Chinese Pharma Companies Rush to Tap Into the Middle East's Emerging Healthcare Market

In November, Fruquintinib was successfully launched in the U.S. at a price more than 20 times higher than in China, demonstrating the strong payment capability of the American pharmaceutical market. On the other hand, since BeOne Medicines' Zanubrutinib was first approved in the U.S. in 2021, only six innovative drugs from China have successfully received FDA approval to enter the U.S. market.

For most pharmaceutical companies, entering the U.S. market is a highly challenging goal, so many have turned their attention to secondary markets. For instance, Indian pharmaceutical companies began aggressively entering the Middle East and North Africa (MENA) region a few years ago to build drug manufacturing plants. Particularly with the emergence of the pandemic, governments in this region have placed greater emphasis on developing their pharmaceutical industries to achieve self-reliance and control.

Notably, Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain form the Gulf Cooperation Council (GCC), which has formulated various policies to encourage biopharmaceutical technology transfer, investment, and localized manufacturing. As Chinese innovative drugs advance toward international markets, while the European and American markets remain highly competitive, countries in the Middle East and North Africa also exhibit significant unmet pharmaceutical needs. These regions will become another path for Chinese pharmaceutical companies expanding overseas.

The pharmaceutical demand in the MENA region is far from being met, which is mismatched with its economic strength.

Last year's Qatar World Cup gave the world an intuitive understanding of the wealth in the Middle East. The World Cup, which cost $220 billion to host, was five times the total investment of the previous seven tournaments combined, while Qatar's GDP ranks only 7th in the Middle East. As the Middle East gradually steps into the global spotlight, its high GDP levels and vast customer base have made the Middle Eastern market increasingly valued by multinational corporations.

According to World Bank data, the MENA region currently has a population of nearly 500 million, with a consistently growing trend. The per capita GDP is at the level of middle-income countries, and the per capita total income of the "Gulf Cooperation Council Six" has reached a world-leading level. In recent years, with the population growth in the Middle East, the local healthcare market has also shown an increasing trend, influenced by factors such as rising healthcare expenditure and the growing burden of chronic diseases.

As reported by the International Diabetes Federation (IDF), the prevalence of diabetes in the MENA region has reached 16.2%, with the expected increase in the number of people with diabetes ranking second globally. It is projected to reach 136 million by 2045. Additionally, obesity is a severe issue faced by this region, with the MENA region accounting for 18 of the top 50 countries with the highest obesity rates worldwide. According to data from the World Bank, by 2030, deaths caused by non-communicable diseases such as diabetes will account for 87% of all deaths in Gulf countries and 81% in Middle Eastern and North African countries outside the Gulf region.

Due to the significant differences in economic conditions among different countries in the MENA region, there is also a considerable variation in the demand for pharmaceuticals. For instance, Saudi Arabia, with its high per capita GDP driven by abundant oil resources, has an overall higher consumption level and stronger payment capability. The country shows a preference for original research drugs and patented medicines, with relatively low demand for generic drugs. Additionally, some affluent groups tend to seek medical treatment in Europe or the United States.

In contrast, Egypt in North Africa has a market dominated by generic drugs. Despite having several pharmaceutical companies domestically, such as Egypt International Pharmaceutical Industries Company (EIPICO), South Egypt for Pharmaceutical Industries (SEDICO), and United Pharmaceutical Manufacturing, the lack of a well-developed chemical industry system and supply chain has led to a heavy reliance on imported active pharmaceutical ingredients in Egypt's pharmaceutical sector.

The International Pharmaceutical Raw Materials and Pharmaceutical Industry Exhibition held in Egypt in September focused on products such as pharmaceutical raw materials, pharmaceutical machinery, packaging materials, and laboratory equipment. This year's exhibition featured a total of 208 participating companies, nearly 80 of which were Chinese enterprises, accounting for nearly 40% of the total number of exhibitors. As one of the major global producers of active pharmaceutical ingredients (API), Egypt is also an important export market for China. Northeast Pharmaceutical Group Co., Ltd., a leading Chinese API company, reached a cooperation agreement with Muscat Changming Investments in September this year to invest in building a factory in Oman, aiming to achieve localized production and sales of its products in the MENA market.

