Kursad Duman · 2017-10-30 · North America 39.2% Europe 29.5% Pharmerging 13.6% Japan 10.5% Rest of the World 7.2% 2010 Forecasted Global Market Shares by Region (%) Top 5 Europe

Kursad DumanInvestor Relations and Capital Markets Manager

Some of the Some of the information in this presentation is not historical in nature and may constitute

forward-looking statements, which are made pursuant to the safe harbor provisions of Code of Capital

Markets of Turkey. These statements may be identified by the use of forward-looking terminology such as

“believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,”

“estimates,” or the negative of these words or other comparable terminology. The discussion of financial

trends, strategy, plans or intentions may also include forward-looking statements. These forward-looking

statements involve risks and uncertainties that could cause actual results to differ materially from those

projected, anticipated or implied by such statements. Although it is not possible to predict or identify all such

risks and uncertainties, they may include, but are not limited to, those described in the Company’s annual,

quarterly and current reports as filed and furnished with the regulations of Capital Markets Board of

Turkey (CMB). You are cautioned not to place undue reliance on any such forward-looking statements,

which speak only as of the date such statements were first made. To the degree financial information is

included in this presentation, it is in summary form only and must be considered in the

context of the full details provided in the Company’s most recent annual, quarterly or current report as

filed or furnished with the CMB. The Company’s IFRS reports are available at www.selcukecza.com.tr

under the “Investors” tab. Except to the extent required by law, the Company undertakes no obligation to

publicly release the result of any revisions to these forward-looking statements to reflect events or

circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

Forward-Looking Statements

2All rights reserved by Selcuk Ecza Deposu A.S.®

http://www.selcukecza.com.tr/




USSize: US$295-305bn

Growth Forecast: 3.0-5.0%

Top 5 EuropeSize: US$162-172bn

Growth Forecast: 3-4%

JapanSize: US$85-90bn


“Pharmerging” MarketsSize: US$110-115bn


Rest of WorldSize: US$165-170bn


Global MarketSize: US$825-850bn

Growth Forecast: 4.0-6.0%

Source: IMS 2010 Global Pharmaceutical Market Forecast Announcement –October 7,2009

“Pharmerging” markets include: China, Brazil, India, S.Korea, Mexico, Turkey and Russia

Prospects 2010: “Pharmerging” still continues to lead the growth...

3

All rights reserved by Selcuk Ecza Deposu A.S.®

North America39.2%

Europe29.5%

Pharmerging13.6%

Japan10.5%

Rest of the World7.2%

2010 Forecasted Global Market Shares by Region (%)

Top 5 Europe19.8%

U.S. 36.1%

2010 Forecasted Global Market Shares

Source: IMS 2010 Global Pharmaceutical Market Forecast Announcement –October 7,2009


5

Total (Public + Private) Health Expenditure per capita, OECD Countries, 200461

02

50

89

40

77

39

66

33

31

31

65

31

59

31

24

30

44

30

41

30

05

28

81

28

76

28

25

25

96

25

50

25

46

23

92

22

49

22

35

21

62

20

94

20

83

18

13

13

61

13

23

11

49

80

5

77

7

66

2

58

0

0

1000

2000

3000

4000

5000

6000

7000

U.S

.

Luxe

nbou

rg

Switze

rlan

d

Nor

way

Icel

and

Can

ada

Fran

ce

Aus

tria

Bel

gium

Net

her

land

s

Ger

man

y

Den

mar

k

Aus

tral

ia

Swed

en

Irel

and

OECD

U.K

.

Italy

Japan

Finl

and

Gre

ece

Spa

in

New

Zea

land

Por

tugal

Cze

ch R

ep.

Hun

gar

y

Kor

ea

Pol

and

Slo

vak

Rep

.

