Stockpiling ahead of lockdown supports Richter earnings growth in Q1

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Image by Richter.hu

Hungarian drugmaker Gedeon Richterʼs first-quarter net income rose 31.7% year-on-year to HUF 29 billion as revenue climbed, lifted by stockpiling ahead of lockdowns to contain the spread of the coronavirus, state news wire MTI reports, citing an earnings report published today.

Image by Richter.hu

Revenue increased by 16.3% to HUF 141.4 billion during the period.

Richter noted a surge in demand for its generic drugs for chronic conditions in March as people prepared for the imminent introduction of quarantine measures. Richter said demand for its antiviral drug Groprinosin was "outstanding" in markets in Poland, Ukraine, and the CIS, while oral contraceptives recorded a higher turnover in most of its key markets in the EU-15.

A breakdown of turnover from Richterʼs top-selling products shows sales of oral contraceptives jumped 18.5% to HUF 28.6 bln, while sales of Groprinosin shot up 118.5% to HUF 5.6 bln. Sales growth of Verospiron, Panangin, and Lisonorm, used to treat heart disease, was also well into the double digits.

Sales of Richterʼs antipsychotic cariprazine, its second best-selling drug after oral contraceptives, rose 1.9% to HUF 15.7 bln.

The direct cost of sales increased 15.6% to HUF 59.7 bln, rising at a slightly slower rate than revenue to lift gross profit 16.8% to HUF 81.7 bln.

Richterʼs sales and marketing costs edged up 1.5% to HUF 32.2 bln in Q1. R&D spending climbed 29.2% to HUF 15.1 bln.

Earnings per share came to HUF 156 for the quarter.

2020 guidance lowered

At an online press conference after the earnings report was released, CEO Gábor Orbán said Richter expects consolidated revenue, calculated in euros, to rise 3% this year, excluding exchange rate volatility.

He noted that guidance was knocked down from 5% in February because of the negative impact of the coronavirus pandemic.

Richter sees turnover on the American market climbing 20% and puts sales growth in Russia at 3%. Sales in Western Europe are set to fall 3%, he added.

He acknowledged the positive impact of the pre-lockdown stockpiling on Q1 sales but said those stocks could have a reverse effect on sales in Q2.

Orbán said declining purchasing power among consumers, a slowdown in clinical drug trials, changes to drug subsidy policies, possible changes to supply chains, and the lack of face-to-face visits with doctors are all risk factors for Richterʼs turnover this year.

Richter plans to plow back 11% of revenue into R&D this year, he added.

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