Gedeon Richter’s full-year results have confirmed its growing sales, driven by key blockbuster cariprazine, marketed as Vraylar, whose royalties have ensured robust recurring cash flow since 2020. EVRA and Bemfola (women’s healthcare) also significantly contributed to revenues and profits. While Gedeon Richter has a sizeable exposure to Russia (around 17% of the pharma revenues and 13% of overall revenues), the market’s profitability contribution is limited. However, a loss of profits cannot be ruled out. In any case, management predicts that revenue growth from cariprazine in 2022 can compensate for any losses incurred in Russia and Ukraine.Scope anticipates that the main negative impacts from the Russia-Ukraine war will come from:

• Difficulties in rouble conversion and a potential depreciation of Gedeon Richter’s local currency, the Hungarian forint;
   
• The exclusion of several Russian banks from the SWIFT international banking transfer system; and
   
• The possible nationalisation of Gedeon Richter's plant in Russia, which could result in a one-off shock, though losses would be limited if the company can retain the product licence.

While the company reduced its sales guidance for 2022 due to uncertainties regarding the Russian business and the potential for a slight reduction in profitability, Scope’s rating case is not impacted given Gedeon Richter's strong AA financial risk profile, driven by low leverage and high liquidity buffer. Scope also highlights that Gedeon Richter is yet to make full use of the HUF 70bn in proceeds from the bond issued in 2021 under the Hungarian Central Bank’s Bond Funding for Growth Scheme.

This publication does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. For the official credit rating action release click here. On 26 May 2021, Scope assigned a first-time issuer rating of BBB+/Stable to Gedeon Richter.