Mex

ico

Turk

ey

US

$ P

PP

Demographic Advantage of Turkey


19.0%20.0%

22.0%

24.0%

26.0%

0%

5%

10%

15%

20%

25%

30%

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Population Over 50 Years Old in Turkey

50+ years age (mn people) 50+years age (% of total population)

Source: Turkstat (TUIK)

6


02

50

89

40

77

39

66

33

31

31

65

31

59

31

24

30

44

30

41

30

05

28

81

28

76

28

25

25

96

25

50

25

46

23

92

22

49

22

35

21

62

20

94

20

83

18

13

13

61

13

23

11

49

80

5

77

7

66

2

58

0

0

1000

2000

3000

4000

5000

6000

7000

U.S

.

Luxe

nbou

rg

Switze

rlan

d

Nor

way

Icel

and

Can

ada

Fran

ce

Aus

tria

Bel

gium

Net

her

land

s

Ger

man

y

Den

mar

k

Aus

tral

ia

Swed

en

Irel

and

OECD

U.K

.

Italy

Japan

Finl

and

Gre

ece

Spa

in

New

Zea

land

Por

tugal

Cze

ch R

ep.

Hun

gar

y

Kor

ea

Pol

and

Slo

vak

Rep

.

Mex

ico

Turk

ey

US

$ P

PP

Source: OECD Source: OECD

Healthcare Expenditures in Turkey


16

1110 10 10 10 9 9 9

8 8 7 7 76 6

9

6

0

2

4

6

8

10

12

14

16

18

US

Fran

ce

Ge

rman

y

Au

stri

a

Gre

ece

Swed

en

No

rway

Ital

y

Spai

n

UK

Slo

vak

Rep

.

Hu

nga

ry

Cze

ch R

ep.

Ko

rea

Po

lan

d

Mex

ico

OEC

D a

vg.

Tu

rke

y

Total Expenditure on Health % of GDP (2007)

6,558

4,3013,472

3,348

3,303

2,9582,693

2,536

2,352

2,2671,455

1,411

1,296

1,139857

724

2,707

618

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

US

No

rway

Au

stri

a

Ger

man

y

Fran

ce

Swed

en

UK

Ital

y

Gre

ece

Spai

n

Cze

ch R

ep

.

Hu

nga

ry

Ko

rea

Slo

vak

Rep

.

Po

lan

d

Mex

ico

OEC

D a

vg.

Turk

ey

Per Capita Expenditure on Health, USD, PPP (2005)

7


02

50

89

40

77

39

66

33

31

31

65

31

59

31

24

30

44

30

41

30

05

28

81

28

76

28

25

25

96

25

50

25

46

23

92

22

49

22

35

21

62

20

94

20

83

18

13

13

61

13

23

11

49

80

5

77

7

66

2

58

0

0

1000

2000

3000

4000

5000

6000

7000

U.S

.

Luxe

nbou

rg

Switze

rlan

d

Nor

way

Icel

and

Can

ada

Fran

ce

Aus

tria

Bel

gium

Net

her

land

s

Ger

man

y

Den

mar

k

Aus

tral

ia

Swed

en

Irel

and

OECD

U.K

.

Italy

Japan

Finl

and

Gre

ece

Spa

in

New

Zea

land

Por

tugal

Cze

ch R

ep.

Hun

gar

y

Kor

ea

Pol

and

Slo

vak

Rep

.

Mex

ico

Turk

ey

US

$ P

PP

Source: OECD, Worldbank Stats Source: OECD, Pharmaceutical Manufacturers

Association of Turkey (IEIS)

Pharmaceutical Expenditures in Turkey


136

161

335

381

384

398

404

424

449

514

519

533

567

639

951

0 200 400 600 800 1000

Turkey*

Poland

Netherlands

Italy

UK

Australia

Spain

Portugal

Germany

Japan

Belgium

Canada

Greece

France

US

Per Capita Pharmaceutical Consumption in 2007 (USD)

3128

25 25 25 24 2221

19 1816 16 15 14 14 13 13 12 11 10 10 9 8

17

41

0

5

10

15

20

25

30

35

40

45

Hu

nga

rySl

ova

k R

ep

.G

ree

ceK

ore

aP

ola

nd

M

exi

coC

zech

Re

p.

