Turkish manufacturers move beyond domestic market to export-led growth, niche products and biologics development

CPhI Worldwide announce the findings of its Pharma Insights report on Turkey. The comprehensive analysis of the Turkish pharma market was conducted amongst all major Turkish manufacturers, evaluating conditions for both foreign and domestic companies, and was compiled with the help of research partner Global Business Reports.

Overall the report concludes that pricing challenges domestically have had a parallel effect of increasing the dynamism in the market and improving overall competitiveness of the sector. As a result, the country now boasts a highly price efficient manufacturing industry far cheaper than those in the West, coupled with a comparable regulatory standards, providing an ideal mix of factors to establish Turkey as the key regional pharma economy.

If reimbursement conditions improve, this should provide the right environment for a burgeoning healthcare industry, with Turkey having seen GDP per capita triple in the last 10 years alone. Beyond the domestic reimbursement market, however, niche products and export-led growth is also providing a significant avenue for greater revenues.

Investment in new facilities is now happening across the market, which CPhI concludes will see Turkey establish itself as the definitive player and supplier of drugs across the MENA and CIS regions, with exports even as far reaching as the Baltic states. Ultimately, the country’s manufacturers are now aiming to begin supplying directly into Europe and even the US; for example, Nobel Pharmaceuticals last year accrued over $100 million in sales to foreign markets and growth at Onko Koçsel predicted to be a staggering 38% in 2014. Mustafa Nevzat is forecasting similar near-term growth to $50 million in international sales across 40 countries.

An increasingly prosperous population and a growing healthcare economy, coupled with a manufacturing base that has many FDA- and EMEA-approved sites means foreign direct investment is increasing.

Vefik Koral, Owner of Farkim, highlighted this growing trend: “The foreign/multinational companies now dominate with the larger Turkish firms acquired. There only a few large-scale Turkish companies left in the market.”

As such, those that remain will increasingly form collaborations and partnerships that will be an essential driver of Turkey’s R&D sector, and international companies are again showing an increased interest in the Turkish market; for example, Mustafa Nevzat is partnering with Amgen to increase its work in biotechnogy.

The government is also helping to reduce the trade deficit and increase innovation by offering corporate tax relief, access to institutions including Tubitak, and R&D expenditure support, which for accredited R&D centres covers 60% of staff expenditures.

One conclusion, that some international companies may find surprising, is that the country has a very robust IP protection environment, with many Turkish-owned manufacturers regularly patenting their own processes. In the recent International IP Report, published in January 2014 by The Global Intellectual Property Center (GIPC) under the US Chamber of Commerce, Turkey now ranks 10th out of 25 countries in terms of patents, related rights and limitations. International companies are now catching up with this reality and a significant increase in manufacturing R&D work and contract manufacturing is being observed.

A major obstacle for growth (experienced universally) in the Turkish pharmaceutical industry is the Government’s price referencing system and a fixed euro­­–lira conversion rate, with low prices consequently putting increasing pressure on profit margins.

This, however, has seen a dynamic approach emerge within the industry and manufactures are looking to new horizons like biologics, niche products and, most significantly, at the export market — particularly in central Asia and CIS regions. This new R&D focus is exemplified by the significant investment made in manufacturing facilities with Pharmactive ($120 million), Onko Koçsel (€70 million), Beko pharma (€60 million) and Centurion (€20 million) having committed to huge facility developments.

 “This comprehensive market report of the Turkish pharma economy is launching alongside the first ever CPhI Istanbul and the outlook both for the near and long term points strongly towards an increasingly prosperous and innovative marketplace. Growth domestically and as key regional hub for pharma products supply has firmly put Turkey on the global pharma map. What we are now seeing is an evolution of the industry internally with bold investments being made in biologics and even R&D programs. It’s a rapidly changing country that is quickly moving beyond generics into new more advanced fields of manufacturing. The investment in this region over the next few years and the collaborations between international pharma and regional companies shows we are now witnessing the sorts of deals that are not only going to affect the Turkish healthcare economy but the entire MENA region,” said Chris Kilbee, group director pharma.