Turkey Market Report 2015Research produced in collaboration with GBR*

The State, the market, and the state of the market

“About GBR: Headquartered in Singapore and with offices in Istanbul, Global Business Reports (GBR) was established in 2001 in order to provide up to date and first hand information for global business decision makers. In an age where cross boundary trade and investment and the globalization process are the driving factors for businesses, information is crucial. Precise sectorial reports help companies understand and expand their markets, improve their sourcing chain, target their investments and discover the trends affecting their industry around the world. GBR provides in depth surveys and up to date information and data covering all aspects of the hydrocarbon, Chemical, Pharmaceutical, Energy, Minerals, Mining and the Metallurgical industries around the world.

For previously published reports visit www.gbreports.com”

CPhI Pharma Insights reports: CPhI, the world’s leading pharmaceutical networking event, with over 100,000 attendees globally–is now using its collective resources to create Pharma Insight reports, analysing individual parts of the pharma industry as wellcreating the well respected and eagerly anticipated Annual Report featuring a global panel of experts (now in its second year).The vision is to harness the power of CPhI’s independent position within the industry so that it can produce unbiased analysis ofthe global pharmaceutical industry and help to see emerging trends and bring different perspectives together. The Annual Reportutilises expert in-depth essays, looking at future contingencies, whilst the Pharma Insights series takes perspectives from CPhIexhibitors and the wider industry.

To get more information on how CPhI events can drive forward growth and new business opportunities for the pharmacommunity, please visit www.cphi.com

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circa 8,000

1.82 billionunits produced per year

drugs being manufactured

2014

2013

2012

2011

856,200,000

817,700,000

720,100,000

620,400,000

166134Local firms

Foreign firms

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The Turkish pharmaceutical market size is

The Turkish pharmaceutical footprint extends to

countries

Germany

Switzerland

South Korea

56,000,000

59,000,000

110,000,000

IRDE

CH

SKRF

IQIraq

Russian Federation

Iran

51,000,000

32,000,00081% annual growth 260% annual growth

8.8% annual growth

45,000,000

L14.6 bn 170

25,000

12,500

Total employment

o/w university educated

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Introduction

The CPhI Istanbul 2015 pharma insights report is amedia ready version of the full analysis piece producedby CPhI and GBR for the attendees at CPhI Istanbul.This concise version is designed to evaluate the overall

position of manufacturers and foreign pharmaceuticalcompanies working in the Turkish pharmaceuticalmarket and contrasts these findings with the inauguralreport from 2014.

Full report

The full report, produced in collaboration with GBR, isentitled “Turkish Pharmaceuticals 2015: Turkey, Research &Development and Regional Growth” and will be available live at the show, 3-5th June 2015. This comprehensive report will provide in-depth insights into the most pressing issues affecting the development of Turkey’s pharmaceuticalsector, supplemented with statistics, graphs, executiveinterviews, and expert opinion pieces provided by theindustry’s leading voices.

Covering the entire value chain of the industry, topics fordiscussion within this publication will include:– The State, the market, and the state of the market:

assessing sectorial development in the wake of the

release of the Turkish government’s “Pharmaceutical Sector Strategy Document and Action Plan”

– Public-private partnerships: Turkey’s intellectual resources and the future of value-added pharmaceutical manufacturing in MENA

– Case studies in export-led growth (Georgia, Azerbaijan, the GCC, and North Africa): geopolitics, trade relations, market authorization and the development of Turkey as a regional export hub for pharmaceutical manufacturing

– Value-added pharmaceuticals: an overview of Turkey’s ten most innovative pharmaceutical manufacturers

– Forging partnerships: strategies in foreign direct investment

– Forecasting: growth expectations, 2015-2020

Methodology

Research partner GBR has undertaken in-depth executive interviews with Turkey’s largest pharmaceutical manufacturers, working across the country to provide a holistic view of the short-term conditions and macroeconomic analysis of how the market is set to develop.