Spai

nIt

aly

Can

ada

Fran

ceB

elg

ium

Ge

rman

yFi

nla

nd

Ice

lan

dSw

ed

en

A

ust

ria

US

Ne

the

rlan

ds

Swit

zerl

and

N. Z

eal

and

De

nm

ark

No

rway

OEC

D a

vg.

Turk

ey

Pharmaceutical Expenditure % of Total Expenditure on Health (2007)

* 2008 figure

9.0%

10.9%

16.1%

7.5%

10.2%

5.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

600

700

800

900

1,000

1,100

1,200

1,300

1,400

2002 2003 2004 2005 2006 2007 2008

G

r

o

w

t

h

R

a

t

e

s

(

%)

Boxes (Million)

Prescription Drugs Market in Turkey

31.1%

23.5%

10.2%

11.5%

17.1%

9.1%

0%

5%

10%

15%

20%

25%

30%

35%

4

5

6

7

8

9

10

11

12

13

2002 2003 2004 2005 2006 2007 2008

G

r

o

w

t

h

R

a

t

e

s

(

%)

Value (Billion TL)

Sustainable growth...IMS anticipates typically annual 6-7% growth rate in volume for Turkish market≈US$10 bn. market size with 17% growth in terms of amount and 4% in volume in 2009


Source: Pharmaceutical Manufacturers Association of

Turkey (IEIS), IMS

Originals vs. Generics in Turkish Market


Source: Pharmaceutical Manufacturers Association of

Turkey (IEIS), IMS

51.5%

49.5% 49.6%

48.6%

49.3%

48.3%48.6%48.5%

50.5% 50.4%

51.4%

50.7%

51.7%51.4%

45%

47%

49%

51%

53%

2002 2003 2004 2005 2006 2007 2008

Volume

Original Generics

69.5%67.8%

65.6% 65.3%67.2% 66.6% 65.4%

30.5%32.2% 34.4% 34.7%

32.8% 33.4% 34.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2002 2003 2004 2005 2006 2007 2008

Value (TL)

Original Generics

300 Companies

42 Manufacturers28 Domestic14 Multinational

12 Raw Mat. Producers 30 Importers

Fragmented market: Largest player with a market share of 7%Top 10 market share: 50%No original product development, local firmsdevelop their own generics, manufacture licensed products and subcontract from international firms

Top 10 Manufacturers ( as of 1Q06)

SANOFI-AVENTIS

ABDI IBRAHIM

NOVARTIS

ECZACIBASI

GSK

ASTRA ZENECA SANOVEL

ROCHE

BILIM

PFIZER

Others

263 Domestic37 Multinationals

Market Structure - Suppliers

Source: Merril Lynch, IMS


MultinationalsNational

CompaniesRegional

CompaniesCooperatives

Hedef-Alliance Group

Hedef

Selcuk Group

Selcuk, As

Nevzat

Galenos, Sıhhat

ISTKOP, EDAK,...

•App. 300 Distributors ;15 of which economically meaningful size.

•Small distributors little room to increase their market share, given the financial strength and economies of scale of the large players.

•High Barriers for New Entrants.

•Top 2 have approximately 70% market share

Market Structure - Distributors


12

Market Structure – Retailers: Pharmacies

• ~ 24,000 pharmacies across the Country– 1 per 2.980 population– 5.000 in Istanbul, 1.700 in Izmir– ~ 500 new every year

• Owned and run by pharmacists• Pharmacy chains NOT allowed • OTC drugs can NOT be sold through other retail

channels• Rely on wholesalers for financing• Typically works with 2 or 3 distributors• Substitution by the pharmacists allowed


A Short Reminder on the Regulatory FrameworkMark-ups, Pricing & Reimbursement


• Reference Pricing Mechanism: Prices determined according to (5 to 10) EU member reference countries determined by the Ministry of Health.

