ANGLES ON PHARMA

Turkey 2011 | HEALTH & EDUCATION | B2B: PHARMACEUTICALS

With both foreign and local players, the Turkish pharmaceutical sector is highly dynamic. Increasing focus on R&D in the country is continuing to drive innovation and growth.

Philipp Haas
PHILIPP HAAS
Chairman & CEO
Deva Holding
Yİğİt Gürçay
YİĞİT GÜRÇAY
Vice-President & General Manager
GlaxoSmithKline

You became the Chairman of Deva Holding in 2006 and its CEO in 2008 during a time of great change. How has the company's strategy been refined, and what are your long-term targets?

PHILIPP HAAS My long-term targets are to develop Deva even further as one of the leading Turkish pharmaceutical companies. In a very crowded market our share is 5.5% on a volume basis. We are a dynamic company that is bringing a lot of new products to the market every year. My other target is to become a world generics player. We built brand new state-of-the-art facilities that have been fully operational since 2009 after an investment of more than $100 million.

How significant is Turkey within GlaxoSmithKline's global operations?

YİĞİT GÜRÇAY Like many companies in the pharmaceutical industry and elsewhere, we are going through a difficult phase in the US and European markets. Emerging markets are generally seen as the source of growth in the world. For GlaxoSmithKline (GSK), Turkey is currently one of the biggest operations in the emerging markets. We expect significant growth from the Turkish market for the next 5-10 years. For GSK, Turkey is a key market and one in which we plan to invest.

What is going to be the focus of your companies' R&D facilities in the coming years?

PH We are one of the few companies with oncology capabilities already, but we are also planning a large R&D project for new oncology products worth some TL60 million. The new facility will be one of the most modern facilities in the world. We are also just months away from launching a new range of inhaler products. Respiratory care is a key growth area for us besides the provision of oncology-related products. The needs of the respiratory care segment are growing in Turkey and worldwide. These are two key areas for us and they have helped shape our R&D strategy, which we believe will lower Turkey's need to import pharmaceutical products.

YG GSK is among the leading research based pharmaceutical companies both in drugs and vaccines. Our R&D operation to develop innovative, efficient drugs and vaccines to improve the quality of life is a basic part of GSK. The classical pharmaceutical model has focused primarily on blockbusters. However, GSK has recently reshaped that strategy. Looking to the future, GSK will still have some blockbusters, but our focus will also be on having a diversified portfolio. We are trying to establish a portfolio, not depending on blockbuster drugs, but rather much more balanced in terms of diverse categories. These may be much smaller, even niche categories, but it is important for us to explore the unaddressed needs of patients. Increased scrutiny of the pharmaceutical industry in recent years has meant that the amount of work being done on new molecules is increasing in a major way, but fewer products are coming through the pipeline. A more diversified portfolio will allow us to balance risk on the business side and create more benefits for patients.

I'm glad to say that GSK's approach to R&D is already starting to bear fruit in the shape of a very strong and rich pipeline. By the end of 2010 we had 30 important R&D programs at Phase 3, 20 of them new molecules or vaccines. Within the next two years there will be 15 more drug and vaccine programs at Phase 3.

What are your expectations for the generics market in Turkey and internationally?

PH The important trend we have seen in the Turkish market, as well as internationally, has been that of generic substitution. In Turkey, the market penetration rate of generic label medical products is only about 50%, while in the US it is 90%. As we see more patents expiring, more doors will open up for the expansion of the generic pharmaceutical industry.

YG For one we can count on the GSK emerging market structure, in which we have a number of global partners for the generics business, like Dr. Reddy's Pharmaceutical Company, Aurobindo from India, and Aspen Pharma from South Africa. We also have a number of local activities. For example, in Argentina a local generics company has been acquired. The same applies for Mexico, where a major dermatology company has been acquired. There are some imminent projects in which GSK is looking for options to expand the generics business. If you put this together with GSK's infrastructure and our emerging market capabilities, we have a strong competitive advantage.

What is your outlook for the future of the sector and the pharmaceuticals market in general?

PH I am very pleased with our performance, especially in terms of our position in the market. I am also very pleased with the re-structuring we have carried out at Deva Holding. We have positioned our company in a way that will ensure that we prevail in the market in the future. We are looking especially for long-term sustainability and long-term growth. I believe that over the last few years we have built the foundation on which we can carry the company forward to a bright future.

YG GSK has secured double-digit growth in Turkey over the last few years, although 2010 was an exception due to pricing pressure. This factor had a major impact on many companies, particularly innovative ones. Following a growth phase from 2007 to 2009, 2010 was flat for us in terms of value turnover despite the fact that volumes have grown strongly. Looking forward it will be a balance between volume and price. We expect continued volume growth and hope to see controlled price reductions.