Pharmaceutical Industry Iran

Current status, Opportunities and Threats

World Pharmaceutical Industry

The pharmaceutical industry is the 2nd most profitable in the world after the oil, gas and petrochemicals industry. It is considered a high-tech industry, heavily regulated and with large investments going towards R&D activities.

The pharmaceutical industry is considered a high-tech sector with the highest added-value per person employed, significantly greater than the average value for other high-tech and manufacturing industries. Furthermore, it is also the sector with the highest ratio of R&D investment to net sales, with a total expenditure of 141.6 billion USD in R&D per year. Over 4.44 million people work in this industry with 91.3 billion USD in salaries in 2013. Total investments by global pharmaceutical companies reached 70.7 billion USD in 2014, which is a 1.4% decrease compared to 2013. The top ten key worldwide pharmaceutical markets in 2013 are shown in the chart below.

Global Pharmaceutical Key Markets in 2013

Several key players are active in the global pharmaceutical industry. According to a 2015 ranking of the global top ten biotech and pharmaceutical companies based on revenue in billion USD, Johnson & Johnson ranks with a revenue of 16.3, Gilead Sciences with 12.1 and Merck with 11.9 – making up the top three.

Global top ten biotech and pharmaceutical companies revenue in billion USD

Pharmaceutical Industry Iran

In 2014 the Iranian pharmaceutical market was estimated at 2.35 billion USD and it is predicted to be at 3.31 billion USD in 2019, with a CAGR of 7.5 percent.

In term of medicine and medicaments, there are about 56 pharmaceutical companies in Iran, of which 36 are stock listed companies that are producing more than 90% of the products. Furthermore, there are 123 registered importers, 30 specialized distribution companies and 10,000 drugstores.

The industry can be divided into two main fields, namely production and import. 96% of the medicine is produced locally and only 4% is being imported. However, in terms of value, 55% of the market belongs to local producers and 45% to the import market. Key international players present in the Iranian market directly or indirectly include: Novartis, Roche, Boehringer Ingelheim, Sanofi, Glaxo Smithkline and Novo Nordisk.

High medicine consumption rates amongst Iranians have been recorded with every citizen using approximately 340 units on average per year (almost one medicine unit each day). This makes Iran the second largest consumer per capita in Asia and the 20th in the world. The average number of medicine per prescription of doctors internationally is 2 units, whereas in Iran it is at 3.5 units.

In 2014 more than 806 million USD worth of medical instruments were imported into Iran, while only 23.6 million USD was exported. Also, approximately 400-500 million USD worth of different medical instruments are produced locally, especially for dentistry and laboratories.

Key governmental bodies responsible for the development of the pharmaceutical and medical equipment industry of Iran include the Food and Drug Organization and the Ministry of Industry. In 2014 general policies for the health care sector of the country were announced in the form of 14 articles, which focus on the creation and development of required infrastructures in order to produce pharmaceutical raw materials and products.

Key Players Iran

There are many successful stock listed pharmaceutical companies in Iran which are profitable. In the diagram below their net profit and profit ratio to sales amount are depicted.

Average ratio of benefit to sales of Iranian pharmaceutical companies in 2014 was approximately 31 percent. The highest ratio was achieved by Pars Daroo with 52.8 percent and the lowest by Abooreyhan with 17.4 percent.

Main Barriers and Sanction Impacts

Active companies describe the main barriers in the industry as: High inflation rate, diminishing purchasing power and international sanctions. At the same time they see opportunity with a growing Iranian population that requires health services.

No direct sanctions were imposed on the medical industry of Iran, however, due to the fact that most of the international banks did not do transactions with the country anymore, the pharmaceutical industry was affected severely. Even cancer medicine became rare in Iran, leading to a black market with unreliable delivery and quality approval.

But nowadays after sanction relief, international competition can be expected, as well as more investments. It is worth mentioning that the high demand of the neighboring countries for drugs and medical equipment is another opportunity for Iranian manufacturers and exporters.

