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Pharmed out

Zentiva pushes into Turkey, and other companies may follow

By Paul Voosen
Staff Writer, The Prague Post
March 14th, 2007 issue

Jan Přerovský/THE PRAGUE POST
Turkey will become the second-largest market for the Czech Republic's biggest manufacturer of generic drugs.
In the largest-ever investment by a Czech company in a foreign firm, Zentiva announced this month that it will acquire Eczacibasi Generic Pharmaceuticals (EGP), Turkey’s third-largest drug company, for 460 million euros ($602.6 million/12.9 billion Kč).
The deal reflects Czech companies’ growing awareness of the Turkish market’s potential, with a population of 70 million and increasingly stable and modern regulations drafted in hopes of European Union membership.
“There’s more than a billion dollars in trade between the Czech Republic and Turkey,” said Miroslav Kelnar, head of CzechTrade’s Turkey office. “It’s growing. Growing and growing.”
Jan Přerovský/THE PRAGUE POST
Zentiva is banking that the increasing demand for pharmaceuticals in Turkey will translate to big profits.
Zentiva, the largest generic drug manufacturer in the Czech Republic, began its rapid expansion four years ago, buying pharmaceutical firms in Slovakia and Romania and launching itself on the Prague Stock Exchange. The regional pharmaceutical market was fragmented, and represented an opportunity.
“Five years ago, no member of our staff would have ever dreamed that drugs produced in Prague would be sold across Europe,” Zentiva spokeswoman Věra Kudynová said. “Now we supply 300 million people.”
Once the deal’s finalized, Turkey will become Zentiva’s second-largest market, and, with the country’s rising demand for pharmaceuticals — growing faster than anywhere in Eastern Europe, due to healthcare reforms, increased life expectancy and wealthier citizens — it could become Zentiva’s most important market.
“Our investment in the Turkish market caught the public by surprise,” Kudynová said. While it is the first large investment made by a Czech firm into Turkey, according to experts, others are sure to follow: Several companies, including ČEZ, are exploring entry.
Turkey calling
Until 2005, the Czech Republic had no direct foreign investment in Turkey. It was up to 58.3 million Kč in 2006, and will be significantly greater this year.
Turkey is working hard to make itself more hospitable to foreign investment, said Tomáš Bartovský, spokesman for the Industry and Trade Ministry. Among other initiatives, the government plans to lower corporate tax rates, abolish interest charges for foreign companies and start an agency to encourage foreign investment, he said.
As part of its EU application, Turkey has already unified most of its business regulations with EU standards.
“Companies will find great opportunities here for cheaper labor than in the Czech Republic,” Kelnar said. Machinery and automobile manufacturers are exploring investment in the country, he said.
There’ll soon be an energy shortage in Turkey, he said. That, and booming economic growth, will create a high demand for new generating capacity.
ČEZ, the Czech state-owned power giant and a major regional player, has taken notice, said Eva Nováková, spokeswoman for the company.
“We’ve expressed our interest toward the Turkish power sector,” she said. “We’re monitoring the market and looking for investment opportunities.”    
Czech companies in Turkey do face obstacles, however, mostly related to customs bureaucracy, Kelnar said.
“Just recently, a Czech company brought production machines to Turkey,” Kelnar said. “But they had to sit on the border for one week because of red tape.”
With its purchase of EGP, Zentiva should gain the local experience to avoid these hassles, observers say. It’s hoped that EU membership, which Turkey applied for in the late 1980s, could also help clear hurdles for other companies. Accession talks began in earnest two years ago.
“On the technical level, it’s going very well,” said Eva Filipi, the Czech ambassador to Turkey. “I talk to people in Brussels and they say every envoy they meet from Turkey is well-prepared.”
Politics threaten Turkey’s accession: It needs to acknowledge the Armenian genocide, and there’s skepticism of the government, which, while democratic, has suffered repeated military interventions, including the ouster of a popularly elected Islamist prime minister in 1997.
The Czech Republic supports Turkey’s bid, Filipi said. So do the United Kingdom, Sweden and the Baltic states, among others, she said. Because of cultural differences, the public is not so keen, however, with 52 percent of the EU population opposing Turkey’s entry. Accession talks are expected to take a decade.
— Nada Černá and Hela Balínová contributed to this report.

Paul Voosen can be reached at pvoosen@praguepost.com


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