Morocco: Standing Firm

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Valued by Fitch at a trifling USD 1.6 billion, the Moroccan pharma sector can be considered only a middling-size market by regional standards, and much less when set against a global backdrop. Yet the MENA’s 10th largest economy by GDP very much manages to hold its ground when it comes to attracting overseas investment into the life science sector courtesy of a well-honed reputation for openness, predictability and stability in a region far more commonly associated with turmoil, volatility and bouts of economic nationalism.

 

“For over a decade this North African nation has been steadfast in rolling out an ambitious socio-economic modernization and reform program anchored upon improving the business and investment climate and strengthening infrastructure…which goes a long way to offsetting any limitations relating to market size and lack of maturity,” confidently asserts Ali Besri, general manager for Pfizer’s Morocco and North Africa cluster.

 

For over a decade this North African nation has been steadfast in rolling out an ambitious socio-economic modernization and reform program

Ali Besri, Pfizer

 

Layla Sentissi, executive director of the Moroccan Association of the Pharmaceutical Industry (AMIP) very much echoes these sentiments when trying to make sense of the enduring allure of a country that many commentators had once written off as destined to become marginalised and peripheral.

“This is a market that remains on the radar of international drug developers because it constitutes a safe bet in an otherwise rather turbulent and uncertain region. Beyond its strategically relevant geographic positioning at the crossroads between the African and European continents, Morocco stands out as a bastion of tranquillity offering strong economic and business fundamentals: encompassing a solid financial system, a manufacturing platform on a par with international norms, skilled human capital and a legal framework whereby investors are able to repatriate all their dividends,” she declares.

Also significant is the conviction of many pharma multinationals that the development trajectory of the Moroccan life science sector is headed in the right direction. “We detect a real willingness on the part of the national authorities to harmonize regulatory, pricing and reimbursement processes, switching from sequential to parallel processes, while simultaneously broadening out access to healthcare and medication including innovative therapies,” confides Besri, pointing to longstanding efforts to update and unify policies, to amend laws governing public-private partnership and to condense marketing authorization timelines down to a maximum of 10 months.

 

[Morocco] constitutes a safe bet in an otherwise rather turbulent and uncertain region

Layla Sentissi, AMIP

 

“The fact that Moroccan policymakers have been putting in a lot of effort to catch up and maintain a degree of competitiveness has certainly not escaped our notice,” agrees Saad Kanbris, regional head for Morocco, Tunisia and Libya at Novartis. “I’m happy to be able to say that we have witnessed tangible improvements in the timeframe to bring innovation to market and nowadays enjoy the fruits of both an advanced regulatory framework for data protection and clearly defined pathways for registration. Crucially we also perceive that outstanding limitations in the marketplace are well understood and recognised by the authorities, which surely bodes well for future progress,” he concedes.

“I’d describe the mood as broadly optimistic. Over the past decade, demonstrable progress has been made with a focus on treating more, treating better, and treating fast. Moreover it’s certainly possible to generate a decent business in this conditions,” enthuses Merck’s general manager for Morocco and Tunisia, Taher Hassen. “Right now the country represents about 30 percent of Merck group’s North Africa revenues and has consistently and sustainably grown at a double-digit rate over the past four to five years, despite no major product launches or inorganic contributions,” he proudly affirms.

Nor are there any real fears that the kingdom might follow many of its neighbours down the dead-end of economic nationalism. There is, for instance, no stipulation or preference for locally manufactured drugs in public tenders, in stark contrast to regional rivals Egypt, Tunisia, Algeria, Jordan and Turkey.

 

I frankly don’t believe the kingdom will adopt a more protectionist industrial strategy any time soon

Myriem Tamimy, Janssen

 

“As you might expect, there are periodic public debates about whether Morocco should be tweaking its development model to better support home-grown, indigenous drug makers through import-substitution measures, but I frankly don’t believe the kingdom will adopt a more protectionist industrial strategy any time soon,” affirms Myriem Tamimy, country manager Morocco, Tunisia and French Speaking Africa at Janssen.

“That would simply not align with the King’s unwavering vision of economic openness exhibited over the years, and with the multitude of free trade agreements the country has signed. On the contrary, Morocco acts as something of a role model for sub-Saharan Africa on how to plug into an increasingly globalised world and, from the perspective of an MNC, we think the country offers certain guarantees thanks to that constancy and clarity,” she elaborates.

