For the past decades, investing in African pharmaceutical companies followed a relatively simple playbook: back local manufacturers of branded generics and ride the structural tailwinds of rising healthcare demand, increasing generics penetration and a steady pipeline of global drugs falling off patent. That model has now largely played out.For private equity investors, the question now is where the next wave of value creation will emerge.The answer differs significantly between North Africa and the rest of the continent.

North Africa: The Branded Generics Thesis Has Matured

The structural tailwinds that have been propelling North Africa’s pharmaceutical industry since the 1980s are fading. Across North Africa, generics penetration has already reached 60%+ in markets like Tunisia and Algeria. The result is crowding in the generics space. In many markets, a single molecule can face competition from seven to fifteen generic versions. At the same time, global pharmaceutical innovation has shifted away from small-molecule drugs toward biologics.

Moreover, most regional companies are not natural molecule innovators. They are structurally price takers, often subject to mandatory discounts relative to originator drugs. In markets with price controls, reliance on imported APIs and devaluing currencies, margins are constantly under pressure. Local players must rely on a continuous pipeline of new product launches at higher price points to protect margins. This strategy becomes increasingly difficult to sustain over time, particularly as penetration levels rise.

In addition, bringing new products to market is challenging: registrations take 4–5 years, and each country requires a separate process. Even after approval in one market, companies must re-register in others—often with different requirements—slowing product rollouts domestically and across export markets.

For investors, this means the traditional growth formula — expanding volumes of branded generics — offers limited future upside.

The Biosimilars Temptation

At first glance, biosimilars appear to offer the natural next chapter.Biologics account for only c. 2-4% of global pharmaceutical volumes but nearly 40% of industry revenues, and 8 of the 10 top-selling drugs in the United States are biologics. The global biologics market reached USD 623bn in 2025 and is forecasted to grow at a 10% CAGR to reach USD 1tn by 2030. As patents expire, biosimilars — highly similar versions of biologic drugs — represent a large and growing global market.

However, the economics differ fundamentally from generics. A key barrier to entry is the absence of local drug substance manufacturing. Establishing this capability requires several hundred million dollars of investment and highly specialized know-how that is largely unavailable in Africa. As a result, most biosimilars are imported or only locally filled and finished, with supply dominated by Chinese and Indian players—leaving markets exposed to FX volatility and supply risks.

In addition, compared to generics, development timelines are longer, with higher regulatory scrutiny and clinical trial requirements.While the case for local manufacturing is compelling, it is only viable at meaningful scale given the capital intensity and technical complexity involved.

Scale is a Real Constraint

The North African generics market for locally manufactured drugs is estimated at roughly US$4.6 billion, shared across c. 300 manufacturers. This implies average revenues of US$15 million per company and EBITDA of US$3 million — far below the scale typically required to sustain biosimilar development.

In such a fragmented market, there is unlikely to be room for more than one or two viable biosimilar platforms per country, if not a single regional champion.

Biosimilars require scale, capital, regulatory expertise and deep biologics manufacturing capabilities — attributes that only a handful of companies currently possess.

For investors, biosimilars are therefore capital-intensive, high-risk/high-return bets rather than the natural continuation of the generics story. For larger local players that have advanced capabilities, a more viable path to biosimilars would be through partnerships with big pharma or Indian biosimilars producers with fill-and-finish contracts.

Where the Real Opportunity Lies in North Africa

If biosimilars are not the answer for most companies, where should investors look?The most compelling opportunities may lie in complex and hard-to-manufacture pharmaceutical products, including advanced galenic formulations, sterile injectables, oncology formulations, hormones microdosing, and specialized delivery systems. Such categories offer higher barriers to entry than conventional oral generics while avoiding the capital intensity of full biosimilar development.

Importantly, they leverage capabilities that some regional manufacturers already possess — particularly companies with strong formulation development and technology transfer teams. In other words, the differentiator is often not manufacturing capacity alone but the “D” in R&D.