• 2 months official notice for change (Changed from previous 4 months valid since Oct.1, 2009)• Reference Countries for 2010: France, Italy, Spain, Portugal, Greece (Not Changed)

• Prices in TL terms adjusted if the change at 90-day moving average of official €/TRL exchange rateannounced by CBT exceeds +/-5% of the offical range, of which the floor of the range is the available reference €/TRL currency (current reference exchange rate: 1€ = 1.9595 TL valid since April 2, 2009)

• Price change effective after 5 days. (Decreased from 45 days to 5 working days, valid since Dec. 4, 2009)• Prices adjusted upwards on February 1; new prices effective as of April 2, 2009• Price ratio of Generic to Original 66% (Max.) (Valid since December 4, 2009)

Original Price = Reference Price x 1 (If its generic substitute does not exist in the market); Original Price = Reference Price x 0.66 (If its generic substitute exists in the market); Generic= Reference Price x 0.66

• Reimbursable margin for generics between the cheapest and the most expensive one in a given bioequivalence group is 15%

1.15 X the lowest priced brand is the ceiling for reimbursement• Patient contribution 20% (pensioner 10%)• Pharmacies directly reimbursed by the Government (Social Security Institution-SGK)

Distributor

Mark-up

Pharmacy

Mark-up

A = 0-10 9% Aa = A x 1.09 25% Aaa = Aa x 1.25 Aaaa = Aaa x 1.08

B = 10-50 8% Bb = B x 1.08 25% Bbb = Bb x 1.25 Aaaa = Bbb x 1.08

C = 50-100 7% Cc = C x 1.07 25% Ccc = Cc x 1.25 Aaaa = Ccc x 1.08

D = 100-200 4% Dd = D x 1.04 16% Ddd = Dd x 1.16 Aaaa = Ddd x 1.08E = 200-X 2% Ee = E x 1.02 12% Eee = Ee x 1.12 Aaaa = Eee x 1.08

Producer

Price

Distributor

Price

Retail

Price (incld. VAT)

Pharmacy

Price (excld.VAT)

Attractive marketsDemographics drive long-term demandPublic policy agenda supports greater access and improved efficiency

Well-positioned businessesSolid operating profit and cash flow strength from distribution segmentNationwide network built over mutual commercial interests

Steady track record of delivering results and a balanced approach to capital deployment

Strong balance sheet and solid liquidity position

Experienced and tenured management team

Selcuk Ecza: A precious link to sustainable value creation


Selcuk Ecza - Over 50 years being a milestone in Turkish pharmaceutical market...

Selcuk Ecza was established as a small local company for distributing pharmaceuticals to its small neighborhood in Konya province - 1958

Selcuk Ecza, started to take orders by phone calls which drives the business to even very small locations - 1960

Selcuk Ecza improved its technology and network and started to serve in many locations in the western side of Turkey - 1970

Selcuk Ecza established its first branch in the business center of Turkey, Istanbul - 1975

Selcuk Ecza’s sister company AS Ecza was established - 1987

Selcuk Ecza went public by a free-floating rate of 20%. Became the first publicly-owned company in its sector - 2006

Selcuk Ecza celebrated its 50th anniversary - 2008


Abdi Ibrahim

Novartis

Sanofi-Aventis

Eczacibasi

Bilim

…

…

Selcuk Ecza (36.1% as of FY09 )

Hedef-Alliance

Co-operatives

Nevzat

…

…

•>App. 24,000 pharmacies across the countryowned and run by pharmacists

•Pharmacy chains not allowed

•OTC drugs cannot be sold through other retailchannels

•Rely on wholesalers for financing

Top 2 wholesalers control approximately 70% of the distribution market. (Top 3 > 80%)

Top 10 drug manufacturers approximately 50% of the market.

App. 24,000 pharmacies throughout Turkey.