 

 

The Power of Attraction

Certainly, there appears to have been little let-up in foreign direct investment in recent years with mid-cap and big pharma alike demonstrating a sustained appetite for deep-pocket infrastructural projects and technology transfer initiatives. Indeed, drug makers from Europe, the United States, Asia and beyond have been splashing the cash as they set about bolstering their in-country manufacturing capabilities.

Pfizer, for example, has invested in excess of USD 25 million in its plant in El Jadida and now employs more than 200 personnel straddling manufacturing, distribution, medical and commercial affairs operating across six therapeutic areas of focus and producing over 12 million units per annum.

 

There’s certainly much to like about this market when you’re making strategic investment decisions based on projections and seeking to minimise your risks

Taher Hassen, Merck

 

US-based generics heavyweight, Mylan, for its part, inaugurated a state-of-the-art production site in Casablanca in May 2019 on the back of USD 6.5 million cash injection, that will see the company manufacturing at a rate of 60 bottles per minute. Meanwhile, Saudi Pharmaceutical Industries and Medical Appliances Corporation (Spimaco) has raised eyebrows by ramping up capacity at a 15,670 square metre mega plant in the Berrechid industrial area that is slated to create an additional 350 new jobs by 2022.

Even Indian drug makers appear enthusiastic to seize a slice of the action. Sun Pharma unveiled a brand new local production site in December 2019, having upped its original investment to USD 6.2 million, while Cipla opened doors on a first-of-a-kind facility in the suburbs of Rabat, boasting a yearly production capacity of 1.5 million metered dose inhalers (MDI).

“There’s certainly much to like about this market when you’re making strategic investment decisions based on projections and seeking to minimise your risks. Once you factor in the stable currency, deeply-embedded industrial legacy and reliable infrastructure and connectivity, it becomes clear that they’re offering a highly sound and stable foundation from which to put down roots and grow your business,” observes Merck’s Taher Hassen. “It’s absolutely no coincidence that this is a place where Merck has felt confident enough to open up our technology to local stakeholders and engage in advanced knowledge and capabilities transfer: specifically around biotech production,” he reveals.

 

Ultimately there’s very little reason not to feel comfortable bringing cutting-edge innovation into this jurisdiction

Saad Kaanbris, Novartis

 

Others agree. Drawing attention to the fact that the latest data from IQVIA suggests that a whopping 80 percent of products available in the Moroccan market place are now manufactured locally (and that out of every 10 domestically manufactured products, 6 constitute original formulations), Pfizer’s Ali Besri argues that these achievements are emblematic of the country’s success in winning over the trust of the international investment community.

“Morocco can justifiably lay claim to be one of only a handful of countries in the region to possess such an established manufacturing tradition and 50-year track record of thriving collaborative relationships between multinationals and indigenous actors so it is entirely logical that companies should be willing to indulge in tech transfer,” he reflects. Novartis’ Saad Kanbris very much concurs. “Ultimately there’s very little reason not to feel comfortable bringing cutting-edge innovation into this jurisdiction,” he insists.

 

Complications in Coverage

That said, coverage deficiencies and structural complexities hardly make Morocco an easy market to navigate. While expenditure on public health is undoubtedly improving – the Ministry of Health’s budget allocation rose in 2019 by 10.4 percent in nominal terms to EUR 1.5 billion or 1.3 percent of national GDP as part of a well-publicised “social” reform drive – it remains humble by regional standards, accounting for a mere 57 percent of total spending in Tunisia and 68 percent in Algeria. Moreover, government-backed health insurance schemes continue to look patchy and inadequate.

 

The state still has a great deal to do if it is to reach its target of 90 percent coverage by 2025

Fadela Benjelloun, LEMM

 

“Since the mid-2000s coverage has been inching up steadily with the introduction of Obligatory Health Insurance (or AMO) for public and private sector employees and a Medical Assistance System (or RAMED) for the indigent and the very lowest-income strata of society, however, the state still has a great deal to do if it is to reach its target of 90 percent coverage by 2025 because, right now, independents, who make up a full third of the population, or about 11 million people, are left without any kind of public insurance at all,” laments Fadela Benjelloun, executive director of the Association of Multinational Pharma Companies in Morocco (LEMM).

