DEVA HOLDING A'S'

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DEVA HOLDING A.S.
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DEVA HOLDING A.S.

• Group Profile
• Deva Holding, established in 1958, is one of the
  largest pharmaceutical groups in Turkey with
  activities in pharmaceutical products, API
  manufacturing, and veterinary products
• Deva Holding is directly engaged in human
  pharmaceuticals business through its production
  facilities and sales organization
• In addition to the core pharmaceutical business,
  non-core activities include
• Ampoule manufacturing and cleaning products
  production
• Marketing sales of cleaning products
• Catering services insurance brokerage

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DEVA HOLDING A.S.

• History
• 1958 Established by 27 founding shareholders
• 1960 First manufacturing facility established
• 1970 Foundation of first API production facility
  in Turkey
• 1978 Acquisition of Carlo Erba
• 1991 Foundation of Cerkezköy synthesis plant
• 1994 Launch of Potassium Clavulanate production
• 1997 Launch of Cefuroxime Axetil production
• 2000 Paid in capital was raised to 16 trillion TL
• 2003 Paid in capital was raised to 48 trillion TL
• 2004 Amoklavin ranked as best selling drug in
  Turkey

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DEVA HOLDING A.S.

• Corporate Structure

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DEVA HOLDING A.S.

• Business Lines
• Human Pharmaceuticals
• Branded Generics
• Licensed Product
• API
• Veterinary Products
• Consumer Goods

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DEVA HOLDING A.S.

• Breakdown of Consolidated Net Sales 2005

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HUMAN PHARMACEUTICALS
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HUMAN PHARMACEUTICALS

• Market Size
• Turkish Pharma Market grew at a striking CAGR of
  17.7 between 1999-2005
• It is expected to reach US 7 billion by the end
  of 2006, based on ex-factory prices
• Strong growth is likely to continue on the back
  of widening access to healthcare system, rising
  income level and favorable demographics

Turkish Pharmaceutical Market (US million)
1999-2005 CAGR 17.5
Source IMS, Company Estimates
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HUMAN PHARMACEUTICALS

• Consumption Per Capita
• In line with market growth, pharmaceutical
  consumption per capita is increasing as well
• Consumption per capita reached US 94 in 2005
  (based on IMS Health data) from US 40 in 1999
• Despite this improvement in recent years, it is
  still far below European countries

Pharmaceutical Consumption Per Capita (2003)
Source EFPIA
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HUMAN PHARMACEUTICALS

• Pharmaceutical Consumption Breakdown () - 2004

Source Turkish Pharmaceutical

Manufacturers Association

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HUMAN PHARMACEUTICALS

• Competitive Environment 1H06

Top 15 Players - Boxes Sold
Top 15 Players - Revenues
Source IMS
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HUMAN PHARMACEUTICALS

• Reference Pricing Mechanism (I)
• Turkey implemented a reference pricing mechanism
  by the beginning of 2004, replacing the former
  cost-plus system
• The price ceiling for an original pharmaceutical
  is the lowest ex-factory price found in five
  reference countries France, Greece, Italy,
  Portugal and Spain plus the country of origin
• If the product is not marketed in any of these
  five countries, any EU country might be taken as
  benchmark
• Generic product price can be set as high as 80
  of the original product price
• Price changes in reference countries should be
  communicated to Ministry of Health within three
  months

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HUMAN PHARMACEUTICALS

• Exchange Rate Factor
• EUR / YTL exchange rate is the other key factor
  of pricing in Turkey in addition to reference
  country prices
• Ministry of Health monitors the exchange rate
  fluctuations on a quarterly basis
• If the exchange rate fluctuation exceeds 5
  (either way) for 30 days in a row one month
  than Ministry of Health sets the new exchange
  rate level and pharmaceutical prices are adjusted
  accordingly
• This mechanism provides protection against
  currency risk

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HUMAN PHARMACEUTICALS

• Reimbursement Mechanism (I)
• Three state controlled insurance institutions,
  SSK, Pension Fund and Bag-Kur realigned their
  positive and negative lists
• Some vitamins, herbals and cosmetics are in the
  Negative List
• Prescription of certain drugs are limited with
  specialists
• All other pharmaceuticals are reimbursed, up to a
  certain threshold reimbursement band
• Reimbursement price ceiling is set as 22 above
  the lowest priced (reference product) in the
  market

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HUMAN PHARMACEUTICALS

• Reimbursement Mechanism (II)
• Reference product should be marketed at least
  five months in the market and should have a
  minimum 1 market share of boxes sold in order to
  be the reference
• Let it be noted that, original pharmaceuticals
  which exist in the market without generic
  alternatives are not bound with reimbursement
  band. Their full price is reimbursed.

