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European Biopharmaceutical Review

Target Market

EBR: What is enthusiasm like for investment in Africa?

Miles Mudzviti: In the last few years, we have seen significant interest in the African pharma space. This investment has been varied, from multinational corporations (MNCs) to South African companies expanding into the rest of the continent, or international private equity covering the entire value chain, from R&D, manufacturing, distribution and retail.

MNCs are increasingly incorporating Africa as a signifi cant component of their emerging market strategies. Novartis Chief Executive Offi cer (CEO) Joseph Jimenez said recently: “I see Africa as the next set of emerging markets. We have to start building infrastructure now in sub-Saharan Africa, in countries like Nigeria and Kenya, because these economies are growing at 6% to 7% per year. You are going to see an emerging middle class in these countries. In years five through to 15, I see Africa as a tremendous growth opportunity for Novartis.”

There is clear enthusiasm in Africa for the development of the local pharmaceutical industry, and continental and sub-regional strategies focusing on the homegrown production of drugs reveal how important progress is to these countries’ agendas. The political will is real, but the conditions necessary for the sector to bloom are still not being met and several challenges remain, including access to capital, technology, expertise and the regulatory frameworks.

Why should pharma start considering the region now?

Four main factors have driven – and continue to underpin – the growth of Africa’s pharmaceutical market, in line with overall emerging market trends.

Firstly, rising health investment and growing consumerism – including increasing population, urbanisation, middle class and burden of disease (both communicable and noncommunicable/ lifestyle).

Secondly, expanding healthcare provision across income levels, with rising human resources for health and a prescriber base. There have also been significant increases in the private health sector, as well as new business models addressing the underserved – but huge – bottom of the pyramid.

Thirdly, a maturing business and evolving regulatory environment encouraged by projects like the African Medicines Registration Harmonization Initiative, led by the New Partnership for Africa’s Development – a technical arm of the African Union Commission. This has begun to encourage a conducive business environment, inspiring confidence within the international investment community. For example, in several countries, substantial strides have been made to reduce counterfeits; Nigeria, for instance, has been at the forefront of leveraging mobile authentication technology to mobile laboratories in Tanzania.

And finally, increasing ‘genericisation’ of the market and rising confi dence in generic products which, in part, has also been led by ongoing pricing pressure. The growing push for local manufacturing, driven by strong political will, has given confidence to private investors to look closer at this sector.

What has prevented firms from getting involved?

There has been limited information, meaning the region’s markets have remained relatively underpenetrated and misunderstood. This lack of knowledge has impacted on strategic planning for investment, manufacturing, sales and marketing, and distribution for both local and international companies. There are still also signifi cant challenges with infrastructure, including energy and transport.

Several MNCs have, however, had considerable presence on the continent for many years, with Sanofi being the longest established for over 50 years, closely followed by GlaxoSmithKline (GSK). These fi rms have built an intimate knowledge of, as well as relationships with, varied stakeholders (both public, private and non-governmental) in the market. GSK has announced plans to invest $100 million in setting up fi ve new plants in Africa, in addition to expanding capacity at its current units in Nigeria and Kenya. In a recent statement, the company declared that it had already completed its growth and investment plan for Ethiopia, where it hopes to make a return to local manufacturing.

Indian firms have also had a long presence in the market, initially distributing generic products. Some companies like Ranbaxy, Cipla and Strides Arcolab now have significant local manufacturing capability within countries such as Nigeria, Uganda and South Africa. Not long ago, Cipla entered into a joint venture with Morocco-based Société Marocaine De Coopération Pharmaceutique (Cooper Pharma) and The Pharmaceutical Institute to enhance its position in the country. Meanwhile, Alembic Pharmaceuticals has acquired a 49% stake in Algeria-based Adwiya Mami SARL as it seeks to enter the North African region.

There is definitely an increase in the level of interest and investment. Looking at intra-African involvement, South African fi rms have led a charge into the rest of the continent, with Adcock Ingram acquiring a business – Ayrton Drug Manufacturing – in Ghana, and Aspen also completing a majority investment into local manufacturing company, KAMA. Aspen already has a unit in Tanzania.

To what extent is the opportunity real and how viable is it?

The pharma opportunity is substantial, especially when you consider that around 80% of incremental generics growth is anticipated to come from countries with under-developed markets, like those in Africa, and the continent’s pharmaceutical market itself is expected to reach $40 billion by 2020. With almost 200 million people aged between 15 and 24, Africa also has the youngest population in the world – and it keeps growing rapidly. The number of young people will double by 2045, and the continent is already the world’s second most populated with over one billion inhabitants. This demographic shift is unprecedented in its scale and swiftness; according to a UNICEF report, in the next 35 years, 1.8 billion babies will be born in Africa and the continent’s population will double in size.

What are the main access and cost issues businesses face?

Market and patient access processes across the region are nascent, and the various markets are poorly understood; a situation compounded by the limited availability of data. The prospects for the pharma industry in Africa will depend on how companies approach and manage these, and other factors infl uencing market and patient access strategies.

Tell us about the changing healthcare needs of African populations.

Africa is a region undergoing major transformation, with rapid economic growth and shifting epidemiological trends. The traditional challenges of infectious diseases are now being compounded with mounting incidences of non-communicable illnesses. An expanding middle class, rising medical investment, healthcare reforms (increasing segments covered by health insurance) and urbanisation are all accompanied by growing expectations of both quality and affordability.

Can pharma learn from the Ebola epidemic?

I think the recent crisis with Ebola in the West African sub-region points to some important issues around the fi nancing of health R&D on the continent and, in particular, for socalled neglected tropical diseases. There are companies that are working on potential vaccines, with some trials already under way. There is a need to look further into public-private partnership models that have worked for other illnesses and, at the same time, also seriously consider the role for African governments in the fi nancing of the health sector.

What would you like the next decade to bring?

I hope that the momentum around pharmaceutical sector development can be sustained. There is a strong political will to build a competitive agenda that can have a major influence on investment decisions and is an ideal platform for the industry to participate further, contributing to the health of everyone living in Africa, and to the local economies.

What is the key to success in Africa?

For firms looking to succeed in the region, understanding the varied countries and markets, and their individual circumstances, is critical. Key issues to consider are defining the therapeutic areas of focus, tailoring products to specific needs, and creating successful public and private market access strategies. Obtaining the right people and operational partners on the ground, as well as building relationships with governmental and non-governmental partners, is essential. Most importantly, knowing that the Africa opportunity is a long-term one – and planning accordingly – will set those who are determined on the path to success.

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Miles Mudzviti is the founder and CEO of PharmaAfrica, a business information company that delivers the latest pharmaceutical market insight, in-depth case studies and networking opportunities through high-level conferences and exhibitions in Africa. His mission is to support the growth of a quality African pharmaceutical industry that competitively contributes to the healthcare needs of local people and is recognised in the global pharma arena for quality and innovation.
Miles Mudzviti
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