According to IQVIA, the global pharmaceutical market is expected to grow at a compound annual growth rate of 3% to 6%, reaching approximately $1.9 trillion by 2027. Among this, the MENA region is projected to see expenditure growth ranging from 35% to 55% over the next five years, positioning it as a potential emerging blue ocean pharmaceutical market.

To address the surging demand for pharmaceuticals, the Gulf Cooperation Council (GCC) has introduced a series of policies aimed at enhancing local pharmaceutical production capabilities. The export of China-produced active pharmaceutical ingredients, pharmaceutical machinery, and laboratory equipment is just the beginning. As this blue ocean market expands, pharmaceutical companies from various countries are actively participating.

Outside the energy sector, the MENA region is vigorously developing its pharmaceuticals industry.

Multiple countries in the MENA region have implemented various measures, including expedited approval, registration, and preferential pricing for locally produced drugs, to encourage pharmaceutical localization. Additionally, substantial incentives are provided when multinational pharmaceutical companies collaborate with local manufacturers to establish joint ventures, enabling the rapid and widespread entry of innovative drugs from multinational corporations into the local market.

Pfizer Establishes a Production Base in King Abdullah Economic City (KAEC), One of Saudi Arabia’s Four Major Economic Zones, and Receives a Trade Investment License from the Saudi General Investment Authority (SAGIA) as Recognition of This Investment. This Grants Pfizer 100% Ownership of Its Operations in Saudi Arabia, Including Import and Export of Products and Various Trading Activities, Allowing It to Directly Provide High-Quality Innovative and Essential Medicines to the Saudi Market.

Pfizer Commits to Successively Producing Approximately 16 Drugs at Its Manufacturing Bases to Meet Saudi Arabia's Medication Needs in Five Therapeutic Areas: Cardiovascular, Pain, Anti-Infectives, Urology, and Neurology. Beyond production, as the company grows, Pfizer will also transfer professional knowledge and technology to the local market, creating job opportunities while cultivating more specialized talents.

In recent years, some multinational pharmaceutical companies have collaborated on projects in the MENA region. Data sourced from IQVIA and public information.

AstraZeneca Partners with SPIMACO for Local Production of High-Demand Medications in Saudi Arabia

Not only Saudi Arabia, but other MENA countries are also actively introducing multinational pharmaceutical companies to establish a presence.

The UAE, as one of the most developed markets in the Middle East, has a large demand for pharmaceuticals and ranks high in per capita pharmaceutical expenditure. Previously, over 70% of the medicines in the UAE were imported from Europe and the United States. Therefore, the UAE has a strong desire to develop its pharmaceutical industry and align it with international pharmaceutical production standards.

As GSK has partnered with Neopharma, a pharmaceutical company headquartered in the UAE. Neopharma became GSK's third-party manufacturer, responsible for handling the secondary packaging process (the final manufacturing stage) of six prescription drugs by GSK in the UAE. Additionally, Neopharma has also reached a cooperation agreement with Merck to localize the production of Merck's diabetes medications.

Thanks to government support, multinational pharmaceutical companies have become increasingly active in the Middle East over the past two years.

In July 2023, Sanofi collaborated with local Saudi biopharmaceutical companies Lifera and Arabio to promote local vaccine production and share expertise in manufacturing seven key vaccines. This aligns with Saudi Arabia's goal of strengthening its biopharmaceutical capabilities through technology transfer and workforce development.

In June, the Ministry of Health in Abu Dhabi, UAE, launched collaborations with Eli Lilly and AbbVie, laying the groundwork for clinical research, real-world evidence, healthcare technology, personalized medicine, and genomics in Abu Dhabi. Additionally, British pharmaceutical giant AstraZeneca and diagnostics company Virax Biolabs have also set up operations in Dubai Science Park this year.

