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Richter still sees revenue climbing no more than 5% in 2011

Hungarian drug maker Richter Gedeon still expects revenue this year to rise at most 5% over the €998.2 million in 2010, based on Q1 results, CEO Erik Bogsch said on Wednesday, after the company published its report for the period.

The projection will also depend on exchange rate changes, Bogsch noted.

Hungarian drug maker Richter Gedeon’s first-quarter net income edged down 3.2% to HUF 11.2 billion as sales and marketing costs jumped, the report showed.

The biggest uncertainty is on the Hungarian market, but the company still expects stagnating revenue, he said. Sales were better than expected in Q1, but it still is not known whether expected government measures will cause pre-purchases, he added.

If the government decides to raise the tax on sales of subsidized medicines from 12% to 20% and double the sales rep fee, it would raise Richter's costs by about HUF 4 billion a year, Bogsch said. If Richter does not get this back as an “acknowledgement” of its research and development spending, the company will be in a difficult position, he added.

The government early this year annulled a regulation that gives the National Health Insurance Fund the financial resources to refund the tax on subsidized medicines up to 100% of the value of R&D spending with a six-month delay.

Richter said in its Q1 report that R&D spending rose 11.4% to HUF 8.26 billion from the same period a year earlier. The spending accounted for 11.7% of sales, it added.

If Richter does not get this refund, it could result in a drop in profit on a scale that could hold back investments, causing a drop in turnover and a fall in headcount, Bogsch said.

Richter has raised its projection for sales growth in Russia from 5%, announced in February, to 10-15%, he said. The company still expects sales in the United States, in dollar terms, to fall 35%.

Richter's original active ingredient for treatment of bipolar mania and schizophrenia, cariprazine, is expected to enter phase III clinical trials by the end of the first quarter of next year, Bogsch said, answering a question. If the trials are successful, the drug could be registered with the US Food and Drug Administration at the end of 2013 or the beginning of 2014, he added.

An original drug to treat uterine myomas developed by Richter's Swiss unit PregLem could be registered next year. The drug will only generate profits from the third year after it is introduced, he added.

Asked whether Richter has any acquisition targets, Bogsch said not at the moment, but the company is on the lookout for opportunities to expand its product portfolio.