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Richter rebounds from Esmya losses in Q4

Hungarian drugmaker Gedeon Richter on Thursday reported a net loss of HUF 16.4 billion in the fourth quarter of 2018, narrowing from a HUF 35.7 bln loss in the base period on lower impairment costs related to its uterine fibroid drug Esmya, state news agency MTI reported. Net income for the full year jumped 251% to HUF 31.2 bln.

Richter said its management "considered it prudent" to account for an impairment loss amounting to HUF 24.3 bln with regard to Esmya when executing year-end mandatory impairment tests. The impairment loss related to the drug was well under the HUF 48.7 bln booked in 2017. Esmya sales plunged after restrictions were placed on the drugʼs use.

Fourth-quarter revenue climbed 10% to HUF 121.6 bln. Direct costs of sales rose at a faster clip, increasing 17% to HUF 56.9 bln. Gross profit was up 5% at HUF 64.7 bln.

Richter booked a HUF 29.4 bln loss on the "other income and other expenses" line of its profit and loss statement, showing the impact of the Esmya impairment. In the base period, the line showed a HUF 49.7 bln loss. 

At the operating level, Richterʼs loss narrowed to HUF 7.6 bln, down from HUF 33.0 bln.

Full-year net income up 251%

Richterʼs net income for the full year jumped 251% to HUF 31.2 bln, also supported by the lower Esmya impairment. Revenue and direct costs of sales were both practically flat, at HUF 445.5 bln and HUF 191.5 bln, respectively. Gross profit stagnated at HUF 254. bln.

Operating profit climbed 112% to HUF 43.9 bln in 2018 as the loss on the "other income and other expenses" line fell to HUF 29.8 bln, down from HUF 54.2 bln. Earnings per share came to HUF 168 for the period.

Full-year sales of Esmya dropped 72% to HUF 8.2 bln because of the temporary precautionary measures introduced as part of a review by the Pharmacovigilance Risk Assessment Committee (PRAC) of the European Medicines Agency (EMA) into liver injury potentially related to the drug, MTI noted.

The PRAC concluded last May that Esmya "may have contributed to the development of some cases of serious liver injury," and recommended that the medicine must not be used in women with known liver problems, that other patients may start new treatment courses provided they have regular liver tests, and that Esmya should be used for more than one treatment course only in women who are not eligible for surgery.

The PRAC recommendations were endorsed by the EMAʼs Committee for Medicinal Products for Human Use (CHMP) on June 1, and the European Commission adopted the opinion of the CHMP on the Esmya referral on July 30, clearing the way for the relaunch of the product.

‘Focused relaunch’ of Esmya

The restrictions on Esmya knocked it off the list of Richterʼs top ten best-selling products. In 2017, it was in third place. At the top of the list during the period were hormonal contraceptives, generating turnover of HUF 90 bln, and the nootropic Cavinton, with sales of HUF 31.8 bln.

Richter noted that its sales network had commenced the "focused relaunch" of Esmya on European markets late in August and early in September.

Speaking at a press conference after the earnings report was released, Richter CEO Gábor Orbán said Richter sees revenue, calculated in euros, rising 2-3% in 2019. Sales growth in Hungary could reach 0-2%, as sales in other East European countries stagnate but sales in Western Europe climb 10%, he added.

In Europe, sales of Esmya could rise to EUR 35 mln, said the CEO, while sales of Bemfola, used in fertility treatments, could climb in the double digits.

Russian sales, calculated in roubles, are set to "fall slightly," while sales in other CIS countries stagnate. U.S. sales are also seen remaining flat, while sales in China fall 10% and sales in Latin America climb 0-5%.

Richter Chairman Erik Bogsch noted that investments required to put a unique identifier (UID) on all of its medicine packaging had come to about HUF 7 bln. An EU directive requires UIDs for medicines from February 9, 2019. Introducing the UIDs reduced productivity by 10-20% and added to operating costs, Bogsch noted.