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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BBB+/Stable issuer rating of Richter Gedeon Nyrt. (Richter). Scope has also affirmed the BBB+ senior unsecured debt rating.

The affirmation follows Richter’s updated mid-to-long term strategy¹: the group intends to grow at above-market rates supported by increasing Cariprazine royalty income and by sizable research and development investments in Women’s Healthcare, Biotechnology and Neuropsychiatry. Scope assumes that Richter’s M&A strategy will be limited to smaller bolt-on acquisitions and that the group will therefore maintain a very strong financial risk profile with a net cash position. Scope also believes that Richter’s credit neutral financial policy will ensure that discretionary spending does not jeopardise its financial risk profile.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB- (unchanged). Richter’s business risk profile benefits from the favourable market characteristics of the pharmaceutical industry in which it operates and the group’s strong operating profitability. The assessment is hindered by Richter’s moderate market share as a medium-sized pharmaceutical group and moderate diversification due to the high revenue concentration from single blockbuster product (Vraylar, the brand name of Cariprazine in the US).

Richter continues to strengthen its exposure to specialty pharmaceuticals, especially towards Neuropsychiatry (CNS) due to the increasing sale of Vraylar in the US, marketed by its partner, AbbVie. Net sales of Vraylar exceeded USD 3.2bn in 2024, a 18% increase YoY, which formed the basis of the higher royalty payments received by Richter. In 2024, the royalties equated to HUF 229bn, an increase of 18% YoY and contributing to 27% of Richter pharmaceutical sales. Women’s healthcare (WHC) remains the most significant contributor to the pharmaceutical business, with HUF 286bn sales in 2024, representing over one-third of sales. The sales of the oral contraceptive franchise continue to ramp up (HUF 144bn in 2024 compared to HUF 137bn in 2023) driven by Drovelis in addition to direct sales from recent launches.

In 2024 Richter expanded its WHC business line with (1) the acquisition of certain Mithra assets (previously customer of Estetrol for its Drovelis and Donesta drugs), and (2) the acquisition of BCI Pharma, a biotech company which conducts research in specialty women’s health treatment areas.

Revenue and gross profit targets remain ambitious, aiming for above-market, double digit growth. Sizeable budget is set aside annually for new product launches as Richter continues to make R&D investments in biotechnology (BIO), WHC and CNS projects, where it is reaching significant pre-clinical and clinical milestones. It is important to note that the exposure to CNS and WHC – both representing large addressable markets – are expected to support future sales growth.

Richter has also reaffirmed its intention in its 2035 strategy to strengthen its biosimilars portfolio through launches after the patent expiry of the originator products. The group’s main focus is on osteoporosis, rheumatology and auto-immune diseases. The transactions completed in 2024 (Richter becoming a strategic investor in Formycon AG and the acquisition of HELM AG’s stakes in Richter-Helm BioLogics and RHT Richter-Helm BioTec) allow Richter to expand its capacities in BIO and contribute to the segment becoming sustainably profitable in the medium term.

In terms of product concentration, dependence on Cariprazine continues to be significant as its sales grow. This includes the growing royalties from Vraylar, which is set to be a mega blockbuster, with a 2025 sales guidance of USD 3.5bn and a potential peak approaching USD 5bn over the medium term. On the positive side, the 29% exposure to the US (likely to further increase due to Vraylar) supports the group’s geographic diversification.

Russia remains Richter’s second largest market accounting for 14% of sales in 2024. Business in Russia continues to be negatively impacted by supply chain disruptions and currency volatility resulting from the Russian-Ukrainian war.

Richter’s operating profitability is very strong for a medium-sized pharmaceutical company. Profitability is supported by the high-margin speciality business and recurring royalties from AbbVie for the use of Vraylar. Assuming that the generic pharma’s operating margin is below that for innovative, the underlying EBITDA margin for innovative is greater than 40%. Scope expects the group’s Scope-adjusted EBITDA margin* to gradually increase to around 35% by 2027 as the BIO segment turns profitable in the medium term.

Financial risk profile: AA (unchanged). Richter's very strong financial risk profile continues to underpin its issuer rating. Strong cash generation partly driven by increasing Vraylar royalty income and the improved group-level profitability has resulted in net cash position in 2024, which is expected to persist throughout the forecast period (to 2027). Scope maintains its conservative assessment of Richter’s financial risk profile as the timing and conditions of future acquisitions are uncertain and depending on the target, the net cash position may not be maintained on a sustained basis. Execution risk associated with M&A activity could also negatively impact Richter’s credit metrics.

Scope’s base case does not assume any major acquisitions, rather smaller bolt-on acquisitions.

Liquidity: adequate (unchanged). Richter’s liquidity profile remains solid as signalled by its projected robust liquidity ratios consistently well above 200%. The group has no significant debt repayments scheduled until 2028, when the bond begins to amortise.

Supplementary rating drivers: credit-neutral (unchanged). The rating has no adjustments related to financial policy, peer group considerations, parent support, or governance and structure.

Scope has assessed Richter’s financial policy as credit neutral. Although Richter has an attractive shareholder remuneration policy and an appetite for M&A, it appears unwilling to take on the risks associated with large-scale acquisitions. Management aims to acquire mature assets that complement its portfolio and to establish a sustainable business model beyond Vraylar’s anticipated loss of exclusivity in 2029.

Outlook and rating sensitivities

The Stable Outlook reflects Richter’s ability to grow while maintaining a very strong financial risk profile as evidenced by its net cash position. This assumption is contingent upon the group's continued utilisation of its substantial cash reserves for smaller acquisitions, rather than larger ones.

The upside scenario for the ratings and Outlook is:

1. Significant improvement in the company's business risk profile, e.g. through increased exposure to innovative pharmaceuticals (remote).

The downside scenarios for the ratings and Outlook are (individually):

1. Lack of visibility regarding the replacement of Cariprazine sales, i.e. by increasing the number of phase 3 molecules (NMEs) in the issuer's pipeline by 2026;
    
2. Debt/EBITDA increasing to above 1.5x.

Debt rating

In June 2021, Richter issued a HUF 70bn senior unsecured bond (ISIN: HU0000360441) through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds were used for general corporate financing. The bond has a tenor of 10 years and a fixed coupon of 1.75%. Bond repayment is in four tranches: 10% in 2028, 2029 and 2030 with 25% of the face and a 70% balloon payment at maturity in 2031. Bond covenants include non-payment, insolvency proceedings and claim disputes.

Scope has affirmed the rating for Richter’s senior unsecured debt at BBB+, in line with the rating action on the underlying issuer rating.

Environmental, social and governance (ESG) factors

The main ESG-factors inherent to the pharmaceutical industry are the high regulatory and reputational risk. At the same time pharmaceutical companies provide products that contribute to human health and well-being.

All rating actions and rated entities

Richter Gedeon Nyrt.

Issuer rating: BBB+/Stable, affirmation

Senior unsecured debt rating: BBB+, affirmation

*All credit metrics refer to Scope-adjusted figures.

Rating driver references
1. 5 March 2025 Richter Capital Market Day

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Pharmaceutical Companies’ Rating Methodology, 5 April 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Vivianne Anna Kápolnai, Senior Analyst
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 26 May 2021. The Credit Ratings/Outlook were last updated on 23 April 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
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