A pharmacy typically works with 2 or 3 distributors (Differentiation: quality and speed of service, close follow-up,payment terms and product campaigns)

Over 20,000 clients countrywide (as of FY09)

107 (27 main + 80 regional) warehouses with a total storage area over 120,000 m2.

Can reach 75% of customers within 30 minutes, and 95% within 90 minutes.

Value Chain- Selcuk Ecza: A strong link...


Drug

ManufacturersPharma

WholesalersPharmacies

...that paves the way for strengthening the market leader position

Permanently gaining a market share that has reached 36.1% in monetary terms in the domestic market according to IMS Figures in FY09

Strengthening the leadership position by efficiency in costs, ways of distribution and storage

Seizing opportunities of entering new businesses under the core business of whosale pharmaceutical distriubution

Serving over 20.000 pharmacies all around Turkey and hence support them as an ever lasting business partner

Formed a big family consists of employees, pharmacies and the producers under the vision of its founder


Solid results in fiscal year 2009


(TL in millions except EPS)As of Dec. 31,

2009 2008 ChgRevenues 5,028.77 4,046.51 24.27%

Gross Margin 9.06% 8.73% 0.33 pts

EBITDA Margin 5.31% 4.34% 0.97 pts

Net Income 231.72 160.67 44.22%

Net Income Margin 4.61% 3.97% 0.64 pts

EPS 0.448 0.310 44.52%

We have a track record of strong revenue growth...


2.763.15

3.634.05

5.03

2005 2006 2007 2008 2009

TL Billions

...That We Have Leveraged into higher Income


93.97 97.29

164.41 160.67

231.70

2005 2006 2007 2008 2009

TL millions

All rights reserved by Selcuk Ecza Deposu A.S.®21

Stable growth to Market Leader Position...

32.90% 33.80% 33.40% 34.40% 36.09%

2005 2006 2007 2008 2009

Market Share (%)


Working Capital Developments

FY05 FY06 FY07 FY08 FY09

A/R 1,064 1,209 1,303 1,502 1,538

INVENTORIES 300 346 387 469 404

A/P 876 929 1,043 1,234 1,228

WC 488 626 647 737 714

WC/REVENUE17.70% 19.88% 17.83% 18.21% 14.20%


Op-Ex Improvement

FY05 FY06 FY07 FY08 FY09

Revenue 2,756 3,151 3,628 4,047 5,029

# of WHs 91 98 100 100 107

# of Employees 4,926 4,694 4,554 4,600 4,893

Op-ex / Sales 4.85% 4.84% 4.49% 4.57% 3.93%

Personnel / Sales 2.76% 2.86% 2.69% 2.64% 2.39%

Employee per WH 54 48 46 46 46

Revenue per Employee (TL)559,539 671,241 796,743 879,676 1,027,748

Nationwide network that covers all regions across Turkey by over 100 branches


Main Warehouses Regional Warehouses Total

Selçuk Ecza 18 61 79As Ecza 9 19 28Group Total 27 80 107

Fundamental Operational Statistics -1-


1 2 3 4 5 6 710

15 1721 22 23

41

53

91

98 100100

107

19

58

19

75

19

77

19

88

19

93

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Number of Branches

198 240 315

462 511

715

895

1,074

1,282

1,483

2,037 2,030

1,970 1,948

2,049

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Number of Vehicles

Fundamental Operational Statistics -2-


857 1,020

1,224

1,738 1,836

2,584 2,825

3,043

3,432

3,917

4,926 4,694

4,554 4,600

4,893

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Number of Employees

10

12.6

14.7

19.5

25.9

29.831.7 32 31.7

31.2

32.933.8

33.434.4

36.09

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Market Share (%)

Shareholding Structure

Selcuk Ecza Deposu Ticaret ve Sanayi A.S.

