Pharma giants move in on UAE as demand stretches local firms

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AstraZeneca and G42 Healthcare have signed an agreement to locally manufacture pharmaceuticals in Abu Dhabi.

The agreement outlines collaboration in four key areas, including localisation of manufacturing, research and development, innovation and sustainability at a global scale. 

But while the deal aims to cement Abu Dhabi’s position as a hub for research and innovation in life sciences, analysts predict that local pharmaceutical manufacturing capacity will not increase fast enough to meet the UAE’s growing medicine needs.

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Fitch Solutions says the UAE’s pharmaceutical imports will grow by 9.2 percent annually over the next five years despite the country’s ambitions to increase local manufacturing while exports are set to increase by 7.3 percent. 

Last month, the Ministry of Health and Prevention encouraged foreign companies to move some of their production lines to the UAE and take advantage of the country’s infrastructure following an agreement between Globalpharma, a subsidiary of Dubai Investments, and GlaxoSmithKline.

Dr Amin Hussein Al Amiri, assistant undersecretary for the health regulation sector at the ministry, said at the time: “The partnership between GlaxoSmithKline and Globalpharma will not only enhance the sustainability of the pharmaceutical sector in the UAE, but will also help effectively meet the needs of all patients.” 

Illumina, an American biotechnology company headquartered in San Diego, which develops, manufactures and markets integrated systems for the analysis of genetic variation and biological function, has also recently launched a solutions centre in Dubai.

But analysts at Fitch Solutions said: “Despite these commitments, we expect that local manufacturing capacity will not increase fast enough to meet the emirates’ growing medicine needs, causing the UAE’s pharmaceutical trade balance to widen.”

By 2031, Fitch expects sales to reach a value of AED25.5 billion ($6.9 billion), representing a 10-year compound annual growth rate of 6.5 percent.

Stephen Moss, regional CEO for the Middle East, North Africa and Turkey at HSBC, said pharmaceuticals is a sector that India and the UAE are developing, with Indian businesses looking towards the Emirates as a means of diversifying their manufacturing base. 

The UAE’s population of 10 million includes an Indian diaspora of 3.3 million.

“The UAE is also undertaking activities to increase the value-add of establishing manufacturing hubs there, increasing interest in the UAE not just as a transitional trade hub, but also as a manufacturing hub,” Moss said. 

The analysis comes despite an announcement in June by Pure Health to invest AED10 billion over the next 10 years to stimulate local industrial capacity, capitalise on opportunities within the healthcare sector and conduct training programmes to upskill the national workforce. 

The agreement is in line with the National Strategy for Industry and Advanced Technology and the In-Country Value Programme, which aim to attract investors and manufacturers to the UAE’s pharmaceutical and medical equipment sectors, among others. 

Fitch analysts added: “The frequency and size of Pure Health’s UAE local manufacturing agreements will increase in the medium term.

“Since Pure Health’s declarations [in June], MoUs have been signed that cover 2.6 percent of the firm’s investment commitment over the next 10 years.

“As a result, we expect the frequency and size of further Pure Health agreements to intensify in the medium term. 

“Given the rising burden of non-communicable diseases in the UAE, we expect further local manufacturing investments by Pure Health will target obesity, diabetes and cardiovascular disease.

“It is notable that rising inflation will have a negative impact on Pure Health and other drugmakers operating in emerging markets in the Mena region.”

Fitch also highlighted opportunities for local and multinational firms who are willing to continue to invest in the UAE to access the growing Mena diabetes market. 

According to the International Diabetes Foundation, the total number of people living with the condition in the Middle East and North Africa is expected to grow 30 percent by 2031. 

As part of an October agreement with the ministry, Pure Health and Julphar will establish the first factory in the Middle East to produce insulin glargine, the first long-acting biological alternative to insulin for the treatment of diabetes. 

The AED150 million manufacturing facility will enable the UAE to produce the product at a more competitive price and support exports to regional and global markets where there is an increasing demand for insulin substitutes. 

In addition to smaller regional manufacturing projects focused on meeting local insulin demand, Fitch said it expects the UAE will receive “significant investment” from local and international firms aiming to export diabetes medications to Mena, given the UAE’s strong long-term commercial potential.