CPhI would like to thank our research partners GBR and the Pharmaceutical Manufacturers Association of Turkey (IEIS), as well as the executives involved in providing raw data to produce this report. These insights have been an invaluable asset in evaluating the overall picture of the market, and have enabled the production of a value-added document that provides strategic input to anybody seeking to do

business within the region. Our contributors included:

Pharmaceuticals Manufacturers Association of Turkey (İEİS)Ali Raif Bilim PharmaceuticalsCenturionDem Pharmaceuticals Deva HoldingEczacibasiEjder KimyaEkin KimyaFirat & Izgi

IMS HealthKeymen Pharmaceuticals Koc UniversityKura Nobel PharmaceuticalsOnko KoçselPharma VisionRecordatiSandozWorld MedicineYilbak

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Overview

Turkey has undergone a considerable transformation in economic status over the last decade, with GDP per capita having more than tripled and disposable incomes rising fast. Yet despite this rising economic status the domestic pharma manufacturing market is yet to fully capitalise on an aging and growing population that is increasingly affluent. The industry has been constrained by currency variation (which is particularly an issue for the importation of pharmaceutical ingredients), coupled with a Government imposed price referencing system that is limiting margins and therefore, by proxy, future investments in R&D that local manufacturers are able to make. A clear trend emerges, that whilst local market penetration is the key for Turkish pharma companies, they are now also increasingly opening up trade ties with neighbouring countries – both from expected regions in Eastern Europe to more surprising and ambitious targets in Russia, CIS and East Asia.

The Turkish market for pharmaceuticals reached a value of 14.6 billion Turkish Lira in 2014, growing by 8.8%

from the previous year. Unit sales rose by 2.7% over this same period up to 1.82 billion units – but despite this it has still grown below inflation in recent years. Between 2009 and 2014, the value of the market for originator drugs, which declined during the first three years of this period, increased only in 2013 and 2014, allowing for collective market growth to reach 8.9% over the course of the past five years. The market for generic drugs, on the other hand, grew by only 6.7% from 2009 until 2014.

However, the overall economic proposition is that if improvements can be made with regard to the domestic market (i.e. creating a more stable pricing model), there is clearly the opportunity for a vast expansion as Turkey is currently under producing pharmaceuticals relative to its resource base. What’s more, with the population growing by one million each year and a social security system that covers 97% of the population, there are also opportunities for foreign direct investment.

Source: IMS, İEİS

Chart 1 – Turkish pharmaceutical market

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With rising economic prosperity and an aging population, the government has been systematically increasing healthcare infrastructure to meet demand (often from imports). However, the country is now entering a new phase of growth whereby the Government has targeted reducing its overall healthcare trade deficit – encouraging local industry and a greater proportion of domestically produced drugs.

“Today, Turkey has an advanced pharmaceutical industry in terms of installed capacity, a production standards and technology. The industry consists of 300 pharmaceutical companies, produces around 8000 drugs and employs around 30K people. This volume and 7 bn USD turnover makes the Turkish pharma market the world’s 16th and Europe’s 6th largest market.” Inci Ayyildiz, International Commercial Operations Director Mustafa Nevzat Pharmaceuticals.

It is predicted that the domestic market will continue to grow for the short and medium term at a modest 5-6% per annum. This growth however, is also likely to come from higher value formulations rather than increased production. The key issue within the Turkish market remains the lack of profitability from the majority of pharmaceutical products due to the price referencing system. Consequently, many Turkish companies are looking into niche, high value formulations and also into nearby markets to increase revenues.

The country is now entering a new phase of growth... encouraging local industry and a greater proportion of domestically produced drugs.

Industry Adaptability and Continuing Problems in Domestic Manufacturing

“Industry profitability, as an aggregate, has fallen in the past two years driven by two levers: currency volatility and Turkey’s price referencing system. For example, whilst pharmaceuticals grew 10% over the course of last year, Turkish lira has depreciated by

over 25%, so the expansion of the country’s pharmaceutical market has not balanced out the declines in profitability.” Cem Baydar, Senior Principal, Head of Turkey and the Middle East, IMS Consulting.

 

Source: IMS, İEİS*Other products: Medical baby formulas and some medical devices in pharmaceutical form, and food supplements approved by the Ministry of Food, Agriculture and Livestock.

