Richter CEO Stops Stock Rout Saying Drugmaker in Sound Shape

(Bloomberg) -- Gedeon Richter Nyrt., eastern Europe’s biggest pharmaceutical company that’s battled investor concerns this year over one of its flagship drugs, surged after four days of losses as Chief Executive Officer Gabor Orban said the firm’s fundamentals remained sound.

"Richter’s cash-generating ability is unchanged from last year," Orban, who’s unrelated to Hungary’s prime minister and who took over the reins of the company last year, said in comments communicated by spokeswoman Zsuzsa Beke to Bloomberg by phone on Thursday. "Concerns over the company’s fundamentals are unfounded."

The comments helped erase earlier losses and lifted Richter shares as much as 5 percent, the most since March. Before Orban’s intervention, the stock had plunged more than 8 percent in five trading days, puzzling investors who had said that negative fallout from a European drug-safety probe of Esmya, which treats symptoms of benign tumors in the womb, had been priced into the share. Allergan Plc holds the marketing rights for Esmya in the U.S. and Canada.

“The CEO’s comments confirmed our positive expectations about the company and improved sentiment,” said Gyorgy Palfi, who helps manage 120 billion forint ($427 million) in central European equity investments at Aegon Hungary Fund Management in Budapest.

Richter’s share price plunged by almost a third since Dec. 1, when the European Union launched its Esmya probe following reports of serious liver initial injuries. The European Medicines Agency on June 1 recommended imposing restrictions on the sale of the drug while lifting its suspension on its use by new patients.

The European Commission, the EU’s executive arm, is scheduled to publish its binding decision on Esmya in August, which is also when the Food and Drug Administration is expected to decide on whether to allow it for sale in the U.S.

Richter, a generic drugmaker that’s turning itself into a specialist pharma company with a focus on women’s healthcare, generated a profit of 166 million euros ($193 million) last year, down 22 percent from 2016.

Richter has seven buys, three holds and zero sell recommendations by analysts, according to Bloomberg data, with an average target price of 6,284 forint. That implies a potential return of about 31 percent compared with the current price level.

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