investor presentation 200900702 cs - selcukecza.com.tr · sanofi-aventis abdi ibrahim novartis...

INVESTOR PRESENTATIONINVESTOR PRESENTATIONLondon Roadshow, July 2009London Roadshow, July 2009

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

Forward-Looking Statements

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.

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

USSize: US$292-302bn

Growth Forecast: 1-2%

Top 5 EuropeSize: US$162-172bn


JapanSize: US$84-88bn

“Pharmerging” MarketsSize: US$105-115bn

“Pharmerging” drives the global market

growth

Size: US$84-88bnGrowth Forecast: 4-5%

Size: US$105-115bnGrowth Forecast: 14-15%

Rest of WorldSize: US$165-175bn


Global MarketSize: US$820-830bn

Growth Forecast: % 4.5-5.5

Source: IMS 2009 Global Pharmaceutical Market Forecast Executive Briefing –October 30,2008

“Pharmerging” markets include: China, Brazil, India, S.Korea, Mexico, Turkey and Russia 3

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

North America38.6%

Japan10.4%

Rest of World 8.1%

US%35.9

2009 Forecasted Global Market Shares

2009 Market Shares (%)

Europe 29.6%

Pharmerging13.3%

%35.9

Top 5 Europe*%19.8

Source: IMS 2009 Global Pharmaceutical Market Forecast Executive Briefing –October 30,2008


2005 total health spending: 7.6% of GDP (OECD: 9%)

Health expenditure per capita: US$586 lowest among OECD countries (OECD Ave. US$2,759)

2000-05 Health spending average growth 5.8% (OECD 4.3%)

Drug expenditure per capita ise US$136 in 2008

Source: OECD

Total (Public + Private) Health Expenditure as % of GDP

OECD Countries 2005

15,3

10,710,3 10,2 10,1 9,8 9,5 9,5 9,2 9,1 9,1 9,1 9,0

8,3 8,3 8,2 8,1 8,07,5 7,5 7,2 7,1

6,4 6,2 6,0

9,0

11,6

8,9

11,110,2

7,6

US

Switz

erlandFr

ance

German

yBelgium

Portug

alAus

tria

Greec

eCan

ada

Icelan

dAus

tralia**

Nethe

rland

s*Sw

eden

Norway

Den

mark

New

Zea

land

OEC

D

Italy UK

Luxe

mbo

urg*Sp

ain

Hun

gary*

Japa

n*Tu

rkey

Ireland

Finlan

dCze

ch R

ep.

Slov

ak R

ep.

Mex

ico

PolandKorea

Drug Expenditures per capita (2005)

451

501

529

846

Belgium

France

Japan

U.S.

Health & Drug Expenditures in Turkey

5

Source: OECD

Source: IMS, World Bank, IEIS (Ex-Manufacturer prices)

121

265

326

327

341

352

369

385

396

419

451

95

0 200 400 600 800 1000

Turkey

Poland

Netherlands

U.K.

Australia

Italy

Spain

Portugal

Germany

Greece

Canada

Belgium

US $, Ex-manufacturer(2006)

Source: Pharmaceutical Manufacturers Association of Turkey (IEIS)

Total (Public + Private) Health Expenditure per capita

OECD Countries, 20056401

5352

43644177

3519 3443 3389 3374 3326 32873128 3108 3094 2981 2926 2918

27242532

2358 2343 2331 22552033

1479 1337 13181137

867675 586

2759

U.S.

Luxe

nbou

rgNorway

Switz

erland

Aus

tria

Icelan

dBelgiumFr

ance

Can

ada

German

yAus

tralia

Den

mark

Nethe

rland

sGreec

eIre

land

Swed

en

OEC

D

U.K

.

Italy

Japa

n

New

Zea

land

Finlan

dSp

ain

Portug

alCze

ch R

ep.

Hun

garyKorea

Slov

ak Rep

.Po

land

Mex

ico

Turkey

US$ (PPP)

71.4% by

public sources

72.5% by

public sources

Source: OECD


9.0%

10.9%

16.1%

7.5%

10.2%

6%

8%

10%

12%

14%

16%

18%

900

1.000

1.100

1.200

1.300

1.400G

r

o

w

t

h

(

%)

Boxes (Million)

RX Drugs Market in Turkey

31,1%

23,5%

11,5%

17,1%

10%

15%

20%

25%

30%

35%

7

8

9

10

11

12

13 G

r

o

w

t

h

R

(

%)

Amount (Billion TL)

7.5%

5.1%

0%

2%

4%

6%

600

700

800

900

2002 2003 2004 2005 2006 2007 2008

R

a

t

e

s

)

10,2%9,1%

0%

5%

10%

4

5

6

2002 2003 2004 2005 2006 2007 2008

R

a

t

e

s

Sustainable growth...IMS estimates 15-17% growth in Turkish Market for 2009.