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HUMAN PHARMACEUTICALS

• Recent Regulatory Changes
• Reimbursement price ceiling has been lowered to
  22 on May 1st 2006, from its previous level of
  30
• 116 products / molecules have been excluded from
  the positive list, such as Gingko Biloba
• Prescription of some molecules, such as
  Pantoprazole and Atorvastatin, has been limited
  with only a number of specialization areas and /
  or under special conditions
• Medication period has been limited to 7 days to
  be effective by October 1st. In other words,
  doctors are not allowed to prescribe medication
  for periods longer than 7 days

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DEVA HUMAN PHARMA

• Profile
• Ranks among the top ten players in the overall
  market, Among top 5 in Generics
• Strong position in the anti-infectives
  (antibiotics) segment with a well established
  portfolio of products and market leading
  positions
• 75 products in 185 pharmaceutical forms
• 68 Branded Generic Products, 174 presentation
  forms
• 7 Licensed Products, 11 presentation forms
• Strong Sales Force 723 Medical Reps and Sales
  Reps
• 80 million boxes production capacity

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DEVA HUMAN PHARMA

• Therapeutic Breakdown 2005 Pharma Net Sales

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DEVA HUMAN PHARMA

• Main Revenue Drivers

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DEVA HUMAN PHARMA

• Amoklavin (Potassium Clav.)
• Amoklavin continues to be the segment leader
• In 1H06, Amoklavin enjoyed a market share of 23
  in terms of boxes sold
• Closest competitors Bilim and GSK accounted for
  19 and 17, respectively

1H06 Potassium Clavunate Segment Market Share of
Top 5 Manufacturers ()
Source IMS
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DEVA HUMAN PHARMA

• Cefaks (Cefuroxime Axetil)
• Cefaks posted significant growth in 2005 and
  1H06 became 1 in its segment
• Segment share of Cefaks climbed to 19 of boxes
  sold for 1H06, from 14 in 2004

1H06 Cefuroxime Axetil Segment Market Share of
Top 5 Manufacturers ()
Source IMS
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DEVA HUMAN PHARMA

• Deklarit (Chlarithromycin)
• Deklarit was 2 of its in 1H06, closely chasing
  the leader
• It had a market share of 15 of boxes sold

1H06 Chlarithromycin Segment Market Share of Top
5 Manufacturers ()
Source IMS
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DEVA HUMAN PHARMA

• Other Key Products
• Azitro and Dikloron are segment leaders, with
  strong market shares
• Hitrizin is 2nd in its segment with 26 market
  share
• Ciflosin is sharing 2nd rank in the segment with
  two other players

Segment Shares of Key Revenue Drivers () 1H06
Source IMS
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DEVA HUMAN PHARMA

• New Product Launches in 2006
• Deva Holding have successfully launched 3 new
  products in 1H06
• Citrex (Citalopram), anti-depresan
  2005 segment size US 33.8 mn
  2000-2005 CAGR 46.6
• Devasid (Sulbactam), anti-biotic
  2005 segment size US 110.6 mn
  2000-2005 CAGR 8.7
• Devalud (Tizanidin), muscle relaxant 2005
  segment size US 5.9 mn 2000-2005
  CAGR 12.9

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DEVA HUMAN PHARMA

• New Products
• Deva lodged license applications for 31 new
  products (molecules) in 105 different
  presentation forms between 2002-2004.
• 5 of these new products have been licensed and
  successfully launched in 2005
• Deva has introduced 3 new products in 1H06 and 6
  new products will be launched before the end of
  the year
• Remaining 17 new molecules will be launched in
  2007 and 2008
• Total domestic market value of the pipeline (31
  molecules) was US 1,207 million in 2005 IMS
  data

