Entering the Middle East market at a low price? Changing your approach will make it easier to succeed. If it weren't for the locals' personal confirmation, it would be hard to believe that 3 out of 10 cars on the streets of Israel are from China. But this is what Ilan Maor, president of the Israel-China Chamber of Commerce and managing partner of Israel's SHENG-BDO, saw. From Chinese restaurants, Yiwu small commodities, to electronic products and new energy vehicles, more and more people are going to the Middle East to make money. In the investment circle in 2024, a saying began to circulate, "It's too late if you don't go to the Middle East." In the past six months, the UAE China Innovation Center alone has received 400-500 Chinese companies for visits, 10% of which have the intention to land. Having been engaged in international technical cooperation and business development for more than 20 years, Ma Yiliang has increasingly felt the Chinese people's interest in Middle East business. In early June, Ma Yiliang contacted a pharmaceutical company and a medical device company. Medical companies may be one of the groups with the greatest interest in going to the Middle East in 2024. "In the past six months, many peers have come to us and said that we must internationalize several products, especially the 'One Belt, One Road' initiative." Wu Huafeng, deputy general manager of Xuantai Pharmaceutical, said that the pharmaceutical company has two drugs being sold in the Middle East. On June 19, Shanghai held the World API China Exhibition, and set up a prayer room for Muslims at the venue. "Do you know which two days are the weekends for Arabs?" A business development staff (BD) of a pharmaceutical company who is developing the Middle East market asked himself and answered, "It is Thursday and Friday." Due to religious reasons, Friday is the most important day of the week in some Middle Eastern countries. Even shops will not be open before the prayer. Since 2006, the United Arab Emirates, Saudi Arabia and other countries have successively changed weekends to Friday and Saturday in order to keep pace with the international community. This is a detail that you will understand only if you have really dealt with Middle Eastern people. Like a sign, it is telling people that it is a brand new market and a completely different world. How high-end products enter the Middle East market Small profits but quick turnover and occupying the low-end market are the consistent paths for Chinese products to "go overseas". In the current Middle East market, this is not entirely true. "Countries such as Egypt, Lebanon, and Syria are very concerned about prices. But Saudi Arabia, the United Arab Emirates, and Israel are not so sensitive to prices." Like all those who are truly engaged in China-Middle East trade, Ma Yiliang analyzed that the Middle East-North Africa is a complex market with very large country differences. The preferred destination for most Chinese companies to go overseas to the Middle East is Saudi Arabia. It is the largest economy and flag in the Arab world, the first country in the country with a gross national product (GDP) of more than one trillion, and its per capita GDP ranks among the top 40 in the world. "Especially for medical products, other Arab countries can be said to follow Saudi Arabia's lead. After success in Saudi Arabia, it will be easier to enter other countries." Wu Huafeng said. "Small but strong" countries such as the United Arab Emirates and Israel, whose economic scale is similar to that of Singapore, are also popular among Chinese businessmen. "The whole world knows that Jews are not easy to deal with. "As an Israeli, Ma Yiliang used a self-deprecating sentence to express their requirements for quality and innovation. In the eyes of this Middle Eastern person, if you want to enter the local high-quality market, price is only the third most important factor. The first and second are quality and international recognition, especially for medical products related to life safety. Medical products are the first priority in any country. In these wealthy countries, low-priced and low-quality products are not selling well. Pang Yan started to be responsible for business development in the Middle East for a domestic medical device company in 2013. It was a very difficult period. "They were full of doubts about Chinese products." After years of trial and error, China's two major medical device leaders, Mindray Medical and United Imaging Medical, have chosen to take the high-end route in the Middle East. During the Arab International Medical Equipment Exhibition in January and February 2024, Mindray Medical signed a strategic cooperation agreement with Cleopatra Hospitals Group, the largest private hospital group in Egypt, involving high-end product lines such as innovative products, digital solutions, and telemedicine; its life information and support equipment will be stationed in Dallah Hospital, a high-end private hospital group in Saudi Arabia. United Imaging Healthcare's partners include the King Hussein Cancer Center in Jordan, the largest holistic cancer treatment center in the Middle East, as well as high-end medical institutions such as the Moroccan private hospital Health Garden Clinic and the I-ONE Nuclear Medicine and Oncology Center at King Abdulaziz University in Saudi Arabia. "It is not convincing to tell others that a high-tech product works well in a hospital they have never heard of. You can only convince other small and medium-sized hospitals after you have proven that it works well in top tertiary hospitals or high-end hospitals." Xia Jusong, president of international business at United Imaging Healthcare, said that for Middle Eastern customers, United Imaging Healthcare adopts a "high-profile" brand strategy. "Participating in exhibitions, from leasing to decoration, costs one to two million yuan, or even seven to eight million yuan, which is part of showing the strength of the company. Of course, the products must also make customers feel the high quality." Xia Jusong