≈US$10 market size with 9% growth in terms of amount and 5% in terms of boxes sold in 2008

Source: İEİS, IMS


Brand-names vs. Generics in Turkish Market

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%

49%

51%

53%

Boxes

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%40%

50%

60%

70%

80%

Amount (TL)

48.6%48.3%

48.6%48.5%

45%

47%

49%

2002 2003 2004 2005 2006 2007 2008Brand-name Generics

30.5%32.2% 34.4%

32.8% 33.4%

0%

10%

20%

30%

2002 2003 2004 2005 2006 2007 2008

Brand-name Generics

Source: İEİS, IMS


134 Companies

84 Manufacturers73 Domestic11 Multinational

12 Raw Mat. Producers 38 Importers

Fragmented market: Largest player with a

SANOFI-AVENTIS

ABDI IBRAHIM

NOVARTIS

ECZACIBASI

BILIM

Others

97 Domestic37 Multinationals

Market Structure - Suppliers

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

GSK

ASTRA ZENECA SANOVEL

ROCHE

PFIZER

Source: Merril Lynch, IMS


MultinationalsNational

CompaniesRegional

CompaniesCooperatives

Hedef-Alliance Group

Selcuk Selcuk GroupGroup

Nevzat

Galenos, Sıhhat

ISTKOP, EDAK,...

•100 Distributors (>300 in 1980s) 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.

Market Structure - Distributors

Hedef, Es

GroupGroup

Selcuk, As

Galenos, Sıhhat•High Barriers for New Entrants.

•Top 2 approximately 70%


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

10

• 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 Framework

Mark-ups, Pricing & Reimbursement• Referential Pricing Mechanism: Prices determined according to (5 to 10) EU member reference countries

determined by the Ministry of Health.

• 4 months notice for change.

• Reference Countries for 2009: France, Spain, Italy, Portugal, Greece (Not Changed).

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 1.08

E = 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)


• Prices in TL terms adjusted if the €/TL exchange rate change exceeds 5% and prevails for more than 30

days (current reference exchange rate: 1€ = 1,9595 TL valid since April 2, 2009)

• Price change effective after 45 days.

• Prices adjusted upwards on Feb.13th; new prices effective as of Apr. 2nd.

• Price ratio of Generic to Original %80 (Max)

Original Price = Reference Price x 1; Generic= Reference Price x 0.8• Reimbursable margin between the cheapest and the most expensive drug in a given bioequivalence group

is 15%

1.15 X the lowest priced brand is the ceiling for reimbursement• Patient contribution 20% (pensioner 10%)

• Pharmacy directly reimbursed by the Government

E = 200-X 2% Ee = E x 1.02 12% Eee = Ee x 1.12 Aaaa = Eee x 1.08

Selcuk Ecza - Over 50 years being a milestone

in Turkish pharmaceutical market...

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

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


Attractive marketsDemographics drive long-term demand

Public policy agenda supports greater access and improved efficiency

Well-positioned businessesSolid operating profit and cash flow strength from distribution segment

Nationwide network built over mutual commercial interests

Selcuk Ecza: A precious link to sustainable

value creation


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


Abdi Ibrahim

Novartis

Sanofi-Aventis

Eczacibasi

Bilim

Selcuk Ecza (36.2% as of 1Q09 )

Hedef Alliance

Co-operatives

Nevzat

…

•>App. 24,000 pharmacies nation-wide ownedand run by pharmacists

•Pharmacy chains not allowed

•OTC drugs can not be sold through other retailchannels

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

DrugManufacturers

Pharma Wholesalers

Pharmacies

…

…

…

…•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 20091Q)

103 (27 central + 76 regional) warehouses with a total storage area over 120,000 m2.

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


...that paves the way for strengthening the

market leader position

Permanently gaining a market share that has reached 36.20% in monetary terms in

the domestic market according to IMS Figures in 1Q09

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 distriubutionpharmaceutical 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 March 31,

2009 2008 Chg

Revenues 1,260.56 972.57 29.61%

Gross Margin 8.84% 6.65% 37.19%Gross Margin 8.84% 6.65% 37.19%

EBITDA Margin 5.19% 2.78% 2.41 pts

Net Income 57.64 46.42 24.17%

Net Income Margin 4.57% 4.77% -0.20 pts

EPS 0.111 0.090 23.33%


TL billions

We have a track record of strong revenue

growth...

2.763.15

3.634.05

FY05 FY06 FY07 FY08


...That We Have Leveraged into higher

Income

TL billions

93,97 97,29

164,41 160,67

FY05 FY06 FY07 FY08


Market Share (%)

Stable growth to Market Leader Position...