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DEVA HUMAN PHARMA

• Pipeline Domestic Market Size (US mn)

1999-2005 CAGR 30
Source IMS
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DEVA HUMAN PHARMA

• Competitive Edge
• Unique and favorable brand equity, being the
  pioneer of many developments in the Turkish
  pharmaceutical industry
• Strong position in systemic anti-infectives, with
  5 segment leader products
• Large and aggressive sales organization with
  established contacts to medical doctors,
  pharmacies, hospitals, social security system and
  other major procurement centers
• Legal and regulatory skills built on 48 years of
  generic drug licensing experience

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API
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API

• Profile
• One of the first API production in Turkey
• Currently, two important APIs, Potassium
  Clavulanate and Cefuroxime Axetil, are produced
  within the Group
• Potassium Clavulanate is the API behind Devas
  top selling drug Amoklavin
• Cefuroxime Axetil is the API behind Devas second
  best selling drug Cefaks

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API

• Potassium Clavulanate
• Production is located in Izmit Kosekoy Plant
• One of the six manufacturers worldwide of
  potassium clauvanate, the API in Deva Holdings
  best selling drug Amoklavin
• The master file of potassium clauvanate is in
  compliance with the regulations of health
  authorities in USA, Canada and Europe
• Exports to 30 clients in 17 different countries
• Continuously developing its RD capabilities to
  expand its production line

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API

• Cefuroxime Axetil
• Production is located in Cerkezkoy Fine Chemicals
  Plant
• In addition to API, finished dosage form of the
  product is also produced within the same facility
• Cefuroxime Axetil is sold to third parties in
  domestic market and exported as well

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VETERINARY PRODUCTS
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VETERINARY PRODUCTS

• Profile
• Engaged in the marketing and sale of veterinary
  products
• Large product portfolio including 60 registered
  products with over 100 presentation forms
• Markets and sells its products with a total of 32
  personnel working in 5 regions of Turkey and
  distributes them through 30 pharmaceutical
  products wholesalers
• Second largest player in the market in 2005, with
  a market share of 10 in terms of revenues
• Veterinary products market size is US 100
  million (2005) and has a stable trend

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VETERINARY PRODUCTS

• Veterinary Products Market

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OUTLOOK AND STRATEGY
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HUMAN PHARMA

• Market Trend in January-June
• Sales volume slowed down in April due to expected
  price adjustments as a result of prospective
  change in reimbursement band
• Especially generic manufacturers have been
  negatively affected by this slow down
• In order to protect themselves from a downwards
  price adjustment, pharmacies hesitated to buy in
  large volumes and tried to manage their
  inventories at minimum levels
• New reimbursement band has been announced in May
  and demand remained weak until mid-June when the
  ambiguity over prices has completely disappeared

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HUMAN PHARMA

• Business Outlook (I)
• Pharmacists are still preferring to operate with
  minimum level of inventories because of three
  main reasons
• Ambiguity remains over the possible effects of 7
  days medication period limit, that would be
  effective by October 1st, 2006
• It is still a question mark whether 116 molecules
  that have been excluded from the reimbursement
  list would be substituted by new products
• Pharmacists are concerned that regulatory changes
  are likely to continue until the end of the year,
  since government aims to remain within the limits
  of the healthcare expenditure budget

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HUMAN PHARMA

• Business Outlook (II)
• However, the demand is expected to surge in
  October and November, since ambiguity over the
  effects of medication limit will disappear once
  it is implemented October 1st
• Despite these unfavorable conditions in the
  market, there are good news from pricing front
• Following the mini devaluation in May-June 2006,
  Council of Ministers decided to allow a price
  increase to compensate for the depreciation of
  the local currency
• Three price increases of 5 have been made in
  July, August and September, and prices have
  recovered in nominal YTL terms to their March
  2006 levels (before the drop of reimbursement
  band)

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STRATEGY- RESTRUCTURING

• New Managements Vision
• Slim and transparent corporate structure
• Integrated and GMP compliant new manufacturing
  site
• Fast introduction of new products to domestic
  market
• Increased level of exports, especially finished
  products
• Optimized cost and expense structure
• Enhanced communication with market participants
• Maximizing value for shareholders

