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Apr 3, 2012

Is Novartis Looking to Turkey for Emerging Markets HQ?

  • Novartis has selected Turkey as a headquarters for operations in central Asia, the Middle East, and Africa, Alexandre F. Jetzer-Chung, a Novartis board member, was quoted by the Turkish state news agency Anadolu Ajansi as saying Monday at a meeting between a Swiss trade delegation led by Johann Schneider-Ammann, chief of the Swiss Federal Department of Economic Affairs, and Nihat Ergün, Turkey’s minister for science, industry and technology.

    Not so, a Novartis spokesperson told GEN. "Current market conditions and dynamics in Turkey create a challenging environment for major investments by Novartis. No commitments have been made by Novartis to date to expand the current manufacturing capacity in Turkey. If current conditions improve, Novartis will evaluate expansion of its collaborations around R&D and manufacturing in Turkey.”

    The spokesperson couldn't clarify Jetzer-Chung's comments, which included that the company envisioned Turkey growing into the medical and health industry center for North Africa in the not-too-distant future. Jetzer-Chung was also quoted as saying that Novartis has backtracked from earlier plans to base Asia-Middle East-Africa operations in Egypt due to that country’s political unrest, reflected in the revolution that ousted longtime leader Hosni Mubarak, according to the Anadolu Ajansi report, carried in the newspaper Hürriyet Daily News.

    Minister Ergün welcomed Novartis’ announcement, calling the Swiss pharma giant a crucial company for Turkey to attract because biopharma and other health and medical companies are viewed as strategic investments. Turkey hopes to grow its biopharma industry through a new system of investment incentives the nation plans to announce “soon,” Anadolu Ajansi reported.

    “Economic and political stability are a source of confidence for investors. Investors in Turkey have no risks. Novartis and other investors should remember such realities,” Minister Ergün said, according to Anadolu. Turkey enjoys one of the world’s fastest-growing economies, reflected in part by figures released this week showing an 8.5% increase in its gross domestic product, to $10,444 per capita. According to a Business Monitor International forecast quoted by several news outlets, the Turkish pharmaceutical market will grow 5% this year in constant currency, from 17.44 billion Turkish Lira ($9.8 billion) in 2011 to 18.31 billion Turkish Lira ($10.3 billion) this year, about the same as was estimated by IMS Health in 2009, InPharm reported.

    However, the Turkish pharma market is expected this year to actually shrink slightly when measured in dollars. In addition to high inflation and a worsening global economy, the industry faces the weakness of the Lira and action by Turkey’s government to cut prices for numerous pharmaceutical products. To soften the impact on industry, Turkey coupled the price cuts with the removal of a mandated 7.5% discount on hundreds of drug products, a measure that BMI estimated was worth about $66 million a year to drugmakers.

    Novartis recently signaled to investors its interest in expanding within Turkey and other emerging markets. “Consistent with our long-term growth strategy, we continue to build our presence in high-growth markets around the world, particularly in our top six emerging markets, comprising Brazil, China, India, Russia, South Korea, and Turkey,” Novartis stated in its 2011 annual Report. “Long-term investments in these areas are crucial to winning market share and being well-positioned to capture the opportunities that expected growth in these markets will offer.”

    The Novartis spokesperson noted that “Novartis currently employs 2,300 employees across four manufacturing sites in Turkey and is one of the leading pharmaceutical exporter from Turkey to more than 90 countries."

    While Novartis has not broken out its results in Turkey, the company has said that Turkey and five other “emerging market” nations generated $5.8 billion, or approximately 10% of the pharma giant’s net sales. Combined net sales in the six emerging markets grew 17% in constant currencies in 2011, compared to 11% constant currency growth in the U.S. and Novartis’ six other largest developed markets.

    “Emerging markets are making increasingly significant contributions to our results, a trend we expect to continue as we plan to continue investing in these markets,” Novartis said in the annual report.

    U.S. biopharma companies also seem to be looking to step up investment in Turkey, explaining why, according to Anadolu, Turkish officials are continuing talks with U.S. officials aimed at opening up Turkey’s pharma industry to American drug exporters. Such activity could aid Turkey’s quest to possess one of the world’s top 10 largest economies by 2023.

    --
    To read the story from Anadolu Ajansi via Hürriyet Daily News, click here.
    To read the story from InPharm, click here.


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