Hungary's Richter swings to fourth-quarter profit as costs fall

BUDAPEST, Feb 9 (Reuters) - Hungarian drug maker Richter swung to a profit in the fourth quarter that beat market forecasts as costs fell, offsetting a smaller-than-expected drop in revenues from a year ago.

Net profit for the last three months of 2015 came in at 9.7 billion forints ($34.94 million) after a loss of 3.9 billion in the same period a year earlier. This exceeded analyst forecasts for 8.3 billion in a survey by financial news website

Richter, which makes gynaecological, cardiovascular and central nervous system drugs, said revenues fell 1.6 percent to 88.7 billion forints, hit by a decline in sales in crisis-torn Ukraine, and a drop in the exchange rate in its main market, Russia.

“By the end of 2015 a significant year-on-year devaluation in the average exchange rate of the Rouble against the Euro (31.5 percent) had occurred in Russia, which could not be entirely offset by increasing Rouble denominated turnover,” it said.

Even so, quarterly revenues exceeded analyst projections for 86.9 billion, driven by higher sales in western Europe, Romania and China, where Richter is working to diversify its footprint to mitigate the damage to its core eastern markets.

Operating profit rose by 34.4 percent from a year ago to 15 billion forints, above market expectations, as research and development (R&D) expenses nearly halved in the last three months to 5.9 billion forints.

Richter however said the brunt of the decline in R&D expenses was due to deferred costs of developing a major new anti-psychotic product.

“R&D costs decreased significantly in the second half 2015 primarily due to the fact that the initiation of additional clinical trials of cariprazine has been postponed to 2016,” it said.

Sales and marketing expenses inched 0.9 percent higher to 22.1 billion forints.

Richter’s losses on financial items narrowed to 3.3 billion forints in the fourth quarter from 15.6 billion in the same period a year ago, when a reassessment of foreign currency related assets and liabilities triggered a substantial loss.

Shares in Richter, which has a market capitalisation of $3.5 billion, gained 4.6 percent over the past three months according to Thomson Reuters data, outperforming the blue chip index, which rose 3.5 percent over that period. ($1 = 277.6 forints) (Reporting by Gergely Szakacs; Editing by Diane Craft)