One of the great outstanding challenges in Morocco is clearly how to cover unreported workers in the black market who often cannot afford to pay out-of-pocket. “Owing to the lack of a viable safety net for these people and also to deep-rooted cultural beliefs, many people prefer to try traditional home remedies instead of pharmaceutical drugs,” admits Salim El Guermai, CEO of Galenica, a local laboratory famed for having introduced generic versions of Gilead’s Hepatitis C treatment Sovaldi and BMS’ Daklinza at a price 60 times lower than the originals. “By way of comparison, the consumption of medicines is much higher in Algeria and Tunisia than in Morocco, at least double per inhabitant,” he argues.

 

The consumption of medicines is much higher in Algeria and Tunisia than in Morocco, at least double per inhabitant

Salim El Guermai, Galenica

 

Meanwhile, “fewer than 30 percent of people covered by AMO actually make use of their insurance in the absence of a third-party payer system as they cannot pay for medical services and pharmaceuticals upfront, especially in the case of expensive long-term treatments,” according to the AMIP’s Layla Sentissi. “To date, only about 90 expensive products have ever been integrated into the third-party payer system,” she adds, “and though latest generation therapies may be granted market authorisations relatively swiftly, this counts for little material benefit if the dossiers end up getting bogged down when they reach the reimbursement stage.”

The consequence of all of this is glaring distortions in healthcare access: According to the latest figures from the National Agency of Medical Insurance, three percent of the insured population consumes a mighty 52 percent of health insurance funds, a situation which Fadela Benjelloun brands as “clearly unsustainable over the long run.”

 

Without proper reimbursement, the vast majority of Moroccan patients cannot gain access to our innovative oncology therapies

Guillaume Recorbet, Servier

 

Insufficient coverage also logically has far-reaching implications for the portfolios of innovative multinational drug makers. “Without proper reimbursement, the vast majority of Moroccan patients cannot gain access to our innovative oncology therapies, irrespective of the fact that they might be registered on the market, simply because they do not have the necessary financial firepower to shoulder the cost of treatment themselves,” candidly admits Guillaume Recorbet, general manager of French midcap outfit, Servier. “Given the difficulties experienced in securing reimbursement, some companies are clearly struggling to place their most sophisticated therapies profitably on the market,” he adds.

How then, are the international labs going about the arduous task of surmounting these hurdles? For Recorbet, “pricing strategy takes on additional relevance and becomes absolutely critical to prospects of success,” because only by identifying an appropriate price level will product managers stand a chance of attaining the necessary market penetration.

 

Ultimately this challenge can only be tackled if we collaborate right across the healthcare ecosystem by engaging with the authorities, payers, practitioners and patients to identify practical workaround solutions

Alain Barry, MSD

 

MSD, meanwhile, has been focusing upon bringing diverse stakeholders together and mobilising a coalition for change. “Ultimately this challenge can only be tackled if we collaborate right across the healthcare ecosystem by engaging with the authorities, payers, practitioners and patients to identify practical workaround solutions,” notes managing director, Alain Barry, while simultaneously acknowledging the value of assembling “highly capable and experienced logistic pricing, scientific and regulatory teams” to make headway in such a “tactical” market.

Janssen’s Myriem Tamimy describes the challenges experienced thusly: “Given that Morocco effectively constitutes a hybrid marketplace composed of three very different segments each exhibiting their own peculiar characteristics, there can be no all-encompassing, one-size-fits-all template. Instead we have to resort to the deployment a micro-approach focusing channel by channel and rolling out different action plans for the private, hospital and public sectors respectively.”

“Frankly, there’s no single winning strategy or formula that can be replicated across the board,” agrees Merck’s Taher Hassen. “Adaptability is the name of the game an everything hinges upon the composition of the portfolio, the maturity of the products and one’s ability to identify a clear and logical pathway whereby the target patients pool can access the proposed solution.”

 

Generics: Towards Consolidation

It is in the generic segment, however, where some of the thorniest challenges lie. After a brief period of relatively high growth following the introduction of Obligatory Health Insurance (AMO), the generics market has stagnated in recent years as a result of a stiffening of competition and successive rounds of price cuts affecting more that 3000 medicines. “Essentially increased volumes did not compensate for lower prices and generic penetration continues to languish at around 40 percent in the absence of clear policies towards doctors and pharmacists to encourage smart prescribing,” bemoans the AMIP’s Layla Sentissi.