Table 1 – Market change by segment

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In the short term, this is forcing manufactuers to seek products with higher margins, with speciality products and oncology key regional growth markets. Looking ahead in the medium term, it is anticipiated that this change will accelerate and the market will be entirely driven by speciality care.

“2009 – 2015 has been a dark period for the country’s pharmaceutical manufacturing base, marked by mistrust and poor communication. If pharmaceutical manufacturing is to play a strategic role in the country’s future – a goal expressed by the Turkish Government – the nature of the country’s regulators relationship with domestic industry must shift.” Ismael Yormaz, Vice President & Regional Director: South East, Recordati. However, there is still a vast amount of scope for growth and many international companies are looking to invest in Turkey as a standalone market. Whilst there are difficulties in the shorter term, in the long term this is obviously going to be a high growth arena for developing pharmaceuticals.

In turn, this is presenting opportunities for domestic manufacturers and CMOs operating regionally. As a first point of entry, international companies are either looking for partners or acquisition opportunities.

“Some international companies that already have an established presence in Turkey are currently importing. They need to start manufacturing locally after gaining a GMP license for their factories. Important generics that have no GMP have expressed interest in manufacturing in Turkey as well.” Ismael Yormaz, Vice President & Regional Director: South East, Recordati.

Looking ahead in the medium term... the market will be entirely driven by speciality care.

  Source: IMS, İEİS

Table 2 – Sub distributions of originator-generic products

What Growth Reveals about the Turkish Pharma Industry

The interesting picture behind the growth in the industry is that whilst Turkish manufacturers have maintained roughly the same production numbers for original products, the overall supply has grown. It appears this rise has been entirely met by the importation of high value drugs. However, in the generics market we see

the opposite position with almost the entire market now dominated by Turkish manufacturers. As a result, the government must improve its support to original products and in the meanwhile, many manufacturers are switching to contract services where margins can be maintained.

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A Call from Turkish Manufacturers

One unanimous point all manufacturers we surveyed were in agreement on is that the Turkish government could, and should, do more to facilitate the expansion of the domestic market. For instance, the government could increase incentives for the development of research and development-centered products.

The resultant effect is that domestic production is still underperforming, relative to the resources it has within the country, and that pharmaceuticals are heavily contributing to Turkey’s current account deficit. Another residual effect is that the API market is becoming increasingly competitive as manufacturers seek ways to reduce marginal pressure. This is a significant factor as currently the majority of APIs are coming through India or Europe and the overall quality of Turkish finished drugs remains very high.

“One indirect consequence of the changing nature of the Indian API supplier’s relationship with the Turkish pharmaceutical manufacturer has been that, while the Indian API supplier still maintains the largest portion of market share, this is decreasing. We are beginning to see Chinese API manufacturers playing a greater role in supplying the domestic market. This, of course, comes with its own set of concerns: the sustainability of these relationships are tenuous at best, and Chinese manufacturers often lack the quality standards of Indian manufacturers, especially for APIs.” Murat Çitiroglu, Business Development Manager; Gamze Çitiroglu, General Manager; Pinar Cakir, Division Manager; Ekin Kimya.

Policy and margin issues aside, considering its considerable resources and modern facilities, investments by Turkish manufacturers are currently quite low. However, the Turkish government is attempting to take this issue in hand and is responding by encouraging both the domestic production of pharmaceuticals and is beginning to offer incentives for increased investment.

“The Turkish pharmaceutical industry has not evolved rapidly, there have been several important advances that have been made. Among these: we have seen a greater emphasis placed on the importance of the development of value-added pharmaceuticals on the part of the Turkish government – an acknowledgement that, as manufacturers, our operations have an important place in the establishment of diversified industry in the country. We are happy to see this change reflected in the strategic policy initiatives that we have seen developed for value-added pharmaceuticals, especially for the cultivation of products in fields such as biosimilars.” Ismael Yormaz, Vice President & Regional Director: South East, Recordati.

