International healthcare and life sciences joint ventures rise in the UAE

With a strategic vision to become a global health hub, the UAE has invested heavily in its healthcare infrastructure. As a result, the UAE is now an attractive market for international companies considering international collaborations.

International collaborations allow healthcare companies to leverage global best practices while benefiting from local knowledge and expertise. By partnering with organisations from different regions, companies can gain insight into innovative approaches, technologies, and the latest patient care models.

To enhance these collaborations and boost the healthcare sector, the UAE has implemented measures to encourage localisation of pharmaceuticals. These measures include fast-tracked approvals, registrations, and pricing incentives. There are also incentives offered when multi-national pharmaceutical healthcare companies collaborate with local manufacturers to establish JVs.

Additional benefits include the link the UAE serves between Europe, Asia, and Africa, enabling the distribution of pharmaceutical products and healthcare services to diverse markets. This geological advantage makes the UAE an attractive destination for companies seeking global expansion.

However, entering into successful JVs requires careful planning, understanding of local regulations, clear communications to ensure alignment of objectives.

Gap analysis and feasibility studies

Typical of any JV, an initial consultation process, or gap analysis, may be beneficial prior to formalising a JV. This may include an assessment of the market potential as well as the infrastructure.

Such research can allow companies to evaluate the viability of the JV, identifying any gaps that may need to be considered, helping the two firms to align expectations of the arrangement. The process helps to prevent surprises later in the partnership and ensure a smoother transition into formal arrangements.

There are also practical considerations to note. For instance, where representatives of a business are flying in to carry out any checks or analysis pre-deal, companies may need to consider local work visa and sponsorship requirements. Other considerations include the use and transfer of data, particularly health data. While the use of such data may be crucial to carry out the required research, compliance with local data privacy regulations is essential.

Understanding the areas and regulatory framework

Rules and regulations can differ dramatically between jurisdictions. For this reason, a market entry strategy analysis is advisable at outset to help international companies understand the local regulatory framework as well as any licencing requirements and foreign ownership restrictions.

Regulators may include health ministries, drug regulatory authorities, and licensing bodies. Specifically in the UAE, the Ministry of Health and Preventing (MOHAP) oversees healthcare licensing and is the main regulatory body, while the Dubai Health Authority (DHA) and the Department of Health (DOH) regulate healthcare facilities and professionals in Dubai and Abu Dhabi respectively.

Corporate and contractual structuring

Some healthcare and life sciences collaborations are purely contractual. These are suited to situations where there is a specific project, such as a clinical research project, with a defined period where the parties want the flexibilities to terminate and walk away once the project aim has been achieved or once the project term has ended.

This is often based on a profit-sharing arrangement. In these circumstances, the two parties, such as a manufacturer and research firm, remain separate legal entities. It means that each bears its own liabilities, aside from where liability is specifically split under their collaboration and partnership contract.

Alternatively, some collaborations are better suited to an incorporated JV whereby each of the parties will own equity in the JV company. Incorporated JVs are more suited where the businesses want a permanent establishment and longevity in the market, with the potential of selling their equity in the future.

An incorporated JV is also a more suitable option where the JV aims to build assets such as hospitals, medical facilities, or technology, or when the collaboration involves significant intellectual property development, for example a new drug discovery. A JV company also assumes its own liabilities, providing a layer of protection between the JV and its owners.

A corporate structuring analysis should be undertaken to decide whether to establish the JV entity in the mainland UAE or within a free zone and to ascertain any foreign ownership, minimum share capital and licensing requirements.

Heads of terms considerations for a healthcare JV

It is common practice for businesses to enter a memorandum of understanding (MoU), a letter of intent, and a heads of terms sheet (HoTs) prior to formalising a JV or collaboration contract. These documents will outline the commercial objectives of the parties and provide a framework for the more comprehensive legal documentation required for the collaboration.

There are a number of things businesses should consider when drawing up these documents. This includes clearly identifying the parties involved, their roles, and their contributions such as cash, assets or services.

The type of JV should also be clear, whether it be a contractual or incorporated JV.

The business purpose or objectives must also be outlined. This may be a new business line, clinical research or the establishment of a new facility in the healthcare sector. Initial funding requirements and ongoing financing needs, including any profit-sharing mechanisms and distribution criteria, should also be included in the HoTs.

Other important processes should be documented, such as decision-making processes and control mechanisms to avoid deadlock when facing difficult situations, as well as clarifying any intellectual property rights conferred by the JV along with any licencing and ownership issues.

Consideration should also be given to any staffing requirements or training as well as prior discussion of things such as early termination triggers, the ability to transfer interests, and valuation methods of the JV in the future.