In 2022, the Saudi Investment Ministry reached an agreement with Novartis to collaborate on cell and gene therapy, technology transfer, and clinical research investment, aiming to enhance Saudi Arabia's biopharmaceutical capabilities and alleviate pressure on the healthcare budget. In the same year, the Saudi Investment Ministry also signed an agreement with British pharmaceutical company GlaxoSmithKline (GSK) to further strengthen Saudi Arabia's healthcare and life sciences capabilities.

Overall, for Middle Eastern countries with a certain level of economic strength, cooperation with large pharmaceutical enterprises and contract manufacturing are merely the beginning. Meeting local demand through localized pharmaceutical production is only a short-term goal. They hope to achieve knowledge and technology transfer so that drug production adheres to global manufacturing technology standards and efficient control methods. This will enable them to acquire the technical capability to produce complex drugs, laying a solid foundation for future industrial upgrading. Additionally, they aim to invest in biotechnology as a pillar industry for the future.

However, the road to industrial upgrading is bound to be fraught with difficulties, which also gives Chinese companies opportunities.

During the industrial upgrading process, many fields have significant growth potential, awaiting participation from Chinese enterprises.

As the collaboration unfolded, the pharmaceutical market in MENA maintained rapid growth, with drugs such as insulin glargine, infliximab, recombinant human erythropoietin, and filgrastim taking leading positions in sales rankings. However, the cooperation was not without challenges. Taking Saudi Arabia as an example, communication over the past few years regarding the introduction and localization of vaccines, blood products, and monoclonal antibody technologies with multinational pharmaceutical companies has not been smooth.

Pharmaceutical companies, out of commercial interests, are more willing to export in finished product form and have limited support for biotechnology transfer, localized production, and the industrial upgrading of the local pharmaceutical industry. As a result, countries like Saudi Arabia have begun seeking more partners, such as pharmaceutical firms from India and South Korea. Compared to them, Chinese pharmaceutical companies are no less competitive in terms of innovation capabilities and the diversity of biopharmaceutical pipelines, thus having sufficient capacity to "go global."

The MENA market has a large number of untapped opportunities, with over 160 healthcare projects in the Gulf Cooperation Council (GCC) alone, totaling more than $50 billion in value. Several fields in the region will have high growth potential in the future.

First isGenomicsIn response to the rising incidence of genetic diseases, Saudi Arabia has launched the Saudi Human Genome Program (SHGP) to accelerate the diagnosis of genetic diseases, expand genetic databases, and enhance understanding of hereditary conditions. Qatar has established the Qatar Genome Programme (QGP) to study genomics and genetics in the Middle East, with a focus on precision medicine and research capacity building. In March this year, the UAE also launched its National Genome Strategy, aiming to establish a legal framework to support genomic initiatives for improving public health and personalized medical needs.

Therefore, the demand for sequencing technology in this region continues to increase, with some companies responding to the growing demand by launching new technologies and expanding their operations in the Middle East. In April this year, Malaysian Genomics entered the Middle East market. In June, CENTOGENE partnered with Lifera, a biopharmaceutical company under Saudi Arabia's Public Investment Fund (PIF), to form a joint venture aimed at enhancing the utilization of leading data-driven multi-omics testing, securing an investment of $30 million. Meanwhile, Illumina also launched relevant operations in Dubai.

In September this year, Genalive, an independent clinical laboratory jointly established by Saudi subsidiary of BGI and Tibbiyah Holding, a wholly-owned subsidiary of Saudi Al Faisaliah Group, officially opened. At the opening ceremony, Ian Yip, CEO of BGI Group, stated: "By combining the strengths of BGI and Tibbiyah, we can unlock more potential in genetic testing, equipping Saudi healthcare workers with the tools needed to provide personalized care for patients. In the future, BGI will bring more Chinese technologies to the Middle East market through Genalive."

