With Iran nearly free from international sanctions since January 2016, the reformist government has been working hard to maintain market stability and openness towards the Western world, as well as to seek more foreign investment.
Many European and Asian investors took no time entering the Iranian market by gaining a head start after sanctions were lifted, provided they are aware of the risks and uncertainty that followed.
According to awhite paper published by Solidiance, an Asia-focused management consulting firm, Iran’s economy is well-diversified across industries from Oil and Gas, to Automotive, Agriculture, Manufacturing, and Mining. With many industries promising great opportunities ahead, Iran’s pharma sector is no exception. Here are five key factors in favor of market entrants seeking growth opportunities in Iran’s pharma market.
1. Iran’s economy supports a healthy healthcare industry
Iran has the 3rd largest GDP in the Middle East, behind Turkey and Saudi Arabia, but ahead of the ‘rich countries’ such as the UAE and Qatar, Solidiance’s report stated. Its nominal gross domestic product (GDP) is forecasted to grow by around 12% annually, which is expected to reach USD 665 billion in 2020.
The Iranian Healthcare industry was estimated to be worth USD 33.4 billion in 2015, with the Pharma market reaching up to USD 1.9 billion the same year. Spending is forecasted to grow at a similar rate to GDP, reaching nearly USD 40 billion in 2020, driven by rising expenditure by the Health Ministry.
By 2020, Iran may inhabit around 84.2 million people – which will be more than Germany’s. Iran is also experiencing a youth bulge; roughly 30% of the people are aged 19 or under, 60% are aged 20 to 59 and 10% of over 60. This indicates a growing customer base for pharmaceutical products, with baby boomers of the 1980s now entering the workforce and fueling out-of-pocket spending.
Additionally, about 80% Iranians receive secondary education and the literacy rate is more than 98%, according to the UN. Iranians are also highly educated; with 44% of the population having majored in the STEM fields (science, technology, engineering and mathematics). Iran’s wide talent pool may serve as a winning factor for significant research base, as evidenced by internationally recognized biomedical centers such as the Pasteur Institute of Iran.
Iran’s high urbanization rate has also enjoyed good access to basic healthcare services. In rural areas, government reforms are being drafted to further develop the sector’s potential. The Iranian pharmaceuticals market reached is predicted to grow at a compound annual growth rate of 6%.
2. A burgeoning Pharmaceutical market in the making
Sanctions have enabled Iran to build a self-sufficient and large drug production infrastructure. Around 60 plants produce almost 40 billion drug units each year, meeting 96% of domestic demand. While most drug facilities do not meet international good manufacturing standards, the Iranian government has pushed out a few initiatives to address these issues.
R&D focuses mainly on new generic drugs, although investment in novel products is increasing. This can be illustrated with the 12 new treatments for diseases, including cancer and diabetes, which were launched in 2015.
Other major breakthroughs are the country’s biotechnology capabilities and stem-cell research – both of which have considerable infrastructure for related facilities such as plasmapheresis (blood plasma treatment).
In order to establish itself as a biotechnology hub, Iran is also building a government-backed USD 2 billion “Industrial Pharmaceutical City” near Tehran.
It will house incubators and startups under the same roof as research labs and biotech producers. To add further attractiveness for investors, foreign companies will be exempted from taxes and is hoped that the venture will attract international experts.
3. Competitive landscape
Iran’s pharmaceutical market is made up of about 100 companies, with most focused on drug manufacturing. Some also carry out R&D, import non-locally produced drugs or provide distribution channels that may serve as potential partners for multinational companies seeking to enter the market. The largest producer is Darou Pakhsh Pharmaceutical Manufacturing Company, which also distributes drugs through its own subsidiary.
The largest drug producer in Iran is Darou Pakhsh Pharmaceutical Manufacturing Company, which also distributes drugs through its own subsidiary. The company generated revenues of over USD 700 million in 2014 and is listed on Tehran Stock Exchange.
However, the sector is largely consolidated. Most companies are owned by publicly controlled listed investors, such as the Ta’min Pharmaceutical Group. Only a few private players, such as cosmetics company Dr. Abidi, exist.