Pharmaceutical Industry Assessment for 2020-2021

The Covid-19 pandemic, a global health crisis, has once again emphasised the importance of pharmaceuticals and, consequently, the pharmaceutical industry for public health. From the beginning of the pandemic process, our work—demonstrating our existing capacity and our dynamic structure capable of quickly solving different problems—clearly showed the technology, experience, knowledge accumulation and expert workforce that the Turkish pharmaceutical industry possesses. During this period, we faced serious challenges in many different areas, from raw material procurement to logistics. We succeeded in overcoming these problems through our strong connections. We maintained uninterrupted production by taking all necessary measures to protect our employees' health. All these adverse conditions and business processes that required restructuring inevitably led to significant cost increases. In addition to this, like many other sectors, our industry is going through a period of declining sales. Indeed, it is understood that pharmaceutical sales in our country in 2020 showed a decline of 6.9% on a unit basis compared to the previous year. With awareness of our social responsibility, we continue our production and work with great dedication and effort to ensure that there are no problems in drug supply even during the most critical periods of the process. Our pharmaceutical companies have maintained uninterrupted production of medicines both included in the Covid-19 treatment protocol and required for other treatments from the very beginning of the process. Today, the fact that 88% of our country's pharmaceutical needs are met through domestic production is a source of great pride and satisfaction for us. Additionally, both our universities and companies are intensively continuing efforts to develop, produce and research vaccines and medicines for Covid-19 treatment. In addition to vaccine development efforts in our country, we are making an intensive effort as a sector to ensure that vaccines developed abroad are produced in our country and thus our people can access vaccines more easily and with alternatives. We can proudly say that we have facilities with the capability to produce all types of Covid-19 vaccines in the world in our country today. It is of great importance that our industry, which fulfils its responsibilities in the best way during this process, aims beyond, and despite the most difficult conditions continues its investments, production, exports and maintains employment with determination, should have the problems arising from regulations that create barriers to market access for medicines resolved and be supported with constructive policies. In this context, delays in pharmaceutical licensing processes are at the top of our priority problems. In 2020, due to first delays in the establishment of committees working in this area and then the failure to activate these committees quickly and effectively, approximately 1,800 licence applications from the sector have been waiting for a long time. In this context, we expect the conditions and a new restructuring to be implemented that will enable the committees to operate at full capacity with increased meeting frequencies as soon as possible. The current situation delaying the market entry of our medicines not only prevents our patients from accessing these medicines for their treatment but also creates a burden on public finances. Additionally, the non-issuance of these licences results in the failure to produce certain medicines, which negatively affects the creation of new employment and our increasingly accelerating pharmaceutical exports. We continue to submit our constructive proposals on this matter to the relevant public institutions. On the other hand, as you know, there are very important developments taking place in the field of biopharmaceuticals globally. It is unthinkable for us to fall behind this development. In this direction, our pharmaceutical companies have made very large investments for a long time and are carrying out important work to develop and produce biosimilar medicines in our country. However, there is a serious regulatory barrier ahead of making biosimilar medicines available to our patients. These products are currently being licensed under regulations developed based on the USA and EU. When reviewing licensing files, additional requests are made that will extend processes and increase costs. Yet, in order to be able to compete with our strong competitors in this field, it is of great importance that our regulations be designed—without compromising public health and scientific rigour—to ensure that these products reach the market in the shortest possible time and that biosimilar products are quickly made available to patients. We know that progress in countries like Argentina, South Korea and India that have been successful in this area has been achieved in this way. In the upcoming period, another important expectation of ours is resolving delays and uncertainties in the evaluation and publication periods of pharmaceutical reimbursement applications. Resolving this issue, which delays access to medicines and thus creates a risk from a public health perspective, is of great importance for our industry. As an industry, we will continue our work with all relevant stakeholders with undiminished momentum in the coming period to create the ecosystem needed for Turkey to become a higher value-added product manufacturer and a global pharmaceutical producer and exporter.

