Guillaume Doane is a country editor for Executive Country Reviews, a press agency headquartered in Paris and Istanbul.

Guillaume Doane

As recently as 2001, Turkey was on the brink of financial collapse, with nearly three-digit inflation and massive national debt. Investment conditions looked dire, mired by a period of political and economic turbulence and a history of systemic volatility. But a set of sweeping reforms turned Turkey into one of the world's most dynamic economies. A flagship of that recovery has been the pharmaceutical industry, with approximately 300 companies selling 1.3 billion units of pharmaceutical products per year. 

(All photos are courtesy of EC Reviews.) 

Since 2001, the industry has grown in value from $3.7 billion to approximately $9 billion in 2007. Behind this transformation stand a steadily growing economy, a young workforce, and increased healthcare expenditures from both the government and consumers. As a "pharmerging" market operating within a population of more than 70 million people, Turkey could surpass pharmaceutical sales of $11 billion by 2010, likely putting it among the world's top 10 pharma countries.  

The country stands to benefit from a growing national population with additional consumer spending on drugs and health improvements. Just as critical will be a surge in foreign investments, brought by economic consistency and recent government healthcare reforms that have improved public access to medicine and created a medical system that is closely aligned to the standards of European Union nations.  

"As the Turkish market has become a lot more stable, a lot more predictable and with better transparency, the international purchasers can begin to understand the benefits of doing business in Turkey," says Zinta Krumins, managing director of Boehringer Ingelheim in Turkey. In the past decade, Turkey has unified its Social Security system, implemented critical patent legislation (1995), and created new laws for generics registration (1996), reference pricing (2004), and data exclusivity (2005). 

Investors have noticed, beginning in 2000 when the Menarini Group, Italy's largest drugmaker, purchased I.E. Ulagay, Turkey's first pharmaceutical company. The deal was viewed with extreme skepticism until I.E. Ulagay increased its value by $200 million within seven years. A spate of strategic partnerships followed: Icelandic company Actavis's takeover of Fako (2004); EastPharma's (Istanbul) acquisition of Deva (2007); Citigroup (New York) and Pils' (Austria) co-purchase of Turkish player Biofarma (2006); and the highly touted deal between Zentiva (Prague) and Eczacibasi (2007). In the latter agreement, the Czech pharma giant took a 75% stake in the Turkish pioneer's generics division, a move that not only symbolized the attractiveness of the market but also the ease that multinationals have had in imposing themselves on a burgeoning sector. Six international companies rank among Turkey's top 10 pharmaceutical sellers, including market leader Novartis (Basel) ($800 million), Sanofi-Aventis (Paris) (nearly $600 million) and GlaxoSmithKline (London) (about $450 million). With broad product portfolios, deep prescription drug pipelines and economies of scale, multinationals have quickly asserted their dominance. 

Turkish companies are prospering as well. Eighty-five local manufacturers, many with family roots and post-World War II origins, have built a branded market in Turkey where generics account for more than half of total volume. Antibiotics are market bestsellers, but the main growth-drivers are products in chronic disease sectors, especially cardiology, central nervous system, and gastro-intestinal. 

But with intensifying generics competition and regulators committed to containing drug costs, several Turkish manufacturers are looking to high-tech, niche products, and overseas markets for future fortune. Mustafa Nevzat, Turkey's only FDA-approved company for finished products, is nearing completion on a production facility for oncologicals that could be exporting to the United States by 2009. Fresh off new capital investments, Biofarma plans to add 13 new export territories and begin construction on a production site for cancer drugs by the end of next year.  

But for all the strides made, significant obstacles lie ahead for Turkey, chief among them government inconsistency and political instability. While health regulations are nearly harmonized with those of Europe, company executives complain about poor applications of current laws, including the 210-day product registration period and a reimbursement list that is seen as biased and incomplete.  

"What we would like from the government is a more effective cooperation with the industry," says Murat Barlas, chairman of Liba Laboratories. "What we are waiting for is a centralized and independent drug authority like the FDA." 

Some executives also worry Turkish manufacturers are not positioned to ward off an economic downturn, especially companies without global presence. Pharmaceutical exports were less than 4% of the industry's value–approximately $357 million–with about half coming from raw materials. Active pharmaceutical ingredient production in Turkey has been in severe decline, undercut by China and India's high-volume, low-price models. Worries about Chinese and Indian generics companies encroaching on the Turkish drug market have begun to materialize.  

"We may have a Chinese or Indian invasion worldwide," says Dr. Cengiz Sezen, chairman of the Board of Mustafa Nevzat. "It is possible, economically." 

Yet others see the branding strength of Turkish generics players, with domestic credibility and more acceptance from the global economy, holding an edge over China and India. "When you look at the record, the development of Indian and Chinese companies trying to get into the branded generics markets is very poor," says Clemens von Oswald, country head for Sandoz Turkey. "For the foreseeable future, Turkey will be a branded generics market. We have a strong growth and a clear positioning in terms of market dynamics." 

For the past 50 years, Bell Holding has set the gold standard in packaging for pharmaceutical manufacturers. Among the nine Turkish companies operating within this business-to-business group, four specialize in industrial packaging: Interkap, Senapa Stampa, Metalum, and Perfektüp. The group's clients include nearly every pharmaceutical manufacturer in Turkey listed by IMS.  

Livio Manzini, (All photos are courtesy of EC Reviews.) 

"One of the cornerstones of our strategy is to nurture relationships with pharmaceutical companies and stay close and attentive to their evolving needs," says Livio Manzini, Bell Holding's chairman and CEO. 

