Investor Caution Advised

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BMI View: Investors hoping to capitalise on emerging market growth stories should be wary of Turkish pharmaceutical firms. Significant cuts to drug prices and reimbursement controls, introduced by the government since September 2009, have piled pressure on both domestic and foreign drugmakers operating in the market, limiting short-term growth and affecting profitability. While Turkey's macroeconomic conditions are highly favourable, drugmaker expansion will be modest compared to the out-of-pocket-driven major emerging markets in Asia. While BMI's projections were considerably cut in the wake of government measures, our forecasts for 2010-2015 are still attractive, particularly in comparison with the stagnant growth expected in developed Europe. We believe that if drugmakers can control costs, there is strong revenue-generating potential in the Turkish market.