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For all of us, 2020 was a year full of challenges that will be difficult to forget, because in the world and in Turkey we saw that none of us were prepared for such a pandemic on behalf of humanity. Countries and economies were seriously strained, a rapid solution search began. Looking at the pharmaceutical sector, we saw that both globally and as Turkey, this was perhaps the best performing and fastest solution-producing sector. As BASF, first when the pandemic began, we took very serious measures in the supply chain to ensure that our customers' production continued, we continued production of raw materials we supply to the pharmaceutical sector, and thus we met our customer's needs during such a period and provided formulation support for medicines used in pandemic treatment. As the BASF Pharmaceutical Solutions team, we participated in R&D work on generic medicines containing Favipiravir and Hydroxychloroquine used in Coronavirus treatment and with our functional excipients we produced, we became part of the treatment process. We also contributed to projects developed for treating patients in intensive care. Additionally, with our raw materials serving as surfactant agents in our portfolio, we played a role in the development and production of non-irritating and long-lasting disinfectants. Apart from medicines used in Coronavirus treatment, a decrease was observed in the unit-based production of some medicines due to the reduction in the number of prescribed medicines. We see that pharmaceutical companies that adapted well to the needs during the pandemic process and conducted R&D work in this direction closed the past year without much loss. As BASF Pharmaceutical Solutions, we also shape ourselves and our solutions according to the needs of our customers and the sector. Pandemic has become part of widespread concerns. The effort to find global solutions to these problems is becoming more critical with each passing day. The aim is to help people access faster treatment and live healthier lives and take precautions. This goal requires cooperation and partnership among different stakeholders. As you know, BASF is a global chemical company and supplies products to many sectors. We certainly had sectors that were affected globally, but as the Nutrition and Health Department, we are working on new innovative strategies to create value with products we supply to the health sector and gain sustainable competitive advantage. We foresee that the impact of the pandemic will continue in 2021 and in this year we pay importance to product supply, and since production of medicines used in coronavirus treatment will continue, we want to produce our products on time and meet market needs. The World Health considers health issues on a global scale and industry leaders form various partnerships to deal with challenges. As BASF Pharmaceutical Solutions, the outputs of some projects we support will play an important role in bringing our sales figures to the desired level this year. We anticipate that different and commercially high value-added projects will emerge. As BASF Pharmaceutical Solutions, by conducting research and examination of these new projects, we aim to provide the support that our global and local customers will need during their R&D work and establish lasting partnerships. Since pharmaceutical companies focused on coronavirus-related projects throughout last year, they were unable to allocate sufficient time to their existing products and projects. In this sense, we anticipate that companies will focus more on their routine production plans and new R&D projects. In 2021, when face-to-face meetings and discussions do not appear to be possible, as the BASF Pharmaceutical Solutions team, we will continue to support our customers through seminars and special training sessions we will organise on virtual platforms. As BASF, since we have a fully integrated and self-sufficient production facility and chain, we did not cause our customers to experience problems related to raw material supply due to the pandemic, and we have taken necessary precautions and actions against possible disruptions and problems that may arise this year. The Covid-19 pandemic, which emerged in China in January 2020 and brought the entire world's economies to a standstill in a very short time, will continue to be the most important agenda item of economies in 2021. We see that in 2021 the general situation in no sector will be "sunny", it is stated that recovery efforts will continue in all sectors or even if they do not pass the year with great momentum, they will pass it sheltered with possible recovery momentum. As many authorities have also pointed out for the way out of the pandemic, health infrastructure must improve worldwide. Even if the Covid-19 vaccine becomes widespread, social distancing will need to continue until herd immunity is reached. In other words, we are learning that old habits and lifestyles will no longer be the case for any of us. The pressure on health systems due to the pandemic is also the locomotive of the momentum in this sector. Health will be one of the star sectors of 2021—Covid-19 vaccines will be hope. On the other hand, the health sector will be one of the rare sectors where investment can be made to grow in 2021. We, as BASF Pharmaceutical Solutions, will continue our investments, develop innovative products and offer faster and solution-producing products to our customers.

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As you know, as Barentz, a Dutch "Life Science Ingredients" distributor-supplier represented in more than 60 countries globally, we are part of the global supply chain. First and foremost, facing such an unexpected and extraordinary challenge, the social, economic and psychological positions of the entire planet underwent change. Humanity faced the question of Maslow's Hierarchy of Needs—"What Do We Need to Survive?"—and the first level, "Basic Survival Needs". My personal answer to this question, as someone who has experienced Covid-19 infection severely, is that the first level would be "Health" or "a Healthy Breath". Yet when the pandemic became global in scope, it shook and continues to shake virtually all supply chains severely. On the B2C side that creates demand, consumer demand for products and services changed in almost every industry. Especially in products related to increased demand, supply time and agility parameters were highlighted. On the B2B side, although major disruptions were first seen in supply chains on the Chinese side, the impact did not remain local and chains sourcing their raw materials from Europe were also shaken. Delays at official institutions and ports extended delivery periods. Then the rapid spread of the pandemic and the panic it created affected production processes. Factory closures occurred. No production means no supply. Specific to Barentz, in supply chain and operations terms, against supply chain uncertainties arising from our customers' changing demands, we experienced a 2020 full of sacrifices in stock management and financing in order to find agile solutions. This was in a sense a mobilisation period for our country's