At present though, fortune favours the brave, as most of the investment incentives put in place by the Turkish government provide funds retrospectively. Some manufactures have taken a longer-term view and are moving ahead with investments in new facilities, both for domestic and international markets, but most are hesitant in such an environment. Thus, the tide appears to be turning for many manufactures as aggregate pharmaceutical exports, which stood at $474 million in 2009, have since grown by 80% over the past five years, standing at $856 million in 2014. This has been largely driven by double-digit growth realized in foreign market sales in 2012 and 2013.

“But our clients can perceive the difference between our products and those of Indian manufacturers and therefore perceive greater value in what we have to offer as a Turkish pharmaceutical manufacturer” Ersin M. Erfa, General Manager, Centurion

Turkey is now well placed to act as a regional hub to supply finished formulations across the Eurasia covering CIS and MENA regions.

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Longer Term Government support and Involvement of Universities.

Five years ago, in meeting with universities, they expressed little interest in collaborating with domestic industry. This is now changing and there are many incentives given by authorities for R&D”. Dr. Erhan Bas, General Manager at Bilim Pharmaceuticals.

One area that has gained increasing traction over the last year has been the increased collaborations between the pharma industry and university community in Turkey. This improved intellectual capital base of the country will in the future enable it to adapt and meet the changing skills need with its industry – notably

around the move towards higher value formulations and into biosimilars rather than just basic generics.

In fact, Koc University is keen to try and open up more collaboration between academia and pharma and this year they opened a new masters programme for pre-clinical research. Prof. Burak Erman from Koc University, commenting on the renewed relationships stated: “We are currently being introduced to the pharmaceutical industry and we have signed an agreement with Astra Zenica and Sanofi…. We hope that some day a Turkish Company will partner with us for a pre-clinical product”.

Biosimilars and International Partnerships

Many Turkish companies are currently looking to biosimilars as a driver of future sales, particularly as an export product into the EU. What is interesting is that these companies are securing their market position by working with international partners on delivery. For example, Centurion is currently working with Amgen on a second investment in biosimilar and bio-better product development. The key point here is that Centurion General manager, Ersin Erfa envisages that the sales potential extends beyond Turkey, “and more significantly, into regional markets such as the European Union”. International; companies are also looking to push ahead in Turkey with biosimilars development and Sandoz, believes that its international experience and greater investment potential will see it achieve results ahead of the competition. “Though there are many Turkish businesses that have now focused on these products, I believe few will be able to realize their ambitions because of a lack of resources” added Altan Demirdere, Cluster Head Turkey for Sandoz. In fact he continued and warned that the entire domestic industry is being put under threat and needs Government led structural reforms are needed. He added, “Turkey now faces a choice: either structural reform that would allow for the Turkish pharmaceutical industry to be profitable, or a news strategic direction where the whole pharma industry and development is government owned.”

Companies like dem pharmaceuticals, however, that are already leading in exports have greater maneuverability than some of the domestic rivals, as they are already generating significant revenues (and margins) from exports. Dem is going a step further and is taking a longer-term approach to invest to biosimilar development today in the hope of improved conditions once its facilities and products are ready.

“Dem pharmaceuticals chose to focus on the development of biosimilars. Initially this involved risk. However, because we chose to undertake this endeavor, today there is an understanding within Turkey that biosimilar products are both safe and cost-effective… Our main objective now is to develop our own products. We are heavily invested in the development of biosimilars, for which we seek to construct a biopharmaceutical production facility. Five years from today, we hope that we will have one to two biosimilars that we are able to produce.” Deniz Demir, General Manager at dem pharmaceuticals.

The key point here is that the sales potential extends beyond Turkey... into regional markets such as the European Union

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Taking a Gamble on Future Returns

The companies that are experiencing the highest growth rate have invested in new facilities and markets, but for cash strapped companies the future is looking a little ominous unless alternative sources of funds can be secured to keep pace.