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STRATEGY

• Merger of Holding and Subs
• Deva Holding and its subsidiaries are intended to
  be merged in order to create a slim and
  transparent corporate structure
• Merger is expected to integrate business lines
  which should ideally have been structured in a
  single entity
• Post-merger entity is intended to exit from
  non-core businesses such as catering and
  insurance brokerage
• It is expected that significant cost advantages
  are enjoyed since duplicated departments like
  accounting, finance, HR etc. are intended to be
  eliminated
• Bottom line New corporate structure is envisaged
  to be easier to understand and easier to value

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STRATEGY

• Integration of Production Units
• Existing production units located in 4 different
  sites will be re-located in an integrated campus
• Integration is expected to provide improved level
  of communication between production units
  enhanced efficiency and productivity advanced
  and instant management control and supervision
• Cost cutting consolidated production workforce
  headcount is expected to be lower than current
  figure in existing structure
• New manufacturing site is expected to get FDA and
  EMEA endorsements, which will provide export
  ability to USA and Western European
  pharmaceutical markets

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STRATEGY

• New Markets
• Expand Export to other countries, as Finished
  Products as well as API
• Primary target countries are Central Asia,
  Ukraine, Russia
• After the commissioning of new manufacturing
  facility, Western European countries as well as
  US will be on target.

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DEVA HOLDING

• Non-core Asset Divestment Opportunities
• Existing production units located in 4 different
  sites will be re-located in an integrated campus
• This consolidation of manufacturing capabilities
  is expected to provide an opportunity to divest
  and / or develop a number of the currently used
  locations
• According to the evaluation of the management,
  divesting real estate could yield around US 196
  million

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DEVA HOLDING

• Real Estate Portfolio (I)

Source Ekol Real Estate Valuation and
Consultancy Co.
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CONSOLIDATED FINANCIALS
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DEVA HOLDING - CONSOLIDATED

• 1H06 Financial Performance
• Consolidated revenues stood at US 75.1 million
  in 1H06, 16.8 lower compared to US 90.3 mn in
  1H05
• Main reason behind this drop in sales is the
  weaker than expected human pharma sales during
  April-June period, because of regulatory changes
  that affected market dynamics
• Gross profitability deteriorated because of the
  loss incurred by API manufacturer subsidiary
  (Depa) and weaker profitability in human pharma
  business
• Gross margin dropped to 44.7 in 1H06, from 52.3
  in 1H05

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DEVA HOLDING - CONSOLIDATED

• 1H06 Financial Performance
• As a result of drop in sales and decline in gross
  profit, consolidated EBITDA fell to US 6.2
  million in 1H06, from US 21.5 in 1H05
• Depreciation of YTL during May-June period and
  increases in interest rates up to 400 basis
  points had an adverse effect on financial
  expenses
• As a result of deteriortion of operational
  profitability and increasing financial expenses,
  Deva posted a negative profit before tax of US
  11.7 million, whereas it recorded a PBT of US
  12.6 mn in the same period of last year

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DEVA HOLDING - CONSOLIDATED

• Financial Highlights

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DEVA HOLDING - CONSOLIDATED

• Post Balance Sheet Date Events
• On July 11th, 2006 International Pharma acquired
  18 of Deva Holding shares, from subsidiary
  companies for a price of YTL 8.1 per class C
  share
• Total cash injection to subsidiaries amounted US
  50 million as a result of the transaction, which
  helped the Group to roll over its short term bank
  loans
• The Group has used and still using these fund for
  working capital requirements
• Consequently, consolidated net debt of Deva
  Holding and its subsidiaries dropped by US 50
  million

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DEVA HOLDING - CONSOLIDATED

• Financial Outlook
• Pharma sales is expected to surge beginning with
  September, in line with market trends and
  supported by new marketing and sales strategies
  developed
• New products will compensate for the retreats
  that some of the established products face as a
  result of increasing competition
• Financial expenses will decline thanks to
  improved net debt
• Positive effects of corporate restructuring is
  expected to start to kick in second half of 2007