As Ecza

Selcuk Ecza Holding A.S. Free Float Gurgen Family

Ahmet Kelesoglu39.20%

Nezahat Kelesoglu

9.80%

77.32%

0.51x0.7732

= 39.43%

0.3920x0.7732

= 30.31%2.67%

99.99%

Ahmet & Nezahat

Kelesoglu Foundation 51%

20.01%

0.0980x0.7732

= 7.58%



Entering A New Segment: Toiletry Products

Selcuk Ecza has started to sell/distribute toiletry products (personal care products, cosmetics etc.) by June 1, 2009 from 9 of its 27 main warehouses

The market size in Turkey for toiletry products is approximately as of US$2 bn.

Selcuk Ecza estimates an additional turnover of 3-4% for 2010 for this segment amounting to 150-200 mn. TL; and almost 75 mn. TL for the remaining half of 2009

Using the same distribution network; while using the same regional staff and warehouses means no extra costs

Higher gross margin around 10% with respect to 8-9% from pharma segment

Strategy to expand business all around Turkey until the end of the year.


One step ahead by 2010...

The price ceiling for original drugs has been reduced to 66% of the reference price, which is determined according to lowest price in the five reference EU member countries (France, Italy, Spain, Portugal, Greece), if the original drug has a generic substitute in the market, although the price ceiling remained at 100% for original drugs that do not have generic substitutes.

The price ceiling for generics has also been lowered from 80% to 66% of the reference price.

The drugs which stay on the market more than 20 years and with a price lower than TL6.79, all drugs with prices lower than TL3.56, OTC drugs (without prescription), blood products, infant food, radiopharmaceutical products, enteral feeding products, and all other products that are not stated in public reimbursement list will not be priced according to this new regulation.

The exchange rate mechanism used to determine drug prices has also been changed. According to the new mechanism, the exchange rate may only be revised if the 90-day moving average of EUR/TRL exchange rate exceeds/falls below the periodic EURO value band by +/-5%; while the upper end of thisband is estimated as 10% higher of the EUR/TRL exchange rate in effect for calculation of drug prices.(The offical EUR/TRL rate is 1.9595 since April 2009)

The Notice period for amending the “Reference Countries List” by the MoH has been reduced from 4 months to 2 months.


The New Regulation-Major Regulatory Changes

Attractive marketsDemographics drive long-term demandPublic policy agenda supports greater access and improved efficiency

Well-positioned businessesSolid operating profit and cash flow strength from distribution segmentNationwide network built over mutual commercial interests

Steady track record of delivering results and a balanced approach to capital deployment

Strong balance sheet and solid liquidity position

Experienced and tenured management team

Selcuk Ecza: A precious link to sustainable value creation



Max

60 DaysFirst Day

of Month

Last Day

of Month

Application

to SSI

15th of the

Following

Month

Reimbursement

Average

15 Days

15

Days

REIMBURSEMENT to PHARMACIES by THE SSI

Dispensing

Appendix-1: Reimbursement Schedule


Reference

Countries

France

Italy

Spain

Portugal

Greece

1.00

Generic Drugs in the Same

Bioequivalence Group

15% higher

than the

cheapest price*

x

q

z

y

j

t

n

p100% = Original Price (If

its generic does not exist

in the market)

66% = Generic Price

p & n NOT reimbursed

REIMBURSEMENT

66% = Original Price (If its

generic exists in the market

Appendix-2: Reference Pricing Scheme

** The government recently lowered the price ceiling from 22% to 15% for the

reimbursement price of generic drugs (which is applied over the lowest

price of the generic product in the market; the lower 15% limit came into

force from August 1, 2009).

*The government has changed

the regulation on the reference

pricing mechanism and lowered

the ratio of both originals and

generics to 66% of the reference

price on Sept.16, 2009 which is

valid since Dec.4, 2009.

Kursad DumanInvestor Relations and Capital Markets Manager

Documents

Kursad Duman · 2017-10-30 · North America 39.2% Europe 29.5% Pharmerging 13.6% Japan 10.5% Rest of the World 7.2% 2010 Forecasted Global Market Shares by Region (%) Top 5 Europe