“Last year, in 2014, Onko Koçsel exhibited strong growth in spite of market circumstance, standing at 26%. Next year, because we have now entered into production through our new plant, we anticipate even stronger growth. We anticipate that this will be aided by interest in toll-manufacturing within our facility, an area that many parties, among them several of the world’s most important pharmaceutical manufacturers, have expressed interest.” Tuğçe Koç, General Manager; Tuğba Koç, Board Member, Marketing & Sales Onko Koçsel.

This is essentially because the fundamentals within the Turkish pharma economy are well suited as a bridging economy – i.e. whilst the products are more expensive than those produced in the Indian markets, they’re still substantially cheaper than those produced from Western manufacturers with comparable standards and, we are increasingly seeing the country’s manufacturers taking tentative footsteps to launch products in the EU and even the US. Here again, we are likely to see the internationalisation of the market, as after successfully supplying to these markets the vast majority of companies will need regional partners.

“Exacting in standards, the US and the EU are both within the reach of Onko Koçsel. Our facility is truly world class. Currently we have entered into internal discussions as to which of these markets to approach, an action we expect to take by the end of the year.” Tuğçe Koç, General Manager Onko Koçsel.

fundamentals within the Turkish pharma economy are well suited as a bridging economy... the products are substantially cheaper than those produced from Western manufactures

Another consideration before launching into foreign markets is that products are likely to take a hit in the first two to three years with companies making a loss. Therefore, it has been a case of chicken and egg for some companies, as they absolutely require a sound domestic base before they can start looking for growth in exports. The ultimate effect of this is that we are likely to see increasing consolidation amongst manufacturers. With “fallen levels of internal profitability and the lack of resourse that this creates, we believe this could result in market consolidation.” Cem Baydar, Senior Principal, Head of Turkey and the Middle East, IMS Consulting.

Picking the Right Market and Product

What is going to be essential for manufacturers in Turkey is that companies match their internal and future capabilities with market requirements, regulatory entry criteria and distribution channels. Taking a broad-brush approach, looking to supply exports to 10 or more markets is simply not going to be effective. Another factor is that some foreign healthcare authorities have come to demand that the prices for pharmaceuticals in Turkey are used in establishing the price, which the Turkish pharmaceutical manufacturer will receive in establishing licensing and supply agreements. One consequence of this attendant decline in profit margins

has been that Turkish pharmaceutical manufacturers have to be creative in their promotion and distribution within foreign markets. Equally, many have moved to contract manufacturing within a target market so as to command a higher price for their products.

This adaptability of the Turkish manufacturer remains its key strength and with Government stance softening and a key regional position, undoubtedly we could yet see the rapid emergence of the Turkish pharma industry. For the next year however, Turkish companies must maintain lean operations and pick their investment opportunities wisely.

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“Exports to emerging markets, underdeveloped markets, such as, the CIS or GCC, are quicker to realize but come with certain risks. Exports to developed markets come with less risk, but require more substantial investments in both quality standards and market entry.” Philipp Haas, CEO, DEVA Holding.

Turkish manufacturers are also now taking advantage of changes in the geopolitical environment with Western companies more reluctant to enter CIS economies due to current strained relations with the Russian government. This has presented a key opportunity for exporting from Turkey, particularly for those looking to invest in neighbouring entry states such as Kazakhstan. “Not all markets can be approached using the same strategy. We have two manufacturing facilities outside of Turkey: one in Kazakhstan and one in Uzbekistan. These facilities allow us to access several regional markets, such as Russia, through their trade agreements and have allowed us to enter several markets, like Uzbekistan, where manufacturing is mandatory.” Numan Balki, Member of the Executive Board; and Gökhan Köse, Business Development Manager at Nobel Pharmaceuticals.

Russia’s trade agreements have been initiated in order to boost the domestic manufacturing economy. It has been declared by the Russian Drug Authority that by 2020, 80% of Russia’s total pharmaceutical market will be supplied domestically, creating a huge shift for international companies currently exporting to Russia.

However, some nearby countries such as Kazakhstan are set to be included in this domestic bracket, and their manufactured products will be classed as local and hence exempt from regulatory changes that will soon come into play for imported products.

