Pharmacare Premium Malta, the Palestinian-German-Maltese joint venture which is to open a €10 million plant in Ħal Far next year, will be the first pharmaceutical facility in Malta to have a dedicated unit for original research, managing director Bassim Khoury told The Times Business in an interview.

"We are proud of the fact that we will be the first and only pharmaceutical company involving Maltese with headquarters in Malta to carry out original research. Research and development in the classical sense is six per cent of our sales, but we have earmarked another three per cent to original research, focusing on new molecules and new issues.

"It is a small percentage compared to larger companies, but most small pharmaceuticals have zero budget for original research. There is good potential for research in Malta. Biotechnology is the field of the future. One of the early developments in this area for our German partners Grünenthal took place in co-operation with the University of Malta about 15 years ago," he said.

Pharmacare Premium is a joint venture between Palestinian-German Pharmacare Europe and Maltese-registered Pharma Group. The 12,500-square metre Malta plant, on which construction begins in April, will kickstart operations on two lines manufacturing conventional generic pharmaceuticals and high potency generics in tablet and capsule form in mid-2010.

It will have a staff complement of over 100 by its third year of operation. The venture constitutes Malta's first ever foreign direct investment from Palestine.

Pharmacare Europe is a subsidiary of Palestinian-registered Pharmacare plc which exports to the CIS (former Soviet republics) and some Middle Eastern countries. Set up 24 years ago, its main operation is in Beutunia, a twin city of Ramallah, 15 km north of Jerusalem; 24 per cent of its production is exported to Europe.

It has 600 shareholders: the largest shareholding belongs to the Wirtz family who also owns Grünenthal and Mr Khoury's family. Pharmacare has been manufacturing products under licence for Grünenthal and other companies for over 10 years; Mr Khoury said the company, which was the first in its country to export in 1994, has 12 per cent market share in Palestine.

"Our turnover is around $10 million," Mr Khoury, an industrial pharmacist, explained. "In 10 years, we have more than doubled our assets, more than tripled our balance sheet, increased our profits threefold, and return on investment is a healthy 13 per cent."

These are remarkable strides for a manufacturer operating in a war zone, amid yet another intifada. Pharmacare plc - which according to two of Mr Khoury's Maltese partners Peter Seychell and Lawrence Hili, operates a state-of-the-art plant among the best in the country - is the image of Palestinian industry in every sense.

Mr Khoury, a school friend of Palestine's Ambassador to Malta Jubran Taweel, and his sister Suha, Palestinian leader Yasser Arafat's widow, is president of the Palestinian Federation of Industries, the largest private sector comprising 14,000 industrialists. He also heads the Private Sector Coordinating Council which incorporates ten private sector groups governing industries such as banking and insurance and IT.

The father of three explains how contingency is a top priority at Pharmacare plc: "Next to our facility we rent apartments for staff, so when there is a curfew they are able to sleep there. We gave bonuses to staff to relocate within 500 metres from the factory and we pay 80 per cent of their rent. There were times when it was really tough and people who could not relocate had to sleep in their offices. My research and development manager and I have slept in our offices when we had business to finish. We have our own power generation and water treatment system for emergencies and we can be independent for about a week.

"As a German partnership, we are registered with the Israeli Ministry of Defence as a German interest and we fly the German and Palestinian flags. I hold Israeli identification, so whenever the Israeli soldiers turn up during a curfew I show them a letter in Hebrew explaining that this company is owned by a Jerusalemite and a German company. We have been shelled only once and there was only minor damage."

Despite its challenging operational environment, Pharmacare's business profile is remarkable. Over the past few years, it has invested close to $5 million to maintain quality standards. It develops many technologies and software in-house and trains most of its staff, 72 per cent of whom are university graduates and 52 per cent are women. Most are Palestinian.

Of its female staff, 28 are pharmacists who work in the plant or travel through the territories as medical representatives. Pharmacare was the first company to employ female marketing staff in Palestine: Mr Khoury says it was unheard of for a Palestinian woman to visit a doctor's practice alone in a country where most pharmacists are female but with limited job opportunities. Its research and development unit is headed by two women who were originally working in the US and who should come to Malta to carry out research with Maltese personnel.

By the time the Maltese operation gets off the ground, Pharmacare should have obtained the EU's Good Manufacturing Practice (GMP) certification which will allow it sell its products across the bloc.

Mr Khoury says Pharmacare also intends to widen its outreach in the Middle East and North Africa region as far as the United Arab Emirates. As Malta, historically, always maintained a balanced foreign policy, it makes for a very good gateway, Mr Khoury pointed out: "Take Libya, for example. The fact that Malta maintained balance in international relations allows Malta now to be a good player in that region where it could have a much bigger role than its size.

"Besides, the alliance behind Pharmacare Premium Malta embodies the true spirit of the Euro-Med."

Significantly, despite being primarily export-oriented, Pharmacare will turn its attention to Malta. "There are companies here who manufacture to the tune of millions and ignore the Maltese market. As a result the cost of pharmaceuticals in Malta is still high," Mr Khoury pointed out. "Pharmacare has a different approach. We will target the Maltese market. It is a small market but we can nourish it.

"We would like to see the creation of a Maltese generic association which would also push for legislation governing them. We have to strike a very delicate balance. We want to maintain a spirit of innovation. There has to be a balance between innovators and generic manufacturers. What is happening in Malta is that the island is not benefitting from the generic manufacturers enough. Very few products that are manufactured in Malta are sold in Malta."

Mr Khoury, who describes himself as a proud Palestinian, says the funding for Pharmacare plc's first-ever investment overseas was earmarked last year, and although the international crisis is a factor, the current climate is a time to grasp opportunity.

He points out that the pharmaceutical industry has a crisis of its own to worry about: the lack of innovation. The number of drugs patented between 2002 and 2007 is less than 50 per cent of those patented in the previous five years. Patents since 2007 and what is expected by 2012 will be less than half the number of the previous five years. Mr Khoury says pipelines of major pharmaceuticals are drying up as they struggle to identify new molecules, despite spending billions in research.

Grünenthal, which has excelled in its niche targeting palliative and acute pain relief, is fortunate to be one of the few international companies to have a launch this year.

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