VZCZCXRO2520
PP RUEHBI
DE RUEHAM #2648/01 1031305
ZNR UUUUU ZZH
P 131305Z APR 06
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC PRIORITY 9604
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUEHKL/AMEMBASSY KUALA LUMPUR 0030
RUEHNE/AMEMBASSY NEW DELHI 0189
RUEHCG/AMCONSUL CHENNAI 0021
RUEHBI/AMCONSUL MUMBAI 0035
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAUSA/DEPT OF HHS WASHDC
RUEHGV/USMISSION GENEVA 0498

UNCLAS SECTION 01 OF 03 AMMAN 002648 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR 
STATE ALSO PASS TO NATIONAL SCIENCE FOUNDATION 
DHHS FOR NIH/FDA 
 
E.O. 12958: N/A 
TAGS: ECON ETRD TSPL KIPR TBIO JO
SUBJECT: HIKMA PHARMACEUTICALS SHOWCASES ANOTHER GROWING 
SECTOR IN JORDAN 
 
REF: A. AMMAN 1305 
     ¶B. AMMAN 1019 
     ¶C. 05 AMMAN 9748 
 
SENSITIVE BUT UNCLASSIFIED.  PROPRIETARY INFORMATION. 
PROTECT ACCORDINGLY.  NOT FOR DISSEMINATION ON THE INTERNET. 
 
¶1.  (SBU) SUMMARY: Jordan's $330 million pharmaceutical 
industry is a bright spot in the nation's industrial 
development and one of the front-runner sectors in the 
leadership's strategy of export-led economic growth.  Hikma 
Pharmaceuticals and its parent, the Hikma Group, is the 
shining star among the constellation of 18 pharmaceutical 
companies in Jordan.  Like the rest of Jordan's industry, 
Hikma is a generic-drug firm, producing drugs that are 
off-patent.  But Hikma offers value added through novel 
delivery systems, developed with a strong R&D base.  Hikma 
boasts U.S. FDA approval for virtually all of its 
manufacturing plants - stretching from Saudi Arabia to 
Algeria to Portugal and the United States, where it owns 
West-ward Pharmaceuticals.  Hikma, which just acquired 
majority control of Saudi and Italian drug firms, listed on 
the London Stock Exchange (LSE) last November and will list 
on the Dubai exchange this month. 
 
¶2.  (SBU) With access to 34 markets, Hikma is one of the 
leading pharma companies in the Middle East and North Africa 
(MENA) region, and the 12th largest generic-drug company in 
the world.  Hikma is primed to take advantage of the rise in 
generic sales worldwide, as more than 30 major drugs come off 
patent in the next five years.  However, for the dream of 
novel drug development to be realized in a major way, Jordan 
needs to move to a higher plane of R&D infrastructure, 
develop advanced life sciences education and research, and 
undergo cultural shifts in areas such as government and 
philanthropic support for research.  END SUMMARY. 
 
Next Stop: NASDAQ 
----------------- 
 
¶3.  (SBU) Hikma (Jordan) CEO Mazen Darwazeh, who is proud of 
the recent LSE listing for a capitalization of $1.2 billion, 
would like some day to be on the NASDAQ.  For now, the costs 
are prohibitive, he told Econoff - three times the cost of 
listing in London.  (He cited Sarbanes-Oxley requirements as 
a costly inhibitor to a NASDAQ listing.)  The LSE and Dubai 
market capitalization will allow Hikma to pursue new growth 
opportunities in areas such as injectable drugs - a major 
earner in 2005 in the U.S. and in European markets - and to 
build on its strength in the MENA region. 
 
¶4.  (U) Hikma Group Chairman Samih Darwazeh began as a small 
drug-store owner 27 years ago in Amman.  His is among a 
prominent group of Palestinian business families who made it 
in Jordan, and whose businesses are positioned to take off 
under Jordan's liberalized economic policy structure.  As 
Samih put it, it took over a quarter century to gain a strong 
foothold in MENA's "fragmented market."  Hikma in the next 
few years will seek to expand its 140-product base to reach 
the MENA region's youthful population and rapidly growing 
health care markets, especially in the GCC countries, a 
proposition made more profitable by the region's lower tax 
base compared to Europe and the U.S.  From a small family 
business, Hikma has grown to have over 700 employees in 
Jordan, with 1100 more employees throughout the world, 
including 302 in the U.S., according to CEO Mazen.  Overall 
employment in the pharmaceutical sector in Jordan is close to 
5,000.  Note: Pharmaceutical company jobs are considered more 
prestigious by Jordanians than jobs in other export 
industries, such as garments or marble stone.  In this sense, 
pharmaceuticals present a concrete picture to Jordan's trade 
and investment leaders of where they want to go with 
industrial growth, and explains in part the current 
fascination with science-technology development.  End Note. 
 
¶5.  (SBU) Hikma is an example of Jordan's success in the 
pharmaceuticals industry in the region.  Last year, total 
pharmaceutical production in Jordan was $330 million, of 
which domestic-targeted production accounted for only 15 
 
AMMAN 00002648  002 OF 003 
 
 
percent.  With exports of $280 million in 2005, 
pharmaceutical products account for 8 percent of all of 
Jordan's exports.  Over the last 50 years, Jordanian firms 
developed major inroads into the Iraqi market, for example. 
This situation quickly reversed in 2003 when drug exports to 
Iraq dropped by 75% to less than $10 million.  Jordan's major 
drug markets now are Saudi Arabia, Algeria, Iraq, and Sudan. 
But many of the generic-drug firms have licensing agreements 
with small factories throughout the MENA region, bringing 
Jordan's generic-drug manufacturing know-how to partnerships 
that gain market access to other countries.  Hikma has a 
respectable 3.5 percent share of the entire Saudi market, and 
is ranked number 6 and the leading generic-drug firm there. 
In Algeria, Hikma boasts a 3.2 percent market share; it is 
the 7th ranked company and second-largest generic firm. 
 