made an analogy, "It's like shopping for clothes. You can feel the materials and design by looking at, touching, and trying them on." "Everything is to build the trust of Middle Eastern customers in Chinese medical devices. Xia Jusong was once troubled by the negative effects of some of his peers who made quick money. "Some companies used low-price strategies in the Middle East to make some quick money, but the after-sales service did not keep up, and no one repaired the broken products. It has a bit affected our 'Made in China' brand image." The Middle East medical market is relatively closed, but it has a fairly high level of internationalization. The penetration rate of the three major international medical device giants GPS (GE Healthcare, Philips, and Siemens) is very high. For example, in Israel, the proportion of people with medical insurance is very high, and they are willing to pay higher prices to get better medical services. "In fact, many local doctors have studied abroad in Europe and the United States." Xia Jusong found that they prefer innovative high-end products, "such as magnetic resonance imaging, not only hope that the scanning speed is faster, but also hope that there are some other functional improvements." Using scientific research cooperation to open up local top hospital channels is the experience of United Imaging Healthcare in China and the United States. Cai Tao, secretary of the board of directors of United Imaging Medical, analyzed that this can not only help products enter the market faster, but also, "the research of these high-end hospitals will provide us with many parameters to help improve products." In Ma Yiliang's view, Israel has a characteristic that they are more willing to be the first to try out breakthrough new technologies. Unlike some Chinese who want to see if there are successful precedents in other countries, Israelis are very willing to be the first to try them out, and many new products will choose this place as a test site. Israel has only 1 million people, but there are all kinds of car brands in the world, and many Japanese and Korean companies will choose to test the waters in Israel. "Europeans also recognize the Israeli market test waters because Jews are not easy to deal with." The first generic drug is only fast and invincible. In 2020, the COVID-19 outbreak suddenly broke out, and with the full export of various Chinese epidemic prevention items, some local businessmen in the Middle East discovered this business opportunity. An Israeli company saw several drugs in the pharmaceutical database and wanted to introduce them, and found that several Chinese pharmaceutical companies could supply them. So they found SHENG-BDO and made a list of products that have been approved for marketing by the U.S. Food and Drug Administration (FDA). Yang Lina, director of SHENG-BDO, recalled that the products favored by the aforementioned Israeli company included Xuantai Pharmaceutical's posaconazole enteric-coated tablets. This is an antifungal drug. In the United States, the original drug costs $58 per tablet, while the first generic drug of a Chinese company costs $40 per tablet; in China, the price of the first generic drug is also nearly 300 yuan per tablet. Just before and after the Israeli company, a Saudi company also took a fancy to this drug in 2021. As Zhang Jianwei, CEO of the UAE China Innovation Center, said, technological content, high unit price and large profit margin are the key points to attract Middle Eastern businessmen. In the United States, a first generic drug approved for marketing can occupy more than 40% of the market share within a year by virtue of its price advantage. Saudi Arabia and Israel are also markets where first generic drugs can be quickly released after approval. Any drug approved in the European Union or the United States can enter Israel and Saudi Arabia through fast approval. The registration and approval process, which generally takes at least 2 years, will be shortened to less than 1 year. Xuantai Pharmaceutical did not disclose the specific revenue of posaconazole in the Middle East. The company's financial report shows that in 2022, the revenue of antifungal drugs was 53.9411 million yuan, which increased to 60.6614 million yuan in 2023. In 2023, Israel was added to the approved regions of the drug, and it was approved in Saudi Arabia in August 2022. The listing in more countries has reversed the downward trend of Xuantai Pharmaceutical's posaconazole revenue. In the first half of 2021, with the approval of the second generic drug in the United States, the market share of the drug in the United States began to decline, and the terminal sales price also fell by about 30%. Previously, the United States was the main source of income for the drug. "Do it, there is no loss and you can collect more than 100,000 US dollars in agency fees." Wu Huafeng admitted his mentality when he first cooperated with Middle Eastern distributors. In fact, posaconazole saw a revenue growth of nearly 6 million yuan in 2023, but the cost increased by more than 300,000 yuan, and the gross profit margin of a single product increased by 4.22 percentage points. If you want to extend the life cycle of generic drugs, you can only continue to open up new market areas. Now Xuantai Pharmaceutical has begun to actively look for partners in Bahrain, Qatar, the United Arab Emirates and other countries. Two other A-share listed companies, Shuangcheng Pharmaceutical and Puli Pharmaceutical, have also set their sights on this market. In 2024, they both had products that obtained Saudi registration certificates. Large pharmaceutical companies such as Shijiazhuang Pharmaceutical Group have also begun to contact partners in the Middle East. For pharmaceutical companies that have experience in going overseas, as long as the product has been successfully listed in the US FDA and the information is complete, during the registration stage, the R&D company only needs to provide assistance to the distributor, and they don’t even need to hire additional people.