This will have a huge influence on development strategies for Turkish companies considering where to invest manufacturing bases, particularly when aiming to gain access to the Russia pharma market. Countries such as Kazakhstan, and Ukraine provide direct access to Russia, and hence present huge opportunities for exporting drugs.

Turkish manufacturers are also now taking advantage of changes in the geopolitical environment

“When we first began export-market development, when we entered into the CIS, many physicians lacked an understanding of foreign pharmaceuticals and the potential benefits they offer. We had to undertake a process of market education. This was critical to our success.” Numan Balki, Member of the Executive Board; and Gökhan Köse, Business Development Manager at Nobel Pharmaceuticals.

Turkish Pharma Expanding into Neighbouring Countries

In the last two to three years we have seen a number of Turkish companies entering the markets of former CIS-countries such as Azerbaijan, Georgia, Estonia, Belarus and Ukraine, alongside the high growth markets in North Africa – e.g. Algeria, Libya and Egypt.

There is a two-prong strategy clearly in place within the Turkish market with some companies seeking to increase their exportation of drugs to traditional regional trading partners, and others looking to invest directly in new sites, outside of Turkey. The advantage for Turkish manufacturers is that some of their major

trading partners are amongst the faster growing pharma economies worldwide and have a large amount of future potential (e.g. Russia).

Another significant benefit is that culturally there is less political sensitivity on working with economies in the Middle East, which is, and will continue to be, an even bigger high growth region for Turkish pharmaceutical exports.

Pervin Ejder, General Manager at Ejder Kimya commented on the progress made through expanding

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their presence in foreign markets, that resulted in them growing by 27% in 2014 alone:

“Ejder Kimya has focused on the Middle East and North Africa. In particular, we have expanded through working closely with Iran, Lebanon and Algeria. We will soon also enter Yemen, which we seek to enter through the establishment of our own office. Though this growth is disproportionately splayed towards the supply of raw materials for cosmetics, our expansion follows a general pattern of outward expansion that we have seen occur within the Turkish pharmaceutical industry. Foreign market sales have increased by as much as 50%.”

Essentially, Turkish manufacturers are looking to internationalise their services in a similar way to what the Indian industry has done over the last few years. Practically, this means that Eastern Europe, Romania, Bulgaria, Czech Republic and Poland may pave the way for a gradual move into high value markets of western markets and the US.

“Over the course of the next five years, World Medicine will become more global than ever before. We are currently establishing a factory in Belarus. We will soon develop a factory in Algeria. We seek to enter into the European Union, and many of the world’s most quickly growing, emerging medical markets. We see great promise in these regions.” Rovshan Tagiyev, Founder & Chairman, World Medicine.

Entering the EU market currently remains difficult as product registration is still relatively high compared to other regions and given that as many as 60% of these business ventures may fail, taken collectively these are quite debilitating for potential investment opportunities. However, the rewards for those companies with confidence to push through new products will be substantial.

“DEVA has invested substantially in ensuring that its facilities are of a high standard. The approval of our facility by the German Ministry of Health marked an important milestone for DEVA: it signaled that we have now built a platform from which we can begin to export. I expect that we will see sales begin in the second half of 2015 to the European market. Though small in the beginning, we believe that this will quickly escalate. The more products one registers within a market, the easier it becomes to authorize additional products. As of December 2014, we obtained license approvals of over 200 products in several countries including developed and EU countries. This will be further facilitated by the partnerships we now have in place with European distributors.” Philipp Haas, CEO, DEVA Holding.

Companies who wish to enter markets, such as the EU, require greater investment in order to meet regulatory standards set by governmental bodies. However, as indicated by the success of DEVA Holding, once established, it becomes easier to obtain license approvals for additional products and increase the profitably of product lines compared to other markets.

the rewards for [Turkish] companies with confidence to push through new products will be substantial.

Tagiyev, added, “as a result of the Turkish pharmaceutical manufacturer’s inability to profitably develop new products or continue existing product lines. World Medicine, and many others within the Turkish market, understand that there is a need for certain types of pharmaceutical products to be developed and launched. Our ability to do so as manufacturer, however, is limited. The immediate consequence of this has been that World Medicine, like many others, is now more heavily focused on the development of export markets.”