Another adjacent opportunity lies in consumer health products, including supplements, dermo cosmetics and wellness products. These categories benefit from rising middle-class consumption, low penetration levels, increasing health, wellness and personal care awareness and growing self-medication trends across North Africa. They also leverage existing pharmaceutical capabilities — including branding, distribution networks and medical sales forces — while offering higher margins, less regulatory complexity than prescription medicines and no price controls. In Egypt, for example, the share of OTC sales grew to 20% in 2024, up from 14% in 2023.

While North Africa faces saturation in generics, the rest of the continent presents the opposite dynamic.Outside South Africa, local pharmaceutical manufacturing remains extremely limited. According to UN estimates, more than 70% of medicines consumed in Africa are imported, and roughly half of African countries have little or no pharmaceutical production capacity. The region therefore relies heavily on imports — primarily from India.

Another adjacent opportunity lies in consumer health products, including supplements, dermo cosmetics and wellness products. These categories benefit from rising middle-class consumption, low penetration levels, increasing health, wellness and personal care awareness and growing self-medication trends across North Africa. They also leverage existing pharmaceutical capabilities — including branding, distribution networks and medical sales forces — while offering higher margins, less regulatory complexity than prescription medicines and no price controls. In Egypt, for example, the share of OTC sales grew to 20% in 2024, up from 14% in 2023.

For private equity investors, backing platforms with credible development pipelines in complex generics and injectables — while selectively expanding into consumer health — may offer an attractive risk-return profile.

Sub-Saharan Africa: A Different Investment Opportunity

While North Africa faces saturation in generics, the rest of the continent presents the opposite dynamic.Outside South Africa, local pharmaceutical manufacturing remains extremely limited. According to UN estimates, more than 70% of medicines consumed in Africa are imported, and roughly half of African countries have little or no pharmaceutical production capacity. The region therefore relies heavily on imports — primarily from India.

Demand is not the constraint. As a reference point, the North African pharma industry emerged in the 1980s and 1990s when GDP per capita was comparable to that of many sub-Saharan countries today, at roughly USD 1,500-2,000. Health expenditure in Sub-Saharan Africa stood at 4.9% of GDP in 2023, compared with 12.7% in OECD countries, while pharma expenditure per capita averaged less than USD 25 versus USD 766 in OECD countries.

The challenge lies in policy and market structure. Tender systems in many countries prioritize the lowest-cost supplier regardless of origin, which discourages domestic manufacturing investment.

Yet the strategic importance of domestic production has become increasingly clear. The COVID-19 pandemic exposed the vulnerability of countries dependent on imported medicines and global supply chains.

Encouragingly, studies suggest that in markets such as Nigeria and Ethiopia, locally produced tablets and capsules could be up to c. 15% cheaper than imported equivalents if manufacturing plants operated at higher capacity utilization. Another welcome development is the significant tightening expected from 2026 onwards in India with the introduction of a revised Good Manufacturing Practices (GMP) framework. This is expected to raise compliance standards and increase production costs for Indian manufacturers, which could reduce the price advantage of Indian imports and allow local players to compete on a more level playing field. With supportive regulation - both in Africa and India - and targeted industrial policy, there is therefore substantial room for growth in basic generics manufacturing across the continent.

Ultimately, unlocking scale will require regulatory harmonization. Initiatives such as the African Medicines Agency represent an important step in this direction, but will require sustained coordination, political will, and industry engagement to materially improve market integration.

Rethinking The Investment Playbook

In North Africa, the generics playbook has matured. Future winners will likely emerge from companies capable of moving up the value chain into complex formulations, specialized injectables and selective biosimilar platforms. In Sub-Saharan Africa, the opportunity is more foundational: building local generics manufacturing capacity where little currently exists.

For private equity investors, the easy era of generics investing is over. The next decade will belong to investors who identify where true differentiation, barriers to entry and scale can be built.