 

Recently… global generics players including Mylan, Sun Pharma, and Hikma have been establishing a direct presence for the first time in the country and, in doing so, have been disrupting the marketplace and redefining the rules of the game

Driss Chaoui, Afric-Phar

 

“Market growth is indeed very low at the moment coming in at about two percent, while new actors have entered thus increasing pressure in what is an already pretty tight environment,” confirms a concerned Salim El Guermai, who reports that Galenica has been encountering a flurry of new Indian and Chinese entrants attempting to undercut on price. “We have been endeavouring to differentiate ourselves by scoping in upon niche drugs where competition tends to be less fierce and by offering up a superior quality of medicines which comply with European standards, unlike many of these Asian outfits,” he confides.

Increasingly, though, it is becoming apparent that business models will have to adapt to a new reality. “Historically, the national generic labs grew in line with the Moroccan market alongside MNCs, which were predominantly focusing upon brand name drugs,” recalls Driss Chaoui, CEO of local entity, Afric-Phar. “Recently, however, global generics players including Mylan, Sun Pharma, and Hikma have been establishing a direct presence for the first time in the country and, in doing so, have been disrupting the marketplace and redefining the rules of the game.”

 

The domestic market is nearing saturation and the growth prospects for generic players are diminishing with the overall price of drugs locked in a downward spiral

Salim Ennaji, Laprophan

 

Many analysts are therefore predicting a wholesale shakeout of the generic segment and are bracing themselves for a splurge of M&A activity. “The economic equation is actually very clear,” declares Salim Ennaji, delegate director general of LaproPhan. “The domestic market is nearing saturation and the growth prospects for generic players are diminishing with the overall price of drugs locked in a downward spiral. In parallel, the costs of raw materials continue to rise, as do regulatory expenses associated with the coming into force of new legislation making bioequivalence studies mandatory for generics to receive marketing authorization. The combination of these forces, as with any industry, will be to compel business owners to try and attain critical mass, which, at present, most simply do not possess,” he reasons.

“The prevailing market dynamics are already encouraging many home grown generic firms, that once used to treasure their independence, to consider collaborating with their competitors, primarily motivated by cost optimizations and operational gains,” acknowledges Driss Chaoui. “Likewise, some labs are actively looking into various scenarios to realign their portfolios or bolster their competitive advantage – through additional marketing authorizations from other national peers,” he notes.

 

A new generation of managers is now taking back the reins of the founder’s company and implementing a different strategy, based on a solid commercial background and a willingness to outsource

Mohamed El Bouhmadi, Zenith Pharma

 

Predicting that many of these collaborations will ultimately evolve into asset swaps or full-blown takeovers, Chaoui also believes that, “the arrival on the scene of a second generation of managers in many Moroccan labs, following the retirements of the founding patriarchs, will also probably accelerate a tendency towards consolidation.

Mohamed El Bouhmadi the CEO of Zenith Pharma supports such a hypothesis. “Historically, pharmacists built the first pharmaceutical laboratories in the country and were very attached to their brainchild, but a new generation of managers is now taking back the reins of the founder’s company and implementing a different strategy, based on a solid commercial background and a willingness to outsource,” he notes. “My firm expectation is that Moroccan industry will keep on professionalizing itself and the logic of profitability will gradually usurp the current family business mind-set that carries strong affective bonds. Today’s market pressures can only hasten the inevitable,” he forecasts.

One clear indicator of the changes underway has been the sudden arrival of on the scene of numerous investment funds. In early 2020, Dubai-based NBK Capital Partners snapped up Polymedic, Morocco’s fastest growing local generics player, while SPE Capital bought out Saham Pharma, the leading antibiotics manufacturer and distributor of injectable solutions in the country. “Taking into account the downturn in local market conditions, we embarked along this path as a way to access new growth channels… The deal essentially enables Polymedic to be part of an international platform, benefiting from NBK’s other assets, and thus hands us far greater competitive advantage while reducing our dependency on and exposure to the domestic marketplace,” explains Yassine Houbachi, business development manager at Polymedic.

 

Broadening Horizons

Indeed, as a consequence of the narrow local market, home grown generics labs have increasingly tilted outwards with the intention of conquering foreign markets, especially in Sub-Saharan Africa where Moroccan medicines enjoy a reputation for superior quality and reliability.

“In general, the made-in-Morocco brand tends to travel well within our region and be trusted by African consumers who consider them on a par with European quality standards,” reveals Galenica’s Salim El Guermai. “Moreover, African countries are liable to be open to collaboration with Moroccan entities as a result of our shared cultural heritage and historical ties.” His company is now present in no fewer than 22 countries through sales and marketing agencies: most of them in Africa, but also Iraq and the Eurasian Economic Union with Galenica enjoying the curious distinction of being the only African pharma firm to date to receive GMP certification from Russian authorities.

