Jordan's Pharmaceutical Industry Increasing Exports 50

UNCLAS AMMAN 004962

SIPDIS

SIPDIS

STATE FOR NEA/ELA, EB/TPP

E.O. 12958: N/A
TAGS: ECON ETRD BTIO EINV KIPR JO
SUBJECT: Jordan's Pharmaceutical Industry Increasing Exports 50
Percent in 2007

Refs: A) Amman 4074
B) 06 Amman 2468


1. Summary: Pharmaceuticals continue to play a key role in
bolstering Jordan's economy, particularly exports. During the first
ten months of 2007, pharmaceutical exports increased almost 50
percent, reaching JD 253 million ($358 million). With over 40 years
experience in the region and growing sophistication, this industry
is ripe for more linkages with U.S. manufacturers. End Summary.

Sector Overview
--------------


2. Jordan has 17 registered pharmaceutical companies that mainly
produce branded generic drugs in various dosage forms, including
solids, liquids, aerosols, and injectables. All Jordanian
pharmaceutical companies are privately-owned and operated. Many
produce licensed products from multi-national companies, and a
number have secured approvals for some of their products from health
authorities in the U.S., UK, Germany, and Sweden.


3. The largest drug company in Jordan, Hikma Pharmaceuticals,
reported revenues of $225 million during the first half of 2007, up
45 percent from the first half of 2006 (Ref B). The company
attributed the growth to strong performances in branded and
injectable products and acquisitions in the region and Europe,
including Alkan Pharmaceuticals in Egypt. On December 10, Hikma
continued its expansion plans by acquiring Arab Pharmaceutical
Manufacturing Company (APM),the third largest pharmaceutical
company in Jordan, for JD 116 million ($160 million). Hikma expects
to assume control of APM by the end of 2007, which will increase its
market share in Jordan to approximately 12 percent.


4. Although the Jordanian pharmaceutical industry comprises only
0.05 percent of the world pharmaceutical market, according to Awraq
Investments, it is a key contributor to Jordan's economy. The total
value of domestic pharmaceutical production reached JD 255 million
($360 million) in 2005. The industry directly employs 4,000 people
and indirectly employs another 4,000 across pharmaceutical firms and
institutions, including manufacturing, research and wholesale. The
Jordanian Association of Pharmaceutical Manufacturers (JAPM) also
reports that employees in this sector earn the highest average
monthly wages; JAPM is currently doing a cross-sectoral survey and
comparing the average salary with that in other countries.

Export-Driven Industry
--------------


5. Jordan's pharmaceutical industry is primarily export-driven, as
the country's third largest export earner after apparel and
fertilizer. Sixty to seventy percent of Jordan's pharmaceutical
production is exported to over 60 countries worldwide, with the
largest market being Saudi Arabia, followed by Algeria.


6. In 2001 and 2002, Iraq was actually Jordan's second top export
destination for its pharmaceutical products, but Jordan lost the
market in 2003 due to the war. Exports to Iraq fell sharply from JD
28 million ($40 million) in 2002 to JD 7 million ($10 million) in

2003. Although Jordan increased exports to Iraq slightly in 2004
and 2005, they slipped back down again to JD 7 million in 2006.


7. To make up for the lost Iraqi market, Jordan began to look for
and enter new markets, particularly in the EU and the U.S., in part
due to the adoption of stronger intellectual property protection
laws. In 2006, pharmaceutical exports increased 23 percent to JD
210 million ($297 million),including JD 3.2 million ($4.5 million)
in exports to the U.S., according to the Department of Statistics
(DOS).


8. During the first ten months of 2007, DOS reported that Jordan
exported JD 253 million ($358 million),representing a 48.9 percent
increase over the same period last year. According to USITC,
Jordanian pharmaceutical exports to the U.S. increased 34.7 percent
to $3.3 million from January to October 2007. JAPM expects total
pharmaceutical exports from Jordan to reach $500 million by the end
of the 2007.


9. Despite export expansion, Awraq notes that the local market is
still reliant on imports. Locally manufactured pharmaceuticals

cover just 30 percent of the local market's demand, as they are
unable to compete with the greater variety offered by international
drug makers. According to DOS, Jordan imported pharmaceuticals
valued at JD 170 million ($240 million) in 2006, including JD 13.3
million ($18.8 million) from the U.S. The EU and Switzerland have
been leading suppliers.

Abiding by International IPR Standards
--------------


10. Jordan put more stringent patent requirements on its local
companies by acceding to the Trade Related Aspects of the
Intellectual Property Rights (TRIPS) patent law and signing onto IPR
provisions in the U.S.-Jordan Free Trade Agreement. Although some
continue to argue that tough IPR laws hurt the domestic industry,
the growth of the sector and the number of Jordanian companies
applying for patents suggest otherwise. For example, Jordan
Pharmaceutical Manufacturing, a limited private company valued at
$17 million, now owns over 52 new patents. Adherence to IPR
regulations has also facilitated licensing agreements for Jordanian
companies like Hikma and Dar al-Dawa to produce products under
license for multinational innovator companies. The local market has
also attracted more research and clinical trial companies, such as
International Pharmaceutical Research Organization and Triumpharma
Drug Delivery Innovations.

Potential for Growth
--------------


11. Jordan's pharmaceutical industry now has a competitive
advantage of having developed a reputation for delivering high
quality products. Its health care sector is also considered one of
the best in the region, attracting many Gulf visitors (Ref A). As
the health field grows, so will the pharmaceutical sector.


12. Hikma is often regarded as the example of how to successfully
export to the U.S., as it boasts of U.S. FDA approval for virtually
all of its manufacturing plants - from Saudi Arabia to the United
States, where it owns West-Ward Pharmaceuticals based in Eatontown,
New Jersey. Hikma Vice-Chairman Mazen Darwazah told Econoff
December 10 that Jordan's pharmaceutical companies are ripe for
expanding further into the American market, but they need to be
better linked with distributors in the U.S. JAPM agreed on the
importance of such matchmaking, but also noted that the smaller
Jordanian pharmaceutical manufacturers are not willing to invest the
$300,000 upfront to file for U.S. FDA approval. Darwazah commented
that such business attitudes are short-sighted.


13. Darwazah added that marketing, which is not in the Jordanian
business culture, is another weak area that needs to be addressed in
order for the industry to grow. Given the focus on generics, Jordan
also has not heavily invested in research and development, which has
generally hovered around 5 percent of total sales (Ref B).
Consolidation among the pharmaceutical companies could further help
this sector by growing economies of scale and maintaining a strong
position in the region.

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