Gedeon Richter Ltd S/Gdr

Q3 2025 Earnings Conference Call. My name is Robert Reti. I'm Head of Investor Relations and ESG. As you probably noticed, there is a slight change in the lineup for today's call. The reason is very simple. Our CEO, Gabor Orban, is not able to participate in today's call because he's on route to Washington, D.C. He's part of the team. of our Prime Minister who is heading to DC to meet President Trump tomorrow and this probably doesn't come as a surprise given the very important role that Richter is playing in the business relations between Hungary and the United States especially when it comes to high value at R&D driven activities and trade relations of course on the other hand this created a bit of a Necessity for us to reset our plan for today. So instead of Gabor, today we have with us Tomas Sojak for the first time in this conference. He is the Chief Commercial Officer and of course Vlasov Kovacs, the Chief Financial Officer. And I'm highly confident that the quality of this discussion will not suffer from the absence of Gabor. Before we start the discussion, the usual technical details I'd like to go through. We will be doing a formal presentation using the slides that we published this morning and the Excel data sheets. After the presentation, there will be a Q&A session, and as usual, you will be able to ask your questions either using the raise your hand functionality of Microsoft Teams or putting your questions into the chat box. Two more things, this call is recorded and also I would like to draw your attention to the cautionary statement at the end of the presentation about the forward-looking statements which this presentation and this discussion may include. With that, I hand it over to Laszlo, who will discuss the financial results and then Tamás will go through the revenue, the top line developments.

Thank you very much, Robi. Good morning to everyone. We will be stepping in for our CEO, Gábor Orbán, for today. and we'll do our best to provide you with his perspective and to ensure that we cover all the important points. I think in this quarter it's particularly important to look a bit behind in numbers because what you see in Q1 to Q3 there's a temporary slowing dynamics in the third quarter. And overall I can say that the quarter was mixed. The strong growth across the innovative businesses including women's healthcare and CNS continued however it was contrasted by multiple headlines in the affordable segment both from biotech CDMO and genmed were impacted by internal and external challenges let me start with CDMO where the performance was constrained by the US market regulatory uncertainty limiting the inflow of new deals while technology related issues in our German side caused some further pressure during the ramp-up period On the other hand, GEMMAD faced a series of hits. First of all, there was supply chain, stock out problems affecting one key product. Then we noticed wholesaler destocking across several markets and we had an extremely high base back in Q3 2024. This mixed effect at the top line was partially compensated as we applied very strong operating cost controls, limiting the impact of the weaker top line on our profitability. So rather than being one of cost cutting measures, this is rather a reflection of the benefits of our longstanding corporate efficiency programs that we run in this company. Now, if we take a look on the color scheme of this slide, you may notice it's pretty similar what we saw in age one. However, the indicators remain the same, but the numbers are more moderate. They're close to 7% growth in nominal terms, including pharma sales, clean and EBIT figures. The ethics adjusted figures are a bit even lower, but the difference between the ethics adjustment and nominal values are getting closer. Both bottom line indicators show slight decline, driven entirely by adverse ethics dynamics and taxes. The swing between last year's ethics gains and this year's losses is close to 30 billion Hungarian Forints. Free cash flow, however, clearly stands out here. We managed to follow our capex controls. and networking capital was favorable during this quarter, so we are able to report an all-time high 200 billion Hungarian Forints here. So what does this picture mean for the rest of the year and further ahead? First of all, we strongly believe that the Q3 revenue shortfall is temporary in nature, but we may not fully return to our previous baseline and growth in Q4 yet. As a result, now we see that our full year revenue on constant exchange rate will be approaching 2.3 billion euros, which is around the lower end of the range we have previously given to you. On the other hand, we continue to expect profitability to visibly improve in 2024. Now we will use all of our tools at our disposal to make sure that we can expect constant exchange rate clean habit growth in the region of 8 to 10%. And given the very strong cash flow generation, we also expect to be in a position to continue to further increase our regular dividends fully in line what we shared with you in our capital allocation framework back in March. Now, I'm handing over to Tomasz to share a few thoughts on the top line. Thank you very much, László.