Iran Medical Instruments Import & Export

Growth Potential

The Iranian pharmaceutical market has experienced a 30% increase in sales from 2009 to 2014, which is higher than the average in the region. The Middle-East as a whole has experienced a 8.6% increase, whilst CIS countries experienced a 10.5% average increase rate from 2009 to 2014.

Germany is the second largest European pharmaceutical market in terms of sales. In 2013 the pharmaceutical industry in Germany produced pharmaceuticals valued at 37 billion USD. This represents an increase of 4.8% compared to the year 2012. Domestic production is highly dependent on pricing and pharmaceutical drug imports, as well as export demand.

In 2012 Turkey’s pharmaceutical market was the 6th largest market in Europe and 16th largest in the world in terms of sales. Pharmaceutical sales reached a stunning 12.5 billion USD, resulting in a CAGR of nearly 10% between 2003 and 2012. Currently there are 53 manufacturing facilities and approximately 300 entities operating in the sector throughout Turkey.

Industry SWOT Analysis

The Iranian pharmaceutical industry has a large domestic market and additionally now has numerous opportunities to collaborate on joint projects with key international players. One of the key threats to the industry in Iran is dependency on the imports of raw materials.

Strengths

Proper infrastructure in place (e.g. good quality factories)
International experience in production of medicine
Good quality of the end products
Diverse product range
Competent workforce

Weaknesses

Low efficiency rate of production throughout the industry

Low capacity utilization rate in the industry

Dependency on international market for producing the key medicines

The investment in R&D compared to international benchmarks is low

Lagging behind technologically during sanctions time

Opportunities

Large domestic market

Proximity to neighboring countries as new markets

Potential to collaborate on joint projects with key international players

Sanctions relief and better international conditions

The new local health care system being a number one priority of the country

Countries KPI’s improvement based on international reports

Special attention of the government to health care and strategy of prevention before curing

Competitive price of the local products

Presence of Iran Food Organization as a centralized decision making mechanism

Private investment and the government supporting local production

Threats

Competitive and strict market in Iran

Being dependent on the imports of raw materials

The possibility of international players entering into the market

High interest rate

Difficulty of importing / transferring high technology to the local market

The presence of the black / shadow market in Iran

The presence of some internal conflicts in local distribution networks

Increase in the number of drugstores (overcapacity in distribution network)

Preference of the consumers towards international pharmaceutical brands

Conclusion & Outlook

This white paper gave a brief introduction to Iran’s pharmaceutical market. Key figures and facts in regards to the industry include:

In 2014 the Iranian pharmaceutical market was estimated at 2.35 billion USD

It is predicted to be at 3.31 billion USD in 2019, with a CAGR of 7.5 percent

There are about 56 pharmaceutical companies in Iran, of which 36 are stock listed companies

96% of the medicine is produced locally and only 4% is being imported

However, in terms of value 55% of the market belongs to local producers and 45% to the import market

High medicine consumption rates amongst Iranians have been recorded with every citizen using approximately 340 units on average per year

The Iranian pharmaceutical market has experienced a 30% increase from 2009 to 2014 in sales, which is substantially higher than the regional average

In 2014 more than 806 million USD worth of medical instruments were imported into Iran, while only 23.6 million USD worth were exported

Furthermore, most of Iranian stock listed companies had a profitable year in 2014, with an average ratio of benefit to sale of approximately 31 percent. The highest ratio is for Pars Daroo with 52.8 percent and the lowest for Abooreyhan with 17.4 percent.

Active companies describe the main barriers in the industry as: High inflation rate, diminishing purchasing power and international sanctions. At the same time they see the opportunity with a growing Iranian population that requires health services.

Considering Iran’s strategic geopolitical positioning and thereby having access to extended neighboring market places amounting to approximately 400 million people that currently only have access to weak health systems, implies high potential for the industry and investors at large.

Concluding, the outlook for the years to come is positive for the Iranian pharmaceutical industry in general. Threats and barriers have to be taken into consideration carefully by local players and should be tackled smartly. International competition can be expected to increase substantially.