In addition, Berry Genomics has signed a cooperation agreement with Ajlan & Bros Medical Company through its holding subsidiary to establish a joint venture in Saudi Arabia. This joint venture will integrate technology, research, industry, and strategic resources to introduce non-invasive prenatal testing (NIPT) and other genetic testing products into the Saudi and broader Middle Eastern markets, providing precise diagnostic and treatment solutions for genetic diseases. In the future, the two parties will also initiate projects including establishing a local genetic testing laboratory.

ThenPrecision MedicineLast year, Abu Dhabi launched the region's first personalized precision oncology program, leveraging genomics to transform diagnostics, drug therapies, and prevention methods. As early as 2020, Dubai established an advanced genomics center at Al Jalila Children's Hospital, offering genetic testing and counseling. Dubai will also host the first Middle East Precision Medicine Exhibition and Summit in 2024, highlighting the region’s commitment to advancing precision medicine in healthcare.

For Chinese companies, cell and gene therapy (CGT), as a new generation of precision medicine, has a relatively small technological gap between China and abroad. In some cases, certain fundamental technologies are even in a leading position. Companies with promising pipeline progress and positive clinical data, if able to develop valuable products, will be highly attractive to the MENA market, where there is significant demand for treatments in areas such as oncology, rare diseases, and autoimmune disorders.

Finally,Anti-AgingOne of the research areas included in Saudi Arabia's Vision 2030 is the goal to increase the average life expectancy of its citizens from 74 to 80 years. To achieve this, Saudi Arabia established the Hevolution Foundation (a name derived from "health" and "evolution," with an evident meaning), aiming to fund universities and startups to participate in the development of anti-aging drugs. The foundation has been allocated an annual budget exceeding $1 billion. In September this year, Mubadala Fund of Abu Dhabi participated in the financing round of Rejuveron Life Sciences AG, a Swiss biotechnology company focused on researching and developing treatments to prevent and cure diseases associated with aging. The company will open an office in Abu Dhabi and has already started collaborating with local universities and hospitals to advance aging-related research in the Middle East.

Chinese enterprises with technological accumulation, a certain scale in China, and international aspirations are more likely to gain a foothold in the Middle East. They can enter the local market through technology localization or technology transfer, and establish their business by implementing operations on the ground, cultivating local talent, and securing local financing for development—this is also a viable growth path.

Simply bringing in is not enough; Middle Eastern capital unleashes its "financial prowess," actively stepping out to invest in the forefront of the global biotechnology wave.

Taking Qatar as an example, its Qatar Investment Authority (QIA), established in 2005, manages assets worth approximately US$500 billion and ranks among the top ten sovereign wealth funds globally. Its investment approach has shifted from a primary focus on the energy sector to diversified investments, with biotechnology and life sciences being key areas of interest. Just this year, QIA has participated in multiple Biotech financing rounds.

This year, some Middle Eastern capital participated in financing projects, data sourced from VCBeat.

Like Qatar, many Middle Eastern countries, despite being rich in oil and natural gas resources, are no longer satisfied with their resource-based economies. They have been striving to transition towards technology-driven and sustainable economic structures. Biotechnology and the new energy industry are the sectors they are betting on for the future.

From the investment style of Middle Eastern capital in recent years, in addition to the pursuit of innovative drugs, there is also a focus on the development of new technologies and efforts to introduce technological upgrades to the local medical industry. For example, the digital transformation of health institutions. According to plans, the Gulf Cooperation Council countries will digitally upgrade and renovate approximately 30% of domestic medical institutions over the next decade. Among them, Saudi Arabia and the United Arab Emirates, due to their strong consumer base, will become the leaders of this wave of digital transformation.

On December 9, the Saudi Investment Ministry held an investment promotion conference in Guangzhou, hoping to strengthen cooperation between Guangdong enterprises and Saudi Arabia, promote technological innovation in Saudi smart cities, artificial intelligence, big data, and talent cultivation, and facilitate digital transformation and development. At the same time, Guangdong Province will also actively support Saudi PIF and other sovereign wealth funds in establishing partnerships with relevant funds in Guangdong to increase investment in emerging industries.

