Richter to maintain production in Hungary despite poor economic outlook, CEO annouces

Hungarian drug company Richter Gedeon plans to retain all of its production in Hungary in spite of the pessimistic economic outlook, company CEO Erik Bogsch told Dow Jones Newswires on Wednesday evening. "The pharmaceutical industry on a global scale is in a difficult state amid the current economic situation. Hungary is especially challenging as tax burdens are way higher than the European average," Bogsch told the financial news service.

Bogsch maintained his outlook for a stagnating revenue level in Hungary for 2011, and said he would provide an outlook for next year's revenues when the company publishes 2011 results in early 2012.

Richter foresees a boost in its CIS and Russian operations, in Poland and Romania, as well as in core European Union countries. This would offset stagnating sales in Hungary and the United States.

The company is also examining possibilities to expand its existing network to countries such as France, the United Kingdom and the Benelux region.

Bogsch noted however, that the European Union needs better research and development policy to anchor drug makers, and must not let them be lured away by more favorable circumstances in Asia. "South Korea and Taiwan are especially challenging competitors, besides India and China," the Richter CEO said.

Despite the wide range of revenue sources in geographical terms, Richter has no plans to hedge against foreign-currency rate fluctuations, Bogsch said, noting that "It wouldn't be wise to enter hedging or other deals amid the current uncertainties and volatile circumstances."

Richter's income is denominated in euros, Russian rubles, US dollars, Polish zlotys, Romanian lei and Hungarian forints.

The company is also aiming to boost business through production of biosimilar products. Richter has therefore signed cooperation agreements with Germany's STADA, which means production of biosimilar medicines would start by 2017 at the latest. That will take place at Richter's site in the city of Debrecen (E Hungary), where the company is inaugurating a new plant at the end of this year. "I expect a general switch toward biosimilar drugs in the next 10-15 years," Bogsch said.

For the time being, Richter is focusing its expansion efforts with regard to traditional drug making on Russia, where the widening of production is continuous, the Richter CEO told Dow Jones Newswires.