 

Even though Morocco continues to be the engine of our business, our intention is that we can hit a target of 30 percent of or global revenues coming from other African markets within 10 years

Karim Lahlou, Iberma

 

Iberma, a local market leader in urology, gastroenterology, and psychiatry medications, stands out as another Moroccan entity in the midst of rolling out an ambitious internationalization strategy. “We pride ourselves on servicing a sizeable market in Africa with a coherent geographic portfolio, thus enabling us to share key learning and strategies with our African partners on how to stimulate growth opportunities,” explains the company’s general manager Karim Lahlou. “To date, we have established a strong foothold in Senegal, Cameroun, the Ivory Coast, and Mauritania, and will be adding a further two markets this year… Even though Morocco continues to be the engine of our business, our intention is that we can hit a target of 30 percent of or global revenues coming from other African markets within 10 years.”

The company has simultaneously been assiduously cultivating ties to European markets. “I am proud to say that we have successfully formed a joint venture with the Spanish subsidiary of Italfarmaco, an Italian pharma group, which has spawned Versalya, a pharma lab exclusively devoted to women’s and children’s health,” enthuses Lahlou.

Others, such as LaproPhan’s Salim Ennaji, detect great potential for Moroccan firms to sell to European markets. “Internationalization will certainly be pivotal for the long term prospects of all Moroccan generic manufacturers, LaproPhan included. While for many of us Africa represents our natural backyard and sphere of influence, I also firmly believe in the excellent opportunities presented by the European market space such as the opportunity to take on the role of manufacturing those drugs and formulations that are no longer produced over there.

After all, the French independent lab Servier has long been using its 13,000 square meter production facility in Nouaceur, which has been certified by the ANSM, the French regulatory agency for drug safety, to manufactures drugs for its generic brand, Biogaran, much of which then gets exported back to the French market.

Still, certain obstacles to a frictionless export strategy remain in force. “As of now, the Moroccan pharmaceutical industry only exports a mere 10 percent of its production despite many manufacturers possessing spare capacity and the fact that the plethora free trade agreements signed by our country should be giving us easy access to a market of over a billion consumers,” warns AMIP’s Layla Sentissi. “Clearly, our narrow and fragmented local market does not easily enable the sorts of economies of scale normally required to achieve real competitiveness on the international stage, but there are also some regulatory wrinkles that we still need to iron out,” she claims.

Indeed AMIP has been lobbying the authorities hard to put in place legislation that would allow companies to export products that are not commercialized in Morocco, which currently is prohibited by the law. “In that way, Moroccan companies could play a role in helping other African countries fight against infectious diseases which have been eradicated or have never existed in Morocco. Moreover, it would attract investments from foreign companies that could use Morocco as an export hub for Africa,” she reasons.

 

Resilient and Forward Looking

All in all, then, the Moroccan life science sector remains resilient, relevant and inclined towards adaptation. Moreover those engaging with it tend to be optimistic about its future prospects. “The market may be sub-optimal in term of maturity, but the direction of travel is resoundingly the right one, growth is reliable and consistent, and incremental improvements are being felt day by day. Our role is to be a conduit to accelerating the pace of progress,” avows Merck’s Taher Hassen

 

Though we might have allowed economies like Algeria to overtake us, there is an obvious route back by transitioning towards universal coverage and adopting a more export-orientated agenda

Abdelhakim Tahri, Gynebio

 

“Our predicament is that Morocco, courtesy of its 70-year heritage in pharmaceuticals production, possesses an enviable knowledge base and depth of infrastructure, but perhaps without the commensurate market heft to enable the industry to properly thrive,” reflects Gynebio’s Abdelhakim Tahri. “Though we might have allowed economies like Algeria to overtake us, there is an obvious route back by transitioning towards universal coverage and adopting a more export-orientated agenda, which is precisely the trajectory we are currently on,” he assures.

“Limitations on scale oblige the industry to come up with bespoke solutions that are custom adapted to the country,” concludes Zenith Pharma ‘s Mohamed El Bouhmadi. “We have much to be proud of in terms of having a regulated, welcoming and open marketplace with clear rules, and our future success will hinge upon playing to our strengths, finding the niches in which we can be competitive and consolidating the spread of health coverage.”

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