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Richter CEO puts 2011 revenue growth at 0-5%

Erik Bogsch, CEO of drugmaker Richter Gedeon, said full-year revenue growth in euro-terms would reach 0-5% in 2011, speaking at a press conference after the company published its Q2 report.

Richter sees its sales in Russia rising 10-15% for the full year, up from 5-10% expected earlier, Bogsch said. Russian sales accounted for 30% of revenue in H1, up from 25% in the same period a year earlier, he added.

Russian sales rose 28% in euro terms in H1.

Richter continues to expect sales in Hungary to stagnate, Bogsch said.

Sales and marketing costs are expected to reach 25-27% of revenue this year. The proportion of revenue spent on research and development is expected to be 12-13%.

Richter's report shows higher sales and marketing costs were a big factor behind the drop in Q2 and H1 sales.

Gross margin is expected to reach 60% of revenue this year, edging down from 61.1% in 2010, Bogsch said. Operating margin is likely to fall to 15-16% from 22.8%, he added.

Changes to drug price regulations and subsidies will reduce Richter's full-year profit by HUF 7.1 billion in 2011, he said. An increase in the drug sector tax from July 1 and the drug sales representative fee will account for HUF 4.1 billion of the reduction, he added.

Richter cannot cut prices any further because of these factors, he said.

Richter said in its report that price cuts it made to remain competitive as well as to keep some drugs subsidized would have an impact of about HUF 1 billion for the full year.

In Hungary, Richter has annual profit of about HUF 4.8 billion on sales of HUF 30 billion, Bogsch said.

Compensation for R&D spending next year is uncertain, he said.

Recently approved legislation reduced the proportion of R&D spending companies may deduct from 100% to 50% for 2011.