industries. Although it increased our stock costs, what mattered was the availability of essential raw materials. In the face of closures, our foreign producers made the same sacrifices in terms of documentation and official institution approvals of the supply chain, achieving very efficient process management and time savings. Again, within this challenge, we took steps to shorten shipment delivery periods. We found and preferred quick options and expanded our business network. Now we have an "Extraordinary Crisis" scenario! In terms of Portfolio and Project Management, we already had a portfolio that would keep us prepared at all times. For this reason, we adapted very easily to our customers' changing priorities. Although some projects were shelved, dynamism in Turkey does not end, and with new projects we reached our 2020 target. Specifically for the Pharmaceutical-Food Supplement-Cosmetics Division I manage, now part of our lives and gaining a place in e-commerce systems, to meet this demand for pharmacy products, we enriched our portfolio with raw materials from manufacturers who have a say in the field and quality, increased our options and thus provided diversity, making innovation partnership with our customers. Because one side of our work at Barentz is suggesting project ideas. Due to our R&D and product development culture, we are very sensitive and equipped in this regard. In this vein, we brought together our customers with effective and reliable raw materials in our portfolio, indirectly increased "Immune System" quality throughout society, and I think this understanding of ours has value in terms of "Social Responsibility". Delays and uncertainties in 2020 due to the pandemic can happen again depending on virus evolution and mutation processes. For this reason, the importance of alternative sources in crisis scenarios will increase. Management of the rising supply chain financing costs is again another very important point. There is a point that should not be overlooked: "Changing Work Environment Order". Now we can make improvements in the medium and perhaps long-term permanent work-from-home system with technologically more equipped, more sustainable and more facilitative solutions. Human Resources units can bring Organisational Behaviour therapists, to put it simply, workplace psychologists to the agenda. We are human and as managers, our resource is again Human! Just as much as maintaining productivity and efficiency, we must also closely monitor, observe and, if necessary, intervene in employee quality of life. Because ahead of us, there is a year and perhaps years in which strategic plans and decisions must be made on the determining factors of the supply chain—the person/employee, production, shipment, pricing, stock, portfolio, financing, promotion, communication and work order—that I mentioned. I recommend people close to me to make rational historical readings. When reading, you can hear the voices that have come and reached us from the past to today. For example; the Hittites, who lived in Anatolia 4,000 years ago, repeatedly fought plague epidemics lasting 25-30 years. A closer example is the Spanish Flu, which spread globally again in the early 1900s. These viruses, like humanity, have always existed and will continue to exist. Humans, with their intellectual and emotional intelligence, will continue to exist if they succeed in changing their surroundings only to a certain extent and adapting to the rest. Just like strong suppliers and supply chains...

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Like many sectors, the pandemic negatively affected the pharmaceutical sector, and the Turkish pharmaceutical market contracted by approximately 3.5 to 4 percent on a unit basis. On a prescription basis, a contraction of 12.6 percent was experienced. While the sector experienced contractions, as Genveon we achieved our growth target of 29 percent on a TL basis in 2020. As a company, we have been achieving growth momentum significantly above the sector from the day we were founded. In this respect, we grew by 73 percent on a TL basis in 2018 and 51 percent in 2019. With the growth we achieved in 2020, we accelerated our investments even further and despite all these negative developments, in the middle of the pandemic we acquired the factory of an international company in Gebze with all its rights. We also made an agreement with this company to produce all its products for a period of 4+2 years. Our facility is currently approved by the health authorities of 29 countries and actively produces medicines for 83 countries. Among the countries where production takes place are Japan, Canada, Russia, Brazil, South Korea, Philippines and many developed European countries such as Germany, Slovenia, Poland and Austria. Our facility produces approximately 3.5 billion bulk products (tablets) annually and approximately 70 million units of finished goods. As a result of this acquisition; keeping the quality of our facility as "Best in Class" internationally and increasing production to contribute to the Turkish economy are among our short-term objectives. In addition to country employment, we aim to increase our contributions to the country's ecosystem and sector by working with many suppliers. Our medium-term objective is to transform our facility into a "Production Hub" for many international companies by producing for the Turkish pharmaceutical market and many developed countries at our facility, increase our exports and become a regional power. These are also among our objectives. The fact that we have approved facilities in many countries is a very valuable advantage in reaching our export target quickly. With our investments, we also started a new transformation movement in our company. We changed our brand name, logo and colours. We renewed our former name "Generica" as "Genveon". Genveon, born from the combination of our former name "Generica" and the definition of innovation today "Invention", symbolises the confidence we have gained, the high quality culture we possess and our new vision that combines dynamism with innovation. January 2021 was sluggish for the sector due to the continuing impact of the pandemic. I think the sector will recover by the end of the year with the pandemic subsiding. As Genveon, in 2021 we are targeting growth above the sector level again and a turnover of TRY 500 million. Additionally, as of 2021, we plan to accelerate the export of both our own products and contract manufacturing products and with this objective we plan to obtain 30 percent of our total revenue from foreign markets by 2025. With our newly acquired facility, we plan to enter new areas. With our R&D Centre, we will accelerate technology transfers and new product development and enter new products and markets. We made quite a large investment in infrastructure, machinery and equipment for our R&D centre. In our R&D centre, we will focus on value-added products, especially products for chronic diseases. We will accelerate our work especially in rapidly growing chronic disease areas worldwide such as oncology, respiratory and diabetes. We have built our 5-year strategic plan on "Sustainable Growth" and continue to serve human health.