Industrial packaging accounted for $75 million of Bell Holding's sales in 2007, and Manzini expects revenues to double within five years. The group leader, Perfektüp, Turkey's main supplier of collapsible aluminum tubes, is Bell Holding's most global player, exporting half of its production to Europe, North America, and the Middle East. 

Since last March, Bell Holding also has offered contract-sales services to pharmaceutical manufacturers through a joint venture with Innovex, the world's largest commercial sales organization, based in the United Kingdom. 

Applying the group's start-up expertise and its vast network in Turkish pharmaceuticals, Innovex already has acquired seven clients and 150 sales reps, and it aims to build a sales force of 1000 by 2010. The Innovex Turkey subsidiary provides drugmakers with product registration, human resources services, health management solutions, and the core activity, contract-sales. 

"For any pharma company that may want to come to Turkey and establish its presence, this service is obviously precious," says Manzini. 

Nobel Ilaç is arguably Turkey's most international pharmaceutical company. Since 2000, it has aggressively targeted foreign markets, setting up sales teams in 14 countries, including developing markets such as Ukraine, Bulgaria and, most recently, Russia and Romania. Both of its production factories in Istanbul received approval this year from German auditors and the company is looking forward to approval from the US Food and Drug Administration as it would like to form out-licensing and contract-manufacturing partnerships in the United States. 

Hasan Ulusoy, (All photos are courtesy of EC Reviews.) 

"The first years are always years of learning, investing, and even losing money," says Nobel Chairman Hasan Ulusoy, of the company's long-term expansion strategy. "But, if you have the patience and are addicted to the target, you can manage it." 

With 2007 revenues approaching $200 million, Nobel has historically been one of Turkey's top local players, bolstered by in-licensing agreements with multinationals such as Altana (Wesel, Germany) and Vitabiotics (London) and an extensive generics portfolio in major therapeutic areas, including cardiovascular, respiratory, and gastrointestinal. Its market leaders include the non-steroidal anti-inflammatory, "Etol," and "Tylol Hot," for cold relief. 

Nobel also offers contract research services through its research and development (R&D) center, Fargem, Turkey's first independent R&D institute. The company wants to expand its R&D investments in Turkey and is conducting a Phase II study in cooperation with a US company.  

"We are aware that the future lies in new developments," says Ulusoy. "Thus, we are also looking for partners with whom we can develop new projects." 

Established in 1990, Bozlu Group is fast developing into an international leader in nuclear medicine and radiotherapy. The group is comprised of eight companies, three of which specialize in nuclear medicine: MNT provides nuclear medicine and radiotherapy services throughout Turkey; VOSS distributes and provides services for the radiotherapy machine manufacturer, Varian Medical Devices; and Monrol serves as the country's foremost radiopharmaceuticals producer. 

ÅÃ¼krÃ¼ BozluolÃ§ay, (All photos are courtesy of EC Reviews.) 

In July, Monrol sold 50% of its shares to Eczacibasi in an effort to hasten its expansion. It completed a fourth production site this year in Izmir that produces isotopes for PET scanners. In 2009, Bozlu Group plans to manufacture radiopharmaceuticals in Romania and Dubai. During the next five years, the company hopes to have a presence in North Africa, Central Asia, and throughout Europe. 

"We find that when we go abroad from the Turkish business market, we are respected," says Bozlu Chairman and Founder Şükrü Bozluolçay. "American companies always contact us when they come to this region, sometimes bringing other companies with them." 

The group continues to invest in new technologies for both radiotherapy and diagnosis, foreseeing a pivotal role in molecular imaging. At its research and development facility in Istanbul, Bozlu plans to develop radiopeptides that can simultaneously image and treat certain diseases specifically. 

Bozluolçay envisions annual growth of at least 20% for nuclear medicine worldwide and predicts the group will reach annual sales of $100 million by 2012.  

"We have more flexibility than big companies," says Bozluolçay. "We have strong technology and logistics and with that, we hope we can fight competition and meet our targets." 

The towering growth of this 55-year-old manufacturer has been iconic of the remarkable inroads made by Turkish generics companies in recent years. On the heels of significant investments in chronic disease therapeutic groups, Bilim Pharmaceuticals has become Turkey's second largest pharma company, with 2007 sales of $370 million and 85 million units.  

BÃ¼lent KaraaÄaÃ§, (All photos are courtesy of EC Reviews.) 

The company has presence in more than 40 markets and exports to 24 countries worldwide. With a newly completed production site outside Istanbul, it hopes to soon export to European Union nations and the United States. 

"We are trying to adapt ourselves for these markets," says Bülent Karaağaç, Bilim's president. "The new plant will be the key element in this development strategy." 

Bilim also plans to use the new site's 125-million-unit yearly capacity to attract toll-manufacturing partners and to expand exports to Turkey's neighboring markets where it has formed marketing teams. Building upon a menu of 120 products, the marketing-oriented company plans to continue launching 10–20 drugs per year in the areas of diabetes and respiratory, cardiovascular, and central nervous systems. With ever-growing challenges brought by Turkey's intense generics competition and a more restrictive regulatory environment, Karaağaç says Bilim is positioned to sustain double-digit growth in the coming years. 

"If you know how to play by the rules, you don't lose," he adds. 

Within a year of its establishment as a local family company in 1956, Adeka was already forging partnerships with international pharmaceutical companies, registering, importing, manufacturing and distributing products to the Turkish market. It's the hallmark of a company that has utilized its outward thinking to become one of the 15 largest Turkish pharmaceutical companies, with 2007 sales reaching  $100 million. 

Articles

In the wake of economic growth, healthcare reforms, and large-scale industry investment, Turkish pharmaceutical companies are charting their own destiny.