Africa's growing market attracts Hikma to Ethiopia

South Africa has a well-established pharmaceutical industry, and North Africa is attracting more attention from Western drugmakers. But many countries in between have limited infrastructure or challenging political situations. Figuring out which have the potential to be emerging markets worth investing in can be a challenge. Jordan-based Hikma sees potential in Ethiopia.

Hikma is investing in a joint venture there to produce low-cost drugs for the Ethiopian market. HikmaCure will be a 50-50 partnership between Hikma and MIDROC Pharmaceuticals, which is part of Sheikh Mohammed Hussein Al Amoudi's MIDROC Group. The two will equally share a $22.3 million cash investment for working capital and building a manufacturing and distribution facility in the country. It expects to have the plant up and producing in 2017.

"Expanding our presence into sub-Saharan Africa is a key strategic priority for Hikma and this is an excellent first step," said Hikma CEO Said Darwazah. "We believe Ethiopia offers strong growth potential in the medium to long term and our investment at this stage will enable us to be well-positioned in the market. We will continue to explore opportunities to build our presence in the sub-Saharan region."

While the plant is being built, the partners will get started with the joint venture distributing Hikma products in the market, with help from MIDROC to get them registered and the operation going. They point out that Ethiopia has a population of 94 million people, 64% of whom are under 25 years old. The Ethiopian pharmaceutical market is valued at only about $500 million but is growing at a compound annual rate of 15%. It is projected to hit $1 billion in sales in 2018 as the country builds out its healthcare infrastructure and incomes rise. Currently, about 75% of the drugs sold there are imported.  

The entire African pharma market is small compared to other areas but is growing at 10.6% a year, putting it in step with Latin America's market expansion. It is projected to reach $45 billion by 2020. And as growth in the more established emerging markets slows down, Africa's could still be going strong.

"We're thinking hard about what happens when those emerging markets start to slow because they are not going to continue growing at the rate that they're growing forever--and a place where we're putting a lot of our attention is Africa," Novartis ($NVS) CEO Joe Jimenez said earlier this year.

Other European drugmakers--including GlaxoSmithKline ($GSK), Sanofi ($SNY) and Novartis--are investing in Africa to capture their shares of the larger market. Sanofi is spending €70 million ($94.15 million) on a new plant in Algeria, while Glaxo just spent $98 million to raise its stake in its Nigerian consumer products unit. GSK is also working to boost its market penetration in other countries with the goal of increasing volumes fivefold within 5 years, partly by keeping prices very low.

- here's the announcement

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