AMMAN - With few exceptions, the majority of universities are not meeting the employment needs of the pharmaceutical industry, according to the Jordan National Competitiveness Report 2007.
"Despite numerous institutions offering pharmaceutical-related degrees, the quality and quantity of the professional workforce is a significant constraint to the growth of the pharmaceuticals industry," the report said.
Written by a group of researchers, the report indicated there is a significant shortage across the key technical and management functions: Operating and production managers, industrial and chemical engineers and pharmacists.
Brain drain was another further constraint on the industry as researcher Rasha Hinnawi pointed to a survey in which 85 per cent highlighted migration of skilled labour outside Jordan as a significant issue compromising the ability to retain the best workers.
Besides supplying the industry with specialised workers with practical expertise, Hinnawi wrote that investment in market-driven research and development was a key factor in determining if Jordanian companies are able to move up the global value chain into branded and patented biopharmaceuticals.
"Research is happening but on a small scale and limited to a few companies and individual scientists," she remarked.
Underlining the low spending on research and development (R&D) compared to international standards, Hinnawi said Jordan currently ranks 60th out of 61 countries in the IMD World Competitiveness Yearbook in total R&D expenditure.
In terms of financing, over half of the companies surveyed indicated that there are limitations in securing public financing from regional or international equity markets.
"As strong, middle-market companies seek to expand outside Jordan and the immediate region, constraints on large-scale financing may limit expansion of the market share and requisite production capacity," the report said, adding that most pharmaceutical firms look outside Jordan to track and understand market trends and develop new products.
The strength of supporting services, especially clinical research organisations, was placed as the last constraint to adaptation and growth of the pharmaceutical sector.
The competitiveness report referred to a survey of industry leaders that listed corruption, inadequately educated personnel, the work ethic of the labour force, inefficient government bureaucracy, supply of infrastructure and inflation as the most worrisome issues.
Noting that Jordan's pharmaceutical sector is highly fragmented with no one player controlling even 10 per cent of the market, and that 90 per cent of total revenues are still generated by branded generics, the report cautioned that local manufacturers are facing a rising threat from lower cost producers in other markets.
But in a section that compared the drug industry in Jordan with regional and international benchmarks, the researcher said: "Based on the latest financial data, Jordanian companies are proving that they can perform on par with international competitors."
"In 2005, the operating margin for the top 15 generic companies was an average of 16.1 per cent compared to 24.8 per cent for the group of top nine-branded drug companies and a 25 per cent margin for Israel's Teva," she added, noting that Hikma Pharmaceuticals registered a 26.4 per cent operating margin in 2005.
Despite a strong manufacturing presence, Jordan imports 10 per cent more of its pharmaceuticals than does Israel: Israel 60 per cent, Jordan 70 per cent, Saudi Arabia 80 per cent and Lebanon 94 per cent, the report indicated.
It said that the strong position of Jordanian companies in the Middle East has allowed many of them to capitalise on the high growth in the regional market.
The contribution of the pharmaceutical industry to the Jordanian economy was highlighted in the report which showed that medicines accounted for 7.18 per cent of Jordan's export base. Exports of medicine have risen fourfold since the early 90s to $300 million at the end of 2006.
Pharmaceutical production in 2006 was worth $450 million, nearly a sixfold increase from 1990 when the value was about $77 million, according to the report.
"Historically, production has been concentrated in generic pharmaceuticals. Around 3 per cent of the production was manufactured under licensure which started about 23 years ago," it said.
The report pointed out that Jordanian pharmaceuticals are registered in over 60 countries including North America and Europe and that nearly 75 per cent of production was destined for export markets.
Although the industry is well-aligned with the latest international market standards, and despite the industry's geographic reach, 80 per cent of exports are sold in the Middle East region, heavily in Saudi Arabia and Algeria. Jordanian products, including solids, semisolids, liquids, aerosols and injectables claim nearly a 30 per cent share of the domestic market.
A total of 17 manufacturers at present employ 4,475 people directly, with the broader industry employing an estimated 8,000 people.
Jordanian companies registered a combined net profit of JD55 million in 2006 up 15 per cent annually over the past two years, with Hikma the sales leader by a significant margin.
With its recent acquisition of Arab Pharmaceutical Manufacturing Co. Ltd. (APM), Hikma will further consolidate its dominance in Jordan, Hinnawi remarked.
Gross margins for all but one manufacturer were above 40 per cent, with most hovering between 50 per cent and 60 per cent.
While both gross and net profit margins are well below the average of the largest global pharmaceutical manufacturers, they are either slightly above or in-line with the major generic manufacturers.
In a number of cases, Jordanian pharmaceutical companies are generating net profit margins that are well above international competitors in generic manufacturing and rival those of the most innovative and globally competitive firms, the report concluded.
By Samir Ghawi
© Jordan Times 2008
