Needs
--------------


9. (SBU) In 2005, Hikma devoted $16.5 million to R&D out of
total revenues of $262.2 million, over 6% of revenues. CEO
Mazen Darwazeh said that two R&D centers are being developed
in Jordan and in the U.S., mainly to discover new delivery
systems and develop new formulations or dosages of off-patent
drugs. Injectables are a big focus of Hikma's research.
Mazen stated that the average R&D expenditure on drugs in
Jordan was about 2% of gross revenues, well above the Arab
world's 0.8% of GDP. He boasted that Hikma had over 120
technicians working on research, with more than 20 PhD's.
For all of Hikma's commitment to R&D, Mazen emphasized that
he did not see Hikma going down the path of novelty drug R&D

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for at least another five years. Jordan was at least a
decade away from developing even the most basic novelty drug
R&D, he stated. Even then, Jordan was better positioned than
most in the MENA region to develop R&D for breakthrough
drugs, he said.


10. (SBU) The Hikma CEO commented that Jordan had a long
to-do list to develop its already flourishing pharma industry
to the next level. Jordan must devote major resources to a
life sciences research center, one that he thought should be
centrally located rather than spread out among Jordan's
half-dozen technical universities. (Note: Jordan has eight
colleges of pharmacy; the most advanced at the University of
Jordan may soon move to devote all of its resources to just a
pharmaceutical doctoral program. End Note.) In addition to
inculcating a spirit of inquiry at all levels of the
educational system, Jordan would have to develop stronger
support for basic research and develop financial incentives,
as well.


11. (SBU) Mazen Darwazeh cited two key parts of a
comprehensive pharmaceutical R&D program: tax incentives for
the research, and government funding for selected sectors
such as biotechnology. In Ireland, he said, the government
provided 1-to-1 matching funds for pharmaceutical R&D. In
the meantime, Hikma would pursue the new and growing
opportunities in the off-patent world. Hikma's legal counsel
indicated that approach meant that even sophisticated Hikma -
with so much going for it and so many options to pursue -
would stand to benefit in the short run from a "narrow"
interpretation of the Jordan-U.S. FTA on points such as "new
uses", a subject that the counsel acknowledged remains to be
determined in bilateral talks (see ref's).
HALE