Pharmaceutical Executive Europe - October 2008 - (Page EC15)

EC Reviews To merge or not to merge ? EC Reviews’ Guillaume Doane, Lina Serafini and Ece Vatansever ponder the question facing many Turkish drug manufacturers. n 2006, the board members of Eczaclbasl Holding gave a mandate to Merrill Lynch pledging their interest in selling the generics unit of its pharmaceutical division. At the time, the unit was performing well, ranking third among generics players in Turkey with a 3% market share. But the board members had recognized multiple growth inhibitors, such as Turkish pharma’s overabundance of production capacity, its deficiency in exports and intensifying competition in the generics sector. In March 2007, Eczaclbasl picked Prague-based Zentiva, selling three-quarters of the generics division in a landmark deal worth nearly $700 million. The acquisition was important at the time in underscoring the attractiveness of Turkey’s pharmaceuticals market and its companies. But it has since become a flashpoint for a critical question facing several Turkish manufacturers: is it better to merge or to continue alone? The interest of thriving multinationals to share in the growth of Turkish pharma has posed significant challenges for local companies that have fewer products and exports. And Turkey’s evolving regulatory environment has added pressures on these companies, making strategic partnerships more appealing. The reference-pricing law of 2004, for instance, placed severe price constraints on drug makers and instilled the market with an extreme, trench warfare-like competitive atmosphere. As a result, several companies have sought to expand their product portfolios with more advanced, high-margin therapeutics. Sometimes those investments require the help of a multinational. “Having this kind of international involvement will bring in access to new technologies for those companies,” says Zinta Krumins, managing director of Boehringer Ingelheim Turkey. “Improvements and efficiency in manufacturing will be much better and that can only be good for the generics market in Turkey.” For Eczaclbasl, the sale allowed the Pharmaceuticals Division to focus its attention on importing and selling high-margin products for multinationals such as Amgen. “You have to be a global company in order to utilize fully your capacity,” says Sedat Birol, Executive Vice President of Eczaclbasl’s Pharmaceuticals Division. “Most companies in Turkey do not utilize their plants fully, so their costs are high, their export potential is low, and they have to fight for an increasingly smaller share of the local market.” I The Turkish generics drugmaker Biofarma has used its corporate parentage — it is owned equally by Citigroup and the Austrian financial firm Pils — to build a new production site, launch new products and acquire more export territories. In selling to the Israeli giant Teva last July, Med-Ilaç gained access to a large portfolio of original and generics products and to the ability to build upon in-licensing deals with international companies such as Protina and Pharmachemie. for many local companies, to acquiesce to multinationals means to relinquish control over their destinies. Turkish executives at leading companies say drugmakers should have the courage to take on the global economy by themselves. But for many local companies, to acquiesce to multinationals means to relinquish control over their destinies. Turkish executives at leading companies say drugmakers should have the courage to take on the global economy by themselves. Sanovel, with a number of blockbuster drugs succeeding in Turkey, has staked its generics winnings in establishing a holding company in The Netherlands with subsidiaries in Germany and France. It is also promoting and selling products in Turkey’s neighbour markets such as Georgia, Kazakhstan, Azerbaijan and Uzbekistan. By the end of 2008 it will have added teams in Russia and Ukraine. Yet a prevailing view among executives is that local companies should have consolidated a long time ago. Mustafa Birgi, chairman of the Birgi Mefar Group, says market conditions have put companies in merge-or-fail situations. “I wish companies had had the good sense of merging before the market opened up,” says Birgi. “It would have become a much stronger industry.” PTE www.pharmexeceurope.com 15 http://www.pharmexeceurope.com

Table of Contents Feed for the Digital Edition of Pharmaceutical Executive Europe - October 2008

Pharmaceutical Executive Europe - October 2008 Contents News and Analysis Calendar BioFutures Strategy Fundamentals Executive Recruitment: Small Company, Big Career Executive Recruitment: Instant Pharma Named Patient Programmes Executive Review: Turkey

Pharmaceutical Executive Europe - October 2008

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