Hikma Pharmaceuticals Plc, a Jordanian pharmaceutical company, is injecting fresh capital into Pharmacure Plc - a local company, operating under the umbrella of MIDROC Ethiopia since 1998.
The deal between the two companies involves the creation of a joint Venture (JV), called HikmaCure, with an initial investment of 50 million dollars, according to a joint press statement issued last week. Under the JV agreement, HikmaCure will commence its operations inEthiopiaby marketing and distributing close to 50 Hikma products, mostly orals and injectables.
The marketing and distribution of Hikma's products will use the facilities already established by Pharmacure Plc, sources close to the issue told Fortune.
Since its establishment with a paid-up capital of 10 million Br, Pharmacure Plc has been engaged in the production and sales of pharmaceutical and medical health care products.
Founded by Mohammed Hussein Al Amoudi (Sheikh ) and MIDROC Ethiopia- contributing seven million Br and three million Br, respectively - the company became operational in February 2003, in the production of intravenous fluids.
Pharmacure's factory - located in Bole District, around Semit - has one of the largest installed production capacities for intravenous fluids in the country. The company planned to avail close to 80 different dosages to local and foreign markets initially.
"I am certain that this partnership will bring best in-class pharmaceutical products to Ethiopia and add to the country's medium to long term growth prospects," Al Amoudi was quoted as saying in the press release.
Pharmacure plays an important role in the local manufacturing sector, characterised largely by its medium-size, which covers only 20pc. It is one of the largest plants in Africa with a total investment of 100 million Br.
However, sources close to the issue told Fortune that Pharmacure has not fared well in its original intention of manufacturing drugs like many of the company operating in the country, because of the stringent regulatory controls, financial constraints and very high technical standards required in the country.
The sector has been in difficulty over the past five years, says a former senior expert who worked at the Ethiopian Food, Health & Medicine Administration and Control Authority.
"Within the last four years, close to four companies were foreclosed by two state-owned banks for failure to service their loan obligations," the expert claimed.
The Ethiopian pharmaceutical industry currently consists of close to 15 pharmaceutical and medical supply manufacturers. About 10 of these produce pharmaceuticals, while the rest are engaged in producing medical supplies, such as syringes, absorbent cottons and lab equipment.
The industry is very small in size and has a limited capacity, serving only a small part of the domestic market, while imported drugs cover the rest of the market. In 2012, about 300 million dollars worth of drugs were imported, according to the Ethiopian Revenues & Customs Authority (ERCA), by 112 importers and wholesalers registered in the country. There are close to 3,228 drug retailers (pharmacies and drug stores) registered in the country.
"Ethiopia is still very underdeveloped in terms of the pharmaceutical market," Mazen Darwazah, executive vice chairman and chief executive of Hikma's Middle East and North Africa business, was quoted by Reuters as saying, last week.
"It's a market that has a huge potential for growth. We are expecting an increase in expenditure on healthcare," said Darwazah. "Today is 400 million dollars, but we are expecting it in the next couple of years to go up to one billion dollars."
To this end, Hikma plans to erect a facility in the future that will have encapsulation, compression, liquid suppository and powder filling lines. Here, approximately 40 products will be manufactured.
Hikma was founded by Samih Darwazah, in 1978, inAmman,Jordan. Eighteen years later, it became the first Arab company to export pharmaceutical products to the US.
Ever since the company was first listed on the London Stock Exchange, in 2005, Hikma has been on an acquisitive streak.
Recent acquisitions include Instituto Biochimico Pavese Pharma, inItaly, in 2005, and Jazeera Pharmaceutical Industries, inSaudi Arabia, in 2006.
Earlier this year, Hikma forked out 22 million dollars to buy Pharmaceuticals & Chemical Industries (EPCI), an Egyptian company, in a deal that included two manufacturing facilities and 35 generic pharmaceutical products.
However, the new venture with Pharmacure marks its first foray into sub-SaharanAfrica.
Hikma came into this venture, since expanding into Sub-Saharan Africa had been its key strategic priority, said Darwazah, CEO of Hikma.
"This is an excellent first step in achieving our continued expansion in Africa and we believe Ethiopia is the ideal platform for us," he was quoted as saying in a press release sent to Fortune.