CAIRO: While the relentless global financial malaise could raise the blood pressure of jittery executives, it could be a silver lining for pharmaceutical companies such as Novartis.
“The pharmaceuticals sector is very important for people. Even when you have a crisis, you will continue to [consume] medicine and food; so the sector will be less affected by the crisis than banking and auto, said Ali Toker, president of Novartis Egypt.
Globally, pharmaceutical makers like Novartis have proven relatively resilient in the economic downturn as healthcare is usually one of the last areas where consumers cut back spending.
When the financial turmoil reared its ugly head in 2007, Novartis Egypt was able to hit growth rates of around 11 percent, he said. “In 2008, our growth rate climbed to 18 percent, which compares to an overall market growth rate of 14 percent, he added.
While growth rate could slow down this year, Toker said the company will likely continue to outperform the market. “Our growth rate will [remain] close to double digits in 2009; between 9 to 10 percent. Our performance will continue to beat the market because we launch new products every year.
The Swiss-based company poured in investments worth $15 million in 2007 alone to upgrade and expand its 80,000 square meter plant in Cairo, with the objective to produce 75 million packs in 2009 up from 68 million a year ago.
“We will also invest $3 million per year for the next five years to maintain our leadership position in the Egyptian pharmaceutical market, said Toker adding that each year the company introduces between two and three new products locally.
Swiss Vice President Doris Leuthard toured Wednesday Novartis Egypt’s plant as part of her economic mission to Egypt where she met with a number of policymakers and Swiss investors in Egypt.
“As Egypt and Switzerland singed a free trade agreement under the European Free Trade Association (EFTA) in January 2007, it has become important to promote bilateral trade and business ties, she told Daily News Egypt during the tour.
“We want more Egyptian companies to beef up their exports to Switzerland, added Leuthard, who is also head of the Swiss Federal Department of Economic Affairs.
In the first nine months of 2008, bilateral trade jumped to $549.8 million, out of which Swiss exports constituted $442.3 million and Egyptian exports $17.4 million.
While Egypt’s exports to Switzerland have been limited in quantity, Leuthard hopes her visit will help promote Egyptian exports. She sees strong potential for Egyptian food exports – as Switzerland is a net importer of food – as well as potential for Swiss pharmaceutical exports.
The Swiss drug giant Novartis established its Egyptian manufacturing facility in 1962. Novartis Egypt currently operates three divisions: pharmaceuticals, which specializes in innovation-driven prescription drugs; Sandoz, which produces generic prescription drugs; and consumer health which manufactures over-the-counter drugs.
The company’s total sales amounted to $150 million in 2008, said Toker, and “Our market share stands at 7 percent, which makes us Egypt’s number one pharmaceutical company.
The country’s pharmaceuticals market – worth some $2.3 billion – is rich, with “strong worldwide companies operating here as well as a number of very strong local ones, he said.
One way Novartis Egypt combats fierce market competition is by managing a diversified portfolio of products that are both innovative and affordable. “For prevention, you need vaccines. For healthcare, you need consumer products. And for diseases, you need innovative drugs, Toker said.
“We are doing our best to let the Egyptian [market] produce affordable products for the community, he added. “Prices in Egypt are the cheapest in the world; cheaper than in India and Bangladesh.
While Novartis Egypt says it will manage to shrug off the ongoing financial crisis, it faces other challenges including pricing of its exports, absence of universal healthcare plan, and violation of intellectual property rights (IPR).
“Pricing conditions of Egypt don’t allow us to export to all countries we want to like the Emirates, said Toker, explaining that one of the biggest hurdles facing exports is that traders want the same prices as Egypt’s.
“Pricing [in Egypt] creates a problem for our exports.but we are trying to come up with new strategies for pricing roles, he clarified.
Novartis Egypt’s exports currently constitute less than 1 percent of sales, with most production being consumed locally. The company rolled out Wednesday its first export consignment headed for Nigeria. The company is eyeing Venezuela, Chile, Brazil, the Middle East, and some European countries next.
“Our target is to increase our exports to 5 percent within the next five years, Toker said.
Another challenge for the company is absence of a universal healthcare insurance in Egypt, which would have helped make drugs more affordable for the wider population. “Without a universal health insurance, people have to pay for medicine from their pockets, and income levels in Egypt are [mostly] not high enough, he said.
As for IPR, Toker said that counterfeiting was one of the biggest problems drug manufacturing companies face locally. “Counterfeiting hurts people because they are buying drugs to get better; so it is not acceptable.
He complained that IPR laws in Egypt were not deterrent enough to prevent such malpractices. “Laws are not strong enough, and it is difficult to penalize violators. They keep repeating crimes over and over, so the law should be improved.