All rights reserved by Selcuk Ecza Deposu A.S.®19

32,90% 33,80% 33,40% 34,40% 36,19%

2005 2006 2007 2008 20091Q

Working Capital Developments

FY05 FY06 FY07 FY08 1Q09

A/R1,064 1,209 1,303 1,502 1,656

INVENTORIES300 346 387 469 367

A/P876 929 1,043 1,234 1,273


WC488 626 647 737 749

WC/REVENUE17.70% 19.88% 17.83% 18.21% 17.29%

FY05 FY06 FY07 FY08 1Q09

Revenue 2,756 3,151 3,628 4,047 1,261

# of WHs 91 98 100 100 100

# of Employees 4,926 4,694 4,554 4,600 4,656

Op-ex / Sales 4.85% 4.84% 4.49% 4.57% 3.73%

Personnel / Sales 2.76% 2.86% 2.69% 2.64% 2.28%

Employee per WH 54 48 46 46 47

Op-Ex Improvement


Employee per WH 54 48 46 46 47

Revenue per Employee (TL) 559,539 671,241 796,743 879,676 930,949*

KONYA

Nationwide network that covers all regions

across Turkey by over 100 branches

• ALAADDİN

KARAMAN

Main Warehouses Regional Warehouses Total

Selçuk Ecza 18 58 76

As Ecza 9 18 27

Group Total 27 76 103


Fundamental Operational Statistics -1-

53

91

98 10

01

00

103Number of Warehouses

89

5

,07

4

1,2

82

1,4

83

2,0

37

2,0

30

1,9

70

1,9

48

1,941

Number of Vehicles

1 2 3 4 5 6 7 10 1

5 17 2

1 22 23

41

53

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

19

8

24

0

31

5

46

2

51

1

71

5

89

5

1,

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


Fundamental Operational Statistics -2-

58

4

82

5

3,0

43

3,4

32

3,9

17

4,9

26

4,6

94

4,5

54

4,6

00

4,6

56

Number of Employees

5

25

.9

29

.8 31

.7

32

31

.7

31

.2 32

.9

33

.8

33

.4

34

.4 36

.19

Market Share(%)Amount (TL)

85

7

1,0

20

1,2

24

1,7

38

1,8

36

2,5

84

2,8

25

3

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

10

12

.6 14

.7

19

.5

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


Shareholding Structure

Selcuk Ecza Holding A.S. Free Float Gurgen Family

Ahmet Ahmet

KelesogluKelesoglu

39.20%39.20%

Nezahat Nezahat

KelesogluKelesoglu

9.80%9.80%

77.32%0.3920x0.7732

= 30.31%2.67%

Ahmet & Ahmet &

Nezahat Nezahat

Kelesoglu Kelesoglu

Foundation Foundation

51%51%

20.01%

0.0980x0.7732

= 7.58%

Selcuk Ecza Deposu Ticaret ve Sanayi A.S.

As Ecza

0.51x0.7732

= 39.43%

= 30.31%

99.99%


Entering A New Segment: Toiletry Products

Selcuk Ecza has started to sell/distribute toiletry products (personal care products, cosmetics etc.) by June 1, 2009 in 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


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, 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.

Prospects for Year-end 2009

Net Sales figure FY09 5 bn. TL

Gross Margin FY09 9-9.5%

EBITDA margin FY09 5-5.5%


Net Margin FY09 4-4.5%

Net Income FY09 200 mn. TL

Working Capital/Sales 17-17.5%

Attractive marketsDemographics drive long-term demand

Public policy agenda supports greater access and improved efficiency

Well-positioned businessesSolid operating profit and cash flow strength from distribution segment


Selcuk Ecza: A precious link to sustainable

value creation


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


Application to SSI

Reimbursement

REIMBURSEMENT to PHARMACIES by THE SSI

Dispensing

Appendix-1: Reimbursement Schedule


Max

60 DaysFirst Day

of Month

Last Day

of Month

to SSI

15th of the

Following

Month

Average

15 Days

15

Days

Reference

Countries

SpainItaly

PortugalFranceGreece

Drugs in the Same

Bioequivalence Group

15% higher

j

t

n

p100% = Original

Price

80% = Generic Price

REIMBURSEMENT

Appendix-2: Reference Pricing Scheme


1.00

15% higher

than the

cheapest price*

x

q

z

y

p & n NOT reimbursed

*The goverment has just changed the maximum reimbursement limit applied

for the previous 5 years as of 22% higher than the cheapest drug price in the

market to 15% by a decree in Jun. 20, 2009 that will be valid from Aug. 1, 2009

INVESTOR PRESENTATIONINVESTOR PRESENTATIONLondon Roadshow, July 2009London Roadshow, July 2009

Kursad DumanInvestor Relations and Capital Markets Manager

investor presentation 200900702 cs - selcukecza.com.tr · sanofi-aventis abdi ibrahim novartis...

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