One of Few Arab Firms in MENA with FDA Approval 
--------------------------------------------- -- 
 
¶6.  (SBU) The company's ability to master the rigorous U.S. 
FDA approval process has been one advantage.  Hikma factories 
first secured FDA approval in 1994; Israel's Teva 
Pharmaceuticals was the only other generic-firm in the region 
to do so.  Up through an investors meeting at the end of 
March, Samih Darwazeh was touting Hikma as the "only Arab" 
firm with FDA approval in MENA, a claim that Hikma CEO Mazen 
thinks will not last the year, as a few other mature MENA 
pharmaceutical companies complete the FDA approval process. 
This past January, Hikma succeeded in securing FDA approval 
for a Saudi-based cephalosporin plant of its wholly-owned 
Subsidiary, Jazeera Pharmaceutical Industries.  Other 
companies in Jordan are looking to follow suit with FDA 
inspections, although one informed observer remarked to 
Econoff that the majority of Jordanian firms will have to 
overcome a contrary culture - so oriented are they to 
short-term profits over a long-term strategy.  According to 
Samih Darwazeh, Hikma's attention to quality makes it the 
"partner of choice for multinationals" in the MENA region. 
 
Licensing Agreements - Wave of the Future? 
------------------------------------------ 
 
¶7.  (SBU) A case in point is Hikma's licensing agreement with 
Eli Lilly to market the brand Cialis (tadalafil) for erectile 
dysfunction.  Hikma places the drug throughout its markets in 
the MENA region, although Lilly still manufactures the pills 
and continues to hold the data exclusivity-registration 
rights.  Hikma pays Lilly a royalty on its Cialis sales. 
Most Jordanian companies would not have the sales force or 
marketing tools to handle this type of drug placement.  They 
would just prefer to follow their short-term success models: 
secure the manufacturing rights and bring the drug molecule 
to the markets they already have, according to a PhRMA 
observer. 
 
¶8.  (SBU) However, the number two pharmaceutical company in 
Jordan - Dar Al Dawa - reportedly has a similar licensing 
arrangement with Novartis, and observers expect more such 
deals in the future.  It remains to be seen if these 
licensing deals can cross over to a generic manufacturing 
scheme by which originator companies share their formulae and 
processes in return for some control of their drugs' market 
access even beyond the patent life. 
 
Hikma R&D and Jordan's R&D Needs 
-------------------------------- 
 
¶9.  (SBU) In 2005, Hikma devoted $16.5 million to R&D out of 
total revenues of $262.2 million, over 6% of revenues.  CEO 
Mazen Darwazeh said that two R&D centers are being developed 
in Jordan and in the U.S., mainly to discover new delivery 
systems and develop new formulations or dosages of off-patent 
drugs.  Injectables are a big focus of Hikma's research. 
Mazen stated that the average R&D expenditure on drugs in 
Jordan was about 2% of gross revenues, well above the Arab 
world's 0.8% of GDP.  He boasted that Hikma had over 120 
technicians working on research, with more than 20 PhD's. 
For all of Hikma's commitment to R&D, Mazen emphasized that 
he did not see Hikma going down the path of novelty drug R&D 
 
AMMAN 00002648  003 OF 003 
 
 
for at least another five years.  Jordan was at least a 
decade away from developing even the most basic novelty drug 
R&D, he stated.  Even then, Jordan was better positioned than 
most in the MENA region to develop R&D for breakthrough 
drugs, he said. 
 
¶10. (SBU) The Hikma CEO commented that Jordan had a long 
to-do list to develop its already flourishing pharma industry 
to the next level.  Jordan must devote major resources to a 
life sciences research center, one that he thought should be 
centrally located rather than spread out among Jordan's 
half-dozen technical universities.  (Note:  Jordan has eight 
colleges of pharmacy; the most advanced at the University of 
Jordan may soon move to devote all of its resources to just a 
pharmaceutical doctoral program.  End Note.)  In addition to 
inculcating a spirit of inquiry at all levels of the 
educational system, Jordan would have to develop stronger 
support for basic research and develop financial incentives, 
as well. 
 
¶11.  (SBU) Mazen Darwazeh cited two key parts of a 
comprehensive pharmaceutical R&D program:  tax incentives for 
the research, and government funding for selected sectors 
such as biotechnology.  In Ireland, he said, the government 
provided 1-to-1 matching funds for pharmaceutical R&D.  In 
the meantime, Hikma would pursue the new and growing 
opportunities in the off-patent world.  Hikma's legal counsel 
indicated that approach meant that even sophisticated Hikma - 
with so much going for it and so many options to pursue - 
would stand to benefit in the short run from a "narrow" 
interpretation of the Jordan-U.S. FTA on points such as "new 
uses", a subject that the counsel acknowledged remains to be 
determined in bilateral talks (see ref's). 
HALE