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Global Sales Help Richter Ride out Impact of Pandemic

It might come as a surprise to the average Hungarian, but in far off Siberia, more than 6,000 km east of Budapest, medical professionals sing the praises of Richter Gedeon medicines.

“If I see two similar drugs, one produced by Richter Gedeon and another by a local pharmaceutical company, I’d rather choose the first,” Svetlana Sizih, a Russian pediatrician from Ust-Ilimsk, Irkutsk region, tells the Budapest Business Journal.  

Her colleague Svetlana Klimenok, a general practitioner, agrees. “[Richter] medications have proven to be very effective treatments, along with a great price to quality ratio,” she says.

These Russian doctors illustrate the strength and reach of the Richter brand. Reliable, effective and affordable medicines have made the blue-chip Hungarian pharmaceutical maker one of the biggest players in Central and Eastern Europe, and beyond.

Richter is currently present in more than 40 countries, operates five manufacturing facilities (in Germany, India Poland, Romania, and Russia) and boasts 38 sales subsidiaries and wholesale companies globally.

The product portfolio includes women’s healthcare, the central nervous system and cardiovascular drugs. Total revenues in 2019 came to HUF 507.794 billion, almost 14% more than in 2018.

The company’s 2020 first quarter report shows more record numbers, with consolidated profit after tax hitting HUF 29.1 bln, up 31.7% year-on-year.

This year, the COVID-19 pandemic has brought complications to drug makers, as in every industry. Nonetheless, relatively speaking, the pharmaceutical sector has been able to remain “shielded from the crisis shockwaves,” Gábor Orbán, Richter Gedeon Nyrt.’s chief executive, said in the company’s first quarter report.

Well Managed

Hungary “has managed the pandemic very well,” Zsuzsa Beke, head of public relations and public affairs at Richter Gedeon told the BBJ. Richter dramatically reduced personal contact and introduced online meetings where possible, but “business activities did not stop”, she stressed.

Inevitably, “online meetings have become dominant and an even more integral part of the daily operation,” he said; for their own safety, sales representatives had to stop personal visits, switching instead to online channels.

“This transition went smoothly and quickly, demonstrating that promotional activities can partly work on digital platforms,” Beke said, adding that the results are being carefully monitored to ascertain what works, and what doesn’t. She admits that, ultimately, it seems new product launches remain impossible without personal visits.

Richter has also joined the scramble to find an antidote against the coronavirus, signing an agreement with U.S.-based biotechnological company INOVIO to support large-scale manufacturing of that company’s trial DNA vaccine for COVID-19, Beke said, stressing that this is still in the developmental phase.

The company is also involved in “several projects” to develop treatments for acute coronavirus infection, Beke revealed, while declining to provide further details at this early stage.

Richter’s management has clearly convinced Michal Kuzawinski, an analyst with U.K.-based investment bank J.P. Morgan Cazenove. In a report on May 8, Kuzawinski wrote that Richter was “broadly unscathed by COVID-19 so far.”

“We have regained high conviction on Richter’s Vraylar story with management sounding very comfortable on supply chains and the drug’s prescriptions continuing to print ~100% growth throughout the U.S. lockdown,” he argued.

But even in these uncertain times, the circumstances seem to be in favor of Richter Gedeon. For example, Kuzawinski noted distinctive growth for Vraylar, higher demand for the company’s main products in the first quarter, wage pressures subsiding and cost-supportive digitalization, together with foreign exchange trends, namely a strengthening dollar and euro against the forint, both compensating for a weaker Russian currency; the latter being a key Richter market.

“The key downside risks to our forecasts and rating is the large reliance of Richter’s earnings on a single drug, Vraylar,” Kuzawinski notes. This posed potential risk should Vraylar be withdrawn from the U.S. market for some reason, for example if it turns out that it can cause a serious risk to patient’s health, he said. Other potential dangers include costs inflation, and the vulnerability of Russia and the CIS to oil price or local currency risks.

At the time of writing (July 9), the share price stood at HUF 6,675, up 4 % this year. In contrast, the Budapest Stock Exchange’s benchmark BUX index closed closed the same day down 22,36% this year, the slump primarily caused by COVID-19 concerns.

Cariprazine: Not Just Good News for Richter

Cariprazane, Richter Gedeon’s atypical antipsychotic, received the Medicine of the Year 2019 award from the Hungarian Society for Experimental and Clinical Pharmacology (MFT).

It’s active ingredient, a Hungarian development, was discovered in early 2000s. Since its launch in 2016, the drug has been used in the treatment of schizophrenia, bipolar mania, and bipolar depression. It has become well-known in many countries and is especially popular in the United States, where more than two million prescriptions of Vraylar (the brand name for the drug in North America) have been made.

“The success of Cariprazine goes well beyond Richter,” says Erik Bogsch, Richter’s chairman. “It also has historical significance for the Hungarian pharmaceutical industry and medicine, as it is the first original product developed in Hungary to be introduced on the U.S. market.”

During the 28th Annual Meeting of the European Psychiatric Association (EPA) on July 4-7, Richter Gedeon presented new results of Cariprazine research. A 16-week observational study conducted in 116 outpatients in Latvia showed that the antipsychotic significantly improved the negative symptom domain of schizophrenia based on clinical judgment.

The majority of doctors were highly satisfied with both the effectiveness and tolerability profile of the drug, Richter Gedeon told prnewswire.com.

Zsuzsa Beke, head of public relations and public affairs at Richter Gedeon.