Gross profit climbs, but other costs put Richter in red in Q4

Revenue growth outpaced the increase in direct cost of sales, but marketing, administration, R&D and "other" expenses weighed on the bottom line.

Revenue climbed 14% to HUF 138.7 bln. Direct cost of sales rose just 11% to HUF 63.3 bln, lifting gross profit by 17% to HUF 75.4 bln.

Richter booked a HUF 12.4 bln loss on the operating profit line as sales and marketing expenses rose 13% to HUF 31.2 bln, administration and general expenses jumped 51% to HUF 8.5 bln, R&D spending climbed 26% to HUF 12.3 bln and other expenses were up 28% at HUF 36.7 bln. 

Full-year profit lifted by financial income

Richter booked net income of HUF 49.3 bln for the full year, up 40%.

Revenue increased 14% to HUF 507.8 bln. Direct cost of sales climbed at a faster clip, rising 17% to HUF 225 bln. Gross profit was up 11% at HUF 282.8 bln.

Operating profit fell 12% to HUF 39.7 bln as marketing, administration, R&D and other expenses increased.

Detailing the HUF 44.8 bln in other expenses - a 54% increase over the base period - Richter said it accounted HUF 37.9 bln in impairment losses, including HUF 29 bln for Esmya, its drug to treat uterine fibroids. Restrictions were earlier placed on the drug after European medicines authorities concluded that it "may have contributed to the development of some cases of serious liver injury", causing Esmya sales to plunge.

Richterʼs net income was lifted by a HUF 11.2 bln financial gain, improving over a HUF 2.1 bln loss in the base period.

Earnings per share came to HUF 265.

Sales up in all markets except Russia, Poland, and China

Sales of Richterʼs pharmaceutical business rose in all of its geographical markets except for Russia, Poland, and China. 

Richter attributed the decline in Russia to a regulatory-related stock-up in the base period. Sales there fell 6% to HUF 86.9 bln.

Sales in Poland dropped 3% to HUF 23.4 bln as turnover of Richterʼs antiviral Groprinosin declined because of a mild flu season and increasing competition.

Chinese sales slipped 28% to HUF 19 bln, mainly because of preshipments of Richterʼs nootropic Cavinton in the base period. Richter noted that Chinese authorities took Cavinton off the pharmaceutical reimbursement list with effect from January 1, 2020.

Richterʼs sales in Hungary increased 3% to HUF 39.8 bln. Richterʼs market share reached 5%, making it the fifth-biggest player. In terms of retail prescription drugs, it had 7.7% market share, putting it in second place.

Cariprazine sales jump

Oral contraceptives remained Richterʼs best-selling product as turnover rose almost 6% to HUF 95.1 bln.

Runner-up was the antipsychotic cariprazine. Sales of the drug, marketed under the brand names Vraylar and Reagila, jumped 130% to HUF 57.7 bln.

Sales of Cavinton, Richterʼs third-biggest product, fell 23% to HUF 24.5 bln.

Esmya was ninth on Richterʼs top ten list of products. Sales of the drug increased 15% to HUF 9.4 bln.

Guidance for 5% revenue growth in 2020

Speaking at a press conference after the earnings report was published, Richter CEO Gábor Orbán said revenue growth, calculated in euros, is set to reach 5% this year, if exchange rates donʼt change too much.

Richter augurs 20% sales growth in the United States, 10% in Western Europe and 3% in Russia, he said. Sales are seen stagnating in other markets, he added.

Orbán said Richter targets R&D spending equivalent to 11.5% of revenue this year, up from close to 10% last year.