Business 8 May 2020, 2:43pm

Hungary Richter lowers 2020 sales target

Portfolio

Gedeon Richter, Hungary's leading pharmaceutical producer, has published its earnings report for the first quarter of 2020 early on Friday, after which the company's management held a press conference. They project a 3% annual increase in consolidated revenues, down from the estimate of a 5% growth made in February. Richter sees its 2020 gross margin at 56% and the new operating margin forecast is 14.5%, up from 12.5%, previously.

Besides the demand and supply impacts of the coronavirus (COVID-19) pandemic, Richter's CEO Gábor Orbán highlighted that the company has so far managed to avoid disruptions in its operation. He has also drawn up four main trends that could have a medium- and long-term impact no Richter's market environment:

Declining purchasing power and changing attitude in financing, from which Richter expects impacts such as a rising price pressure on generic products, restrictions on or even a temporary suspension of the registration of innovative products. Declining demand at financing out of own pockets. The issue of biosimilars: will these help in respect of permits, registrations and pricing?

A slowdown in clinical trials has a negative impact on development processes. This will lead to an increased role of digital channels in clinical trials.

The changes to supply chains raises the possibility of relocating manufacturing units to Europe, which could potentially affect cost levels, the rate of price erosion and the activities of competitors. The global economy will become even more fragmanted, while there is no downturn in Asia.

The restrictio of personal doctor visits will also increase the role of digital channels and have a major impact on expenses.

Richter's management published the following updated estimates:

The sale of some of Richter's products could decline as a result of diminished demand caused by COVID-19.
Group revenue is to rise 3% year on year in 2020, versus the February estiate of a 5% increase.
Richter forecasts 3% growth in sales to Russia.
20% growth projected on the U.S. market.
Sales to Western Europe are to drop 3%.
Sales of Terrosa are to generate EUR 15 mn revenue adn Reagila sales could reach EUR 12 mn. The Grünenthal portfolio is estimated to bring EUR 40 mn, while the Esmya sales estimates made in February have been scrapped due to its suspension.
Gross margin is seen reaching 56% this year and the operating margin is projected at 14.5%, up from 12.5% previously.

Cover photo: Budapest Stock Exchange