investor presentation 200900702 cs - selcukecza.com.tr · sanofi-aventis abdi ibrahim novartis...
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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
Growth Forecast: 3-4%
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
Growth Forecast: 8-9%
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
4All rights reserved by Selcuk Ecza Deposu A.S.®
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
All rights reserved by Selcuk Ecza Deposu A.S.®
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
6All rights reserved by Selcuk Ecza Deposu A.S.®
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
7All rights reserved by Selcuk Ecza Deposu A.S.®
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
8All rights reserved by Selcuk Ecza Deposu A.S.®
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%
9All rights reserved by Selcuk Ecza Deposu A.S.®
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
All rights reserved by Selcuk Ecza Deposu A.S.®
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)
11All rights reserved by Selcuk Ecza Deposu A.S.®
• 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
12All rights reserved by Selcuk Ecza Deposu A.S.®
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
Nationwide 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
13All rights reserved by Selcuk Ecza Deposu A.S.®
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.
14All rights reserved by Selcuk Ecza Deposu A.S.®
...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
15All rights reserved by Selcuk Ecza Deposu A.S.®
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%
16All rights reserved by Selcuk Ecza Deposu A.S.®
TL billions
We have a track record of strong revenue
growth...
2.763.15
3.634.05
FY05 FY06 FY07 FY08
17All rights reserved by Selcuk Ecza Deposu A.S.®
...That We Have Leveraged into higher
Income
TL billions
93,97 97,29
164,41 160,67
FY05 FY06 FY07 FY08
18All rights reserved by Selcuk Ecza Deposu A.S.®
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
All rights reserved by Selcuk Ecza Deposu A.S.®20
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
All rights reserved by Selcuk Ecza Deposu A.S.®21
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
22All rights reserved by Selcuk Ecza Deposu A.S.®
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
23All rights reserved by Selcuk Ecza Deposu A.S.®
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
24All rights reserved by Selcuk Ecza Deposu A.S.®
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%
25All rights reserved by Selcuk Ecza Deposu A.S.®
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
All rights reserved by Selcuk Ecza Deposu A.S.®26
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%
All rights reserved by Selcuk Ecza Deposu A.S.®27
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
Nationwide network built over mutual commercial interests
Selcuk Ecza: A precious link to sustainable
value creation
Nationwide 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
28All rights reserved by Selcuk Ecza Deposu A.S.®
Application to SSI
Reimbursement
REIMBURSEMENT to PHARMACIES by THE SSI
Dispensing
Appendix-1: Reimbursement Schedule
All rights reserved by Selcuk Ecza Deposu A.S.®29
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
All rights reserved by Selcuk Ecza Deposu A.S.®30
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