In addition, the application of artificial intelligence is also a key development direction that Middle Eastern capital focuses on, including imaging-based artificial intelligence and AI-driven drug discovery. In this aspect, companies in China are also participating. At the beginning of July, XtalPi, New Horizon Health, and several other companies signed a cooperation memorandum to enter the Saudi market and join the China-Saudi Enterprise Federation. To establish a presence in the Middle Eastern market, XtalPi conducted multiple surveys in the region and ultimately chose Saudi Arabia, which has a strong demand for artificial intelligence research, as its first stop in expanding to the Middle East. In the future, XtalPi will not only apply artificial intelligence to the healthcare and wellness sector but also hopes to make breakthroughs in new areas such as materials science.

In February this year, Insilico Medicine, another AI-driven drug discovery company headquartered in Hong Kong SAR, China, also announced the establishment of a generative AI and quantum computing research and development center in Abu Dhabi. The company has developed an experimental drug for idiopathic pulmonary fibrosis using AI. It is currently undergoing mid-stage trials in the United States and China, with preliminary results expected by early 2025.

During the pandemic, companies including Sinopharm Group, CanSino Biologics, and Yisheng Biopharma conducted clinical trials for vaccines in countries like Saudi Arabia and the UAE, laying the foundation for ongoing collaboration. Subsequently, multiple domestic innovative pharmaceutical companies began to focus on this blue ocean market. For instance, Junshi Biosciences granted Hikma MENA FZE an exclusive license and commercialization agreement for its PD-1 drug, Toripalimab, allowing development and commercialization rights across 20 countries in the MENA region, including Jordan, Saudi Arabia, the UAE, Qatar, Morocco, and Egypt.

In addition, Huadong Medicine has reached a cooperation with Julphar (Gulf Pharmaceutical Industries), granting Julphar the rights to develop, manufacture, and commercialize its Liraglutide Injection in 17 countries within the MENA region, including the UAE and Saudi Arabia. BeOne Medicines has partnered with NewBridge Pharmaceuticals to promote Zanubrutinib in Kuwait, Bahrain, Qatar, Saudi Arabia, the UAE, and other countries.

In September this year, Shanghai Henlius Biotech, Inc. reached a cooperation agreement with PT Kalbe Farma Tbk, granting it exclusive rights for the development and commercialization of Henlius' self-developed anti-PD-1 serplulimab in 12 MENA countries, including Saudi Arabia, the United Arab Emirates, Egypt, Qatar, Jordan, and Morocco.

For pharmaceutical companies with international experience, licensed cooperation to penetrate the MENA market is just the beginning. Joint ventures or investments with local pharmaceutical companies, or technology licensing for localized production and marketing, growing into a leading brand in a specific disease area or niche market in this region, will be an important step towards becoming a global pharmaceutical enterprise. Innovative vaccines and monoclonal antibody drugs produced in China have broad development prospects.

In September this year, a delegation of Chinese healthcare enterprises supported by AstraZeneca and Legend Capital embarked on a Middle East tour. The delegation included CanSino, Luye Pharma, AmoyDx, Changchun High & New Technology Industries, Innovent Biologics, Boan Biotech, New Horizon Health, Innomind, Kanglieda, Etana, Berger Medical, Yidu Tech, and Legend Capital, covering multiple fields such as pharmaceuticals, biotechnology, vaccines, medical devices, diagnostics, medical big data, and capital.

Breaking into the Middle East may become a path for Chinese pharmaceutical companies to break through in overseas markets.

References:

https://www.fiercepharma.com/manufacturing/uae-merck-serono-neopharma-announce-first-pharmaceutical-production-agreement

IQVIA White Paper November 2020 “Realizing Biosimilar Potential In the Middle East & Africa”

IQVIA White Paper “Localization of Pharmaceutical Manufacturing in Middle East and North Africa Region”