Women’s Health Tailwinds And CNS Pipeline Will Drive Long-Term Earnings Power

Catalysts

About Gedeon Richter

Gedeon Richter is a Hungary based pharmaceutical company focused on innovative women’s health, central nervous system therapies and selected biosimilars, alongside a resilient general medicines portfolio.

What are the underlying business or industry changes driving this perspective?

• Rapid adoption of novel women’s health products such as Drovelis, Ryeqo and Lenzetto in Western Europe, North America and Asia Pacific positions the portfolio to outgrow the market, supporting sustained mid to high single digit revenue growth and operating leverage in clean EBIT.
• Structural underinvestment in women’s health globally is reversing as clinicians and payers focus more on menopause, uterine fibroids and endometriosis. This should expand addressable markets for Richter’s differentiated therapies and lift long term margin rich specialty sales.
• Normalization of temporary headwinds in GenMed and CDMO, including Mydeton supply constraints, wholesaler destocking and German ramp up issues, is expected to restore volumes from Q4 and into 2026. This should improve capacity utilization, gross margin and free cash flow conversion.
• Completion of the heavy biotech R&D investment cycle, with four biosimilar products and three molecules reaching commercialization, reduces R&D intensity while shifting cash toward commercialization. This should support higher net margins and dividend growth.
• Progress of the CNS pipeline with AbbVie, particularly the potential transition of RGH ABBV 932 into Phase III for bipolar depression, creates a medium term earnings option on new royalty and milestone streams that could enhance earnings per share beyond the current base business.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Gedeon Richter's revenue will grow by 7.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 25.2% today to 29.0% in 3 years time.
• Analysts expect earnings to reach HUF 328.4 billion (and earnings per share of HUF 1793.77) by about December 2028, up from HUF 227.3 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as HUF279.5 billion.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 9.4x on those 2028 earnings, up from 7.8x today. This future PE is greater than the current PE for the GB Pharmaceuticals industry at 9.1x.
• Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.88%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent operational disruptions in GenMed and CDMO, such as recurring technical issues at the German biotech site and repeated supply chain stockouts for key products like Mydeton, could indicate structural rather than temporary problems. This could limit the recovery of volume, suppress revenue and constrain clean EBIT growth.
• Adverse foreign exchange dynamics, including a structurally stronger Hungarian forint against key trading currencies and recurring FX losses similar to the HUF 24.7 billion swing referenced this year, could continue to erode net profit even if underlying operational performance and revenue improve.
• Intensifying competition and weaker than expected launches in the affordable GenMed segment, especially in blood and metabolic therapies where local generics have already outperformed Richter in markets such as Russia, Romania and Poland, could cap long term pricing power and lead to structurally lower gross margins and earnings.
• Regulatory and macro uncertainty in key CDMO markets, including tighter U.S. capital availability and shifting client contracts, may dampen long term demand for outsourced development and manufacturing services. This could limit CDMO scale benefits and result in lower revenue growth and a weaker contribution to net margins.
• Execution risk in R&D and partnership driven growth, including potential delays in CNS projects with AbbVie, uncertainty around pediatric patent extensions for Vraylar and tighter internal R&D budget caps at no more than 13% of sales, could reduce the upside from new high margin products and royalties, leading to earnings falling short of expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of HUF11949.38 for Gedeon Richter based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HUF13750.0, and the most bearish reporting a price target of just HUF9435.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be HUF1132.6 billion, earnings will come to HUF328.4 billion, and it would be trading on a PE ratio of 9.4x, assuming you use a discount rate of 11.9%.
  
• Given the current share price of HUF9710.0, the analyst price target of HUF11949.38 is 18.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.