IHS Global Insight Perspective | |
Significance | Major acquisition rumours in the Turkish market have seen top local firms Bilim Ilac, Dr. Frik, and Biofarma attracting interest from major pharma, private equity firms, and compatriot companies. Bilim Ilac has attracted interest from UK private equity firms Cinven, CVC Capital Partners, and Advent International; Dr. Frik has attracted interest from Turkish major Abdi Ibrahim; while Biofarma has drawn attention from the likes of GlaxoSmithKline (UK) and Israeli major Teva. |
Implications | The rumoured acquisitions reflect the continuing trend towards market consolidation in Turkey following increased government pricing controls and reduced drug reimbursement. It also sees ongoing interest from private equity firms in the Turkish pharma market, and a drive by Big Pharma and generic firms to expand their presence in Turkey in order to capitalise on the 7.3% growth forecast for the market. |
Outlook | Acquisitions are expected to continue in the immediate-to-medium term, as the government looks set to further tighten drug price controls in order to control the ever-increasing health budget. |
The past week has seen rumours of significant acquisitions circulating through the Turkish pharma industry, with three top local firms—Bilim Ilac, Dr. Frik, and Biofarma—reported to be up for grabs by local players, multinationals, and private equity firms. Turkey's pharmaceutical market racked up sales of USD9.2 billion in 2010, and the overall market is expected to grow at an average annual rate of 7.3% to reach USD15.07 billion by 2014 (source: IMS).
Proposed Sale of Bilim Ilac
On Friday last week (8 April), UK private equity firms Cinven, CVC Capital Partners, and Advent International were named as potential buyers of stakes in Turkish major Bilim Ilac, which may see the latter valued at approximately USD1 billion, Sabah reports. Cinven has partnered with Turkish investor Actera, while CVC Capital Partners is collaborating with Turkish firm Turkven. The size of the Bilim Ilac stake up for sale has not yet been disclosed. Bilim Ilac is the fourth largest pharma firm in the Turkish market in terms of value and third in terms of volume, with 212 products, a 4.7% market share, sales of 102.4 million boxes, and revenues of 14.8 billion Turkish lira (USD 9.74 billion) in 2009, according to the firm's website.
Abdi Ibrahim Interested in Dr. Frik Takeover
Turkish major Abdi Ibrahim has stated its intent on wholly acquiring compatriot Dr. Frik, including the 17% stake owned by private equity firm IS, Reuters reports. Abdi Ibrahim did not provide a valuation for the generics firm. Dr. Frik had 2007 revenues of about USD65 million, a portfolio of more than a dozen products, and anticipates 50% growth over the 2008–13 period based on new licensing agreements with multinational firms and the introduction of 40 new products.
Scramble for Biofarma
In December 2010, the owners of Turkish generic firm Biofarma—the Greek private equity firm, Global Finance—put the company up for sale for more than USD500 million (source: TradingMarkets.com). Partners in Life Sciences (PiLS) and Citigroup Venture Capital International (CVCI) acquired Biofarma in 2007 for USD200 million, before later selling the firm on to Global Finance. Following periods of review, the number of prospective rumoured buyers has been narrowed to three, including GlaxoSmithKline (GSK; UK; see United Kingdom - Turkey: 8 April 2011: GSK is Contender for Ownership of Biofarma), Israeli major Teva Pharmaceuticals (see Israel - Turkey: 14 October 2010: Turkey's Biofarma Up for Sale, with Teva Potential Buyers), and one other unnamed European major. A winning bid is expected to be chosen in the next two to three months
Outlook and Implications
The rumoured acquisitions of Bilim Ilac, Dr. Frik, and Biofarma mark another round of Turkish pharma industry consolidation following a USD3.5-billion loss in 2010 sales (see Turkey: 15 February 2011: Pharmaceutical Firms in Turkey Lose US$3.5 Bil. in 2010 Sales) brought on by increased pricing pressures from the government, which have significantly decreased industry margins (see Turkey: 25 January 2010: Turkish Government Faces Pharma Industry Criticism over Additional 9.5% Social Security Discount) making it difficult for local firms to operate profitable businesses. This continues the market consolidation in Turkey which started in 2008, and has seen the acquisition of Turkish pharma major Eczacibasi Ilac by Czech generic firm Zentiva, which later sold it to French major Sanofi-Aventis, as well as the acquisition of Yeni Ilac by Italian generic major Recordati (see Czech Republic - Turkey: 20 March 2009: Eczacibasi Sells Remaining 25% Stake in Two Subsidiaries to Zentiva and Italy - Turkey: 29 October 2008: Recordati Acquires Turkish Pharma Firm Yeni Ilaç). In 2010, Greek generic firm Alapis bought 50% of Genesis Ilac (see Turkey - Greece: 4 January 2010: Alapis Buys 50% of Genesis Ilac). Turkey's expected growth rate of 7.3% and its geographical position between Europe and Asia is a major attraction for major pharma and generic firms as they look to expand into emerging markets, and for those already present in such markets in order to solidify their presence.
The rumoured takeover of Bilim Ilac continues the increased interest of private equity firms in the Turkish pharmaceutical and healthcare market. Previously, PiLS and CVCI acquired Biofarma in 2007 for USD200 million, before later selling the firm on to Global Finance, while a UAE private equity firm invested in health services provider Acibadem (see United Arab Emirates - Turkey: 25 June 2007: Private Equity Investors Eye Turkey's Acibadem as Potential Acquisition Target). Abdi Ibrahim's proposed acquisition of Dr. Frik continues the trend for the largest domestic firms to acquire small compatriots to boost market share, distribution and manufacturing capabilities, and product offerings—as with Deva's previous acquisition of Zentiva-Eczacibasi's manufacturing facility (see Turkey: 2 December 2010: Deva Holding Acquires Zentiva API Manufacturing Facility).
The acquisition of these three firms offer the potential to expand any buyer's generic portfolio, which could provide significant in-roads and a recognised brand in the growing Turkish pharmaceutical market, as well as market access to Central and Eastern European markets, Russia, and the Middle East, which are some of the most difficult markets to enter. However, this reduces the number of domestic players in the Turkish market, hence reducing competition major pharma and generic firms will face on entry to this market. To Turkey's gain, such activity will boost the innovative and newly off-patent product offerings in the market, allowing the government to set up its disease-management programmes, which may also mean tighter controls especially in terms of pricing and social security reimbursement. In the Immediate-to-medium term, such acquisitions are expected to continue due to the tough market conditions in the Turkish market.