Good morning, everyone. As you can see from our numbers, our Q3 performance basically hindered a bit of our growth rate right now. We are sitting on a mid-single-digit growth year-to-date. If you look into the regional setup of this growth, we do see that Western Europe, North America and Asia-Pacific has very good results. I'm kind of proud to see that Western Europe is growing fastest right now, around 12.7% year-to-date growth, what we could recognize in that segment, and North America and Asia-Pacific as well, very high single-digit, close to 10%, but still it was a single digit altogether. This segment reflects very well that how well the innovative portfolio is performing. On the other side, in Central Europe and Eastern Europe, we had a much lower growth, what we achieved. We were basically prepared for this slowdown altogether due to the fact that we've seen the impact from last year, a higher base mostly. and as well we have seen some of the trends and activities what we initiated recently. So from that perspective, the slowdown of the growth of the Central European markets were expected. Taking into consideration the exchange rate that has been changed from the first half year, in Q3 we had basically it was mostly due to the weakening dollar and the strengthening Hungarian foreign altogether. Q3, as you see here on the full portfolio, we had a bit of a drop of sales compared to last year, Q3, year-on-year comparison. And I think it is good to look into the details. Thank you, Roby. So first of all, we would focus on the innovative business part, mostly from Vimeo Healthcare. which is very important to recognize that the quarter-on-quarter growth of the Vimine Healthcare portfolio was 11.7%, so the portfolio growth did not slow down at all. Our key products, again, quarter-on-quarter, Rieco, Drovalis and Lenzetto, all of them achieved growth above 60%, so it is still a very dynamically growing portfolio for us. The growth is mostly driven by Drovalis. This is fantastic. We still see a very big long-term potential in the product. The emergency contraception had a little dip in Q3, mostly due to the fact that we needed to reschedule some of the deliveries to the U.S. and to the Chinese market, which was, on the other side, a positive development that Evra portfolio strengthened. as we could complete our tender deals in Mexico. Fertility business, important therapeutic area is get back and taking back its market position. However, it takes time, it's a bit slower. We have seen some supply chain challenges for Benfula in the LATAM region. Uterine fibroids and endometriosis, this is one of the center in the center of the key women health care topics as we do see right now, or patient centric approach. It is important to see that how we are really improving the access for all innovative therapeutic options for women in this territory, which in the past did not have good solution. Rieco is flying on it, performs excellently, and it's providing an efficient and safety option for our patients. Manopause portfolio growth is mostly driven by a strong patient demand which is completely understandable because that issue is hindering significantly the quality of life of the women and this is a kind of a trend change what we do see as well in the professional community because they are focusing more and more on this territory. We do see as well more and more investment coming back to this territory in menopause which reflects as well the future potential of the women healthcare portfolio and we have a really robust growth for Lanzetto. Going to the CNS business part, Vrylar 6.7 growth, 934 million USD sales in Q3. Year-to-date growth is double-digit. This we quote from the reports of AbbVie. We would love to focus to our own performance, which might look bad based on the figures you can see. However, we need to know that all markets, which is managed by Richter, still have a double-digit growth. So we are managing this product under all premises. or partnering sales a bit slow down, but this was mostly shipment issues and we are absolutely confident in the performance because we do see that the market performance is not a high single digit, the middle or low single digit growth is provided throughout the years. So we do see that the Q4 numbers in the CNS portfolio will improve. General Medicine, this was the trouble child business unit set up for the Q3 results. Declined, we suffered on quarter by quarter comparison in 17%. As I mentioned to you, we partly were prepared to have a weaker growth of this portfolio. It was mainly made mostly based on the issue that in the last year in September the Hungary we had one of positive impact which increased our basis rather significantly. Together with Laszlo, we are working very heavily to manage the working capital in a better way. It's a high focus right now. With that one, we turn with managing our customers, especially in the traditional markets, with a higher rigor, and it has an impact when and how we can supply them with products. And that caused another negative impact, and we calculated when we looked to the Q3 numbers in order. Dewe saw other elements. Many of the traditional markets have a typical pattern of the quarterly sales. The Q2 is regularly rather high, which is followed by a weaker Q3. In Q3, the wholesalers regularly destocking. This year, this magnitude was much higher than we anticipated. And there were other elements that in September, they were already much better prepared how to handle the usual stockpiling of the wholesalers. We managed it with a much more financial rigor compared to the past years. and it had an impact. One of the most important impact is that the leading product of our affordable portfolio, Midatom, Midecon, Top Horizon, suffered a supply issue and a significant stock-out problem. This was basically high value, especially in September. We've already seen some impact in August, but September was critically hindered by these supply issues. that it will unfortunately hit October as well. We will stabilize the sales through in November. So from that perspective, we expect a gradual recovery from the supply to the markets of Thorpe, Arizona through Q4. Another negative element was the cause of market where legislation change pushed down the market and the wholesalers, they were this stocking. from four-month stock level they went back basically to a three-week stock level. This happened again in the third quarter. All of these impacts arrived to us basically parallel and therefore compared to the expectation we finished the Q3 on a lower level and all of them what we tried to manage resulted a kind of weaker performance. What we could see on the other side that the in-market sales did not suffer that much at all. We were basically throughout the year stable. We suffered an open 2% market share loss in the respective markets in the traditional markets what I do see and mostly it comes this loss from the impact of the Middleton sales. Therefore, we are confident that the base performance of the General Medicines Business Unit is kept on the market, and we do see that gradually we will gain back and build back our position step by step in that portfolio. Business unit revenue, it's again two-part what we have to look for. One is the tera-parotide sales. Altogether, the growth is 6.1%. and teriparatide year-to-date growth is 9.5%. In the quarter in Q3, we were able to grow still in 5.1%, so the terriporatite business altogether goes very well. We have seen some slowdown due to how we are managing the supply. We were deciding to move some of the supply to the partners later into Q4. However, the markets we are managing perform very well with terriporatite. On the other side, the CDMO, especially quarter by quarter, presented a different number, a minus 12% drop. This was basically due to the factors that in the very beginning of the year we had some technical issues. These technical issues actually delayed production for several months. Few batches what we could manufacture in this time compared to what we originally planned. and all of these manufacturing had been shifted backwards to Q4. We are working very hard, we condense production, we are looking for a significant improvement and most of the deliveries which already contracted will be managed through Q4. We have a very clear focus on how the company is performing from that perspective and looking for monitoring, testing and release times. We are aware that there are some macro factors which already have been mentioned by lots of tariff uncertainty tied to capital availability from the US, which clues that some of the project has been postponed, customers looking to adjustments in the contracts. However, we manage it proactively. We already secured some new development service And even more, we have a new European biotech company contracted recently. So we do see that the future is getting back for this portfolio as well. Looking ahead for Q4, we believe that the Q4 results will go back again We aim to achieve around double-digit growth quarter-on-quarter, year-by-year results in Q4. Basically, the above-mentioned factors, as you could have seen, were mostly one of factors and issues what we already handled. Therefore, we will go back to the trajectory where we've been with biotech and the GEMMED, and we are absolutely trust that the women healthcare portfolio growth will fly in the last quarter as well.