Gedeon Richter Posts Strong Q112 Figures But Outlook Still Austere

BMI View: Hungary's largest drugmaker, Gedeon Richter, has posted strong and above-consensus results for Q112, with profits benefiting from favourable exchange rates and two milestone payments. Despite particularly weak domestic sales, as BMI has consistently highlighted, Gedeon Richter's exposure to Hungary is not a major concern given that it only represents a declining 10.7% of its sales, in contrast to its domestic competitor Egis, which is considerably more exposed to the market. On balance, while the latest quarter's financials are better than expected, they do not fundamentally change the fact that the firm is exposed to an increasingly austere regional market, with the exception of the Commonwealth of Independent States (CIS), and the coming quarters are unlikely to return the same level of profitability when milestone payments are excluded.

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