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Fastest Growth in Surprisingly Regions

Today, the markets to which Turkish pharmaceutical manufacturers export are widely dispersed, spread across 170 countries. Chief among these markets is South Korea, Switzerland, Germany, Iraq, Iran, the Russian Federation, the USA and Azerbaijan, which represent, by size, Turkey’s largest export markets for pharmaceuticals. The most notable trend is 80% growth in supply to Russia and a 260% growth in exports to South Korea in the last year.

The traditional markets in the Middle East and across North Africa have become temporary cooled by political instability

and regional conflict, which has led to the explosion of new export markets in Russia and more surprisingly East Asia.

“Bilim Pharmaceuticals targets two markets in particular, at least immediately: Russia and Vietnam. MENA, CIS countries, and Iraq, have been complicated by regional conflict, which has resulted in constraints on public medical expenses not dissimilar to those imposed in Turkey. Yet as a whole, Turkey is fortunate in that regional medical markets, by and large, lack a domestic pharmaceutical manufacturing base.” Dr. Erhan Bas, General Manager at Bilim Pharmaceuticals.

Conclusion

Taking all factors into consideration, CPhI concludes that despite short-term marginal pressures, the long-term opportunities across the Turkish and neighbouring markets are substantial. Growth potential, whilst limited towards generics in the domestic market, will be driven over the next two to five years by manufacturers increasingly pushing into new markets with limited domestic manufacturing capabilities. In particular, Turkey’s manufacturers will look to invest in new facilities in nearby CIS nations to take advantage of the growth potential in the Russian pharma market. Moreover, manufacturers that have invested in the last two to three years in specialty products and biosimliars already look well set for substantial growth in the short term, and we will likely see them increasingly selling these high value products into EU markets.

What is interesting is that while exports to traditional neighbouring countries (many with political instabilities) have fallen, Turkey has maintained growth in exports by looking to supply to newer and more diverse regions. The recent exponential growth in exports to South Korea is a surprising and largely unforeseen development and we may see products exported to other East Asian economies like Vietnam.

The government position with regards to reimbursement system remains a sticking point for growth in the short term. However, with government elections this year, and a desire across both parties to increase domestic production we should now see domestic manufacturers getting the support they

need. Already, government-backed investment opportunities have been taken advantage of by a number of the country’s most innovative manufacturers.

With a price referencing reform, particularly around exchange rates, manufacturing capacities are likely to increase significantly, providing essential capital for manufacturers to reinvest in new technologies and facilities. Turkey’s manufactures are operating highly lean and efficient operations, which bodes extremely well for the country’s growth once marginal pressures improve.

What is telling about the potential in this market is that large international players are clearly not put off by short-term low margins, and are actively seeking to secure a presence within the market. As a result, what we will see emerging in the next two to three years will be a consolidated industry with leaner, more flexible manufacturers, a significantly expanded contract services sector, a highly flexible workforce thanks to industry academia partnerships and ultimately, an export-led pharma economy. Ten years from now, this period may very well be talked about as the defining moment in establishing Turkey as a key drug development hub.

long-term opportunities across the Turkish and neighbouring markets are substantial

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About CPhICPhI drives growth and innovation at every step of the global pharmaceutical supply chain from drug discovery to finished dosage. Through exhibitions, conferences and online communities, CPhI brings together more than 100,000 pharmaceutical professionals each year to network, identify business opportunities and expand the global market. CPhI hosts events in Europe, China, India, Japan, Southeast Asia, Russia, Istanbul, Korea and South America co-located with ICSE for contract services, P-MEC for machinery, equipment & technology, InnoPack for pharmaceutical packaging and BioPh for biopharma. CPhI provides an online buyer & supplier directory at CPhI-Online.com.

For more information visit: www.cphi.com

AddendumThe statements and figures contained within this release were collected at an early stage of GBR’s research. As such, it may not reflect final conclusions on market trends. GBR is finalising its research this May and will be presenting its conclusive findings at the opening conference of CPhI Istanbul 2014

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