Best of 2012: Hikma Pharmaceuticals interview

The Middle East is not known for prioritising healthcare budgets. Despite its rapidly growing population and the alarming speed that lifestyle diseases such as diabetes and heart disease are being diagnosed, the Arab world spends sixteen times less than the average American on healthcare, Mazen Darwazah tells Arabian Business.

“We are still one of the very low spending consumers in healthcare; the average Arab spends around $42 while the average US patient spends around $800 a year so there is a huge disparity between patients in the Arab world and patients in the US,” the executive vice chairman and the CEO of Hikma Pharmaceuticals for the MENA region says.

Luckily for the Jordan-based pharmaceuticals group, which makes and sells branded and generic drugs, regional governments are ramping up their healthcare spending packages in the wake of the Arab Spring and with manufacturing plants across the Middle East, Hikma is well poised to take full advantage of this renewed focus.

With more than 60 percent of its revenues generated from the MENA region, the pharma company initially took a hit during last year’s political turmoil and was forced to almost halve its sales growth forecast for 2011 from twelve-thirteen percent to seven percent. But increased demand from Arab governments to quell demonstrations across the region is now boosting demand.

Morocco, Egypt, Tunisia and many of the Gulf states have announced new spending packages widely seen as an insurance policy against the arrival of the Arab Spring. In its most recent five-year spending plan Saudi Arabia allocated $73bn on healthcare initiatives including the construction of 117 hospitals, 750 primary healthcare centres, and 400 emergency centres. Meanwhile Morocco has increased its healthcare budget for this year by nine percent to $1.4bn.

Others countries are also following suit, says Darwazah. “Tunisia is embarking on a new healthcare programme whereby they will include more people in terms of subsidising pharmaceuticals. Algeria is increasing its investment; they earmarked last year something in the range of half a billion dollars for procurement in the local industry.

“Morocco is another government that is embarking on a welfare programme for its patients — they want to include six to eight million patients on a reimbursement programme — and Saudi Arabia is embarking on a huge expenditure in terms of refurbishing its hospitals.

“We are well prepared in terms of our geographical presence in these markets, to develop our business model with the governments, in terms of being able to provide effective, high quality generic medicines for the communities in these countries that we are working with,” he adds.

With operations stretching from Jordan to Egypt, Morocco and beyond, Hikma, which was founded in Amman in 1978, is well poised geographically to be able to take advantage of the improved outlook for healthcare budgets. While much of this growth will come organically, Hikma says it will also look to bolster its regional operations through acquisitions.

In the last two years Hikma, which listed on the London Stock Exchange in 2005, has completed several significant acquisitions including Illinois, US-based Baxter Healthcare’s injectable division for $112m and a controlling stake in Morocco’s Promopharm for $111m, and has previously said it has the ability to spend up to $300m-$400m on a single deal.

The firm is currently doing due diligence on two companies in the region with a view to acquiring them and has a robust mergers and acquisitions team, says Darwazah. “Acquisitions could be of a new geographical area, a new therapeutic class or an extension of the lines that we have, so we are looking actively in more than one country in the Arab world. We are looking actively in Turkey, we are looking at opportunities in Levant so these are the markets that we are working in and we are always looking for opportunities,” he says.

New areas of expansion could include Northern Turkey and the oil-rich Gulf, he adds. “Turkey is a natural extension because our habits, our culture and our diets are very common in many ways. We are looking at a couple of companies in Turkey.

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