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Why should Hebi manufacture insulin?
In Africa and the Middle East governments and health authorities are struggling to reduce their dependence on the international pharmaceutical industry. The timing of Hebi Biotech’s investment is therefore right.
Competitive advantages
1. Low labour costs.
2. Low investment costs (proximity to existing plant).
3. Low other production costs in the form of electricity, water & transportation.
4. Freedom of taxes and customs duty due to domestic production.
5. The domestic market is large.
Diabetes
Diabetes is classified as the most common worldwide disease. According to WHO’s (World Health Organisation) report from 2003, approximately 180 million people suffer from diabetes and the number is expected to double by the year 2030. This increase is expected to be largest in the developing countries. Paradoxically because of rising living standard and changed living habits, particularly with respect to diet, where people eat more and especially more fat-producing food, at the same time as they work less with their bodies. The risk for diabetes also rises with advancing age. More than 3 million deaths each year can be ascribed to complications caused by diabetes. The direct health-related costs vary from 2.5 percent to 15 percent of the annual health budget, depending on the local number of diabetes cases and the quality of care that is available. On top of this there are costs due to production shortfalls that are five times as large as the direct health care costs.
Increase by geographic area
Area 2000 2030 Increase
Africa 7 18 157%
Eastern Mediterranean 15 36 140%
Europe 33 48 45%
South East Asia 47 120 155%
Western Pacific area 30 56 87%
The word market for human insulin was valued at approximately SEK 36 billion in 2002. Europe accounted for 40 percent of the entire market and the United States for 33 percent. The world’s insulin market is expected to reach SEK 56 billion in 2007.
How is insulin produced?
Today insulin is produced by genetically modified bacteria, Recombinant Human insulin, and is done by DNA cloning. Production of insulin crystals is the first step in the production process. Formulation of insulin phials follows. The production time is 30 days for insulin crystals and three days for formulation into phials.
Hebi Biotech in Egypt
The Hebi Biotech company has been formed to build and run a recombinant insulin factory in the Qeft, Quena free-trade zone in Egypt. These facilities will produce insulin crystals and ready insulin phials. The factory will be built adjacent to the existing plant at Hebi Pharmaceutical Raw Materials.
In January 2004 Hebi Biotech concluded an agreement for an exclusive technology licence to produce up to 800 kilograms of insulin crystals annually in Egypt. The agreement has a term of 14 years.
Main contractor for construction and start-up
The entire project will be implemented on a turn-key basis. The main contractor is a so-called "EPC Contractor," (engineering, Procurement & Construction) who is responsible for basic and detailed design. Responsibility for procurement of and installation of processing equipment and the actual construction, including final inspection and start-up, also falls on the main contractor.
Competitors
The world market for insulin is dominated by two players, Eli Lily (USA) and Novo Nordisk (Denmark). These two companies command about 80 percent of the world market.
Impediments to establishment in the insulin market
There are several significant barriers to entry into the insulin market. A potential player must have access to at least the following:
1. Patents and intangible rights.
2. A strong market position.
3. Capital.
Patents are an absolute necessity for production of recombinant insulin, which in many countries is seen as the most apparent process for production of insulin.
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