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Pharmaceutical company Richter Gedeon Nyrt., A decision-based but completely global Hungarian sales company listed on the Budapest Stock Exchange, performed excellently in the first quarter of 2020. We also report the specific numbers here.
This article is not about the exact economic results, but about whether the coronavirus can create a new situation, new opportunities in the traditionally strong domestic pharmaceutical industry.
The first effects are positive.
According to Richter executives, the pharmaceutical company also had immediate effects on the short-term effects of the virus. At first, perhaps to see more positive consequences for a pharmaceutical manufacturer, as this is traditionally a crisis-proof industry whose products are also needed during a pandemic. For some products even better.
Furthermore, the numbers are scrapped by the careful “bagging” and storage of patients who are set to stay home for the next few months.
Furthermore, Richter has a lot of internal costs at HUF, but also a lot of export earnings from abroad, so the guilder exchange rate, which decreased after the epidemic, was especially important to him, which greatly improved his financial figures.
It also means confusion.
Perhaps we think less that there are also many difficulties in the pharmaceutical industry during an epidemic. Production, productivity inevitably stalls when there are disruptions in supply chains, or when employees need to be better segregated, precautions must be taken. Certain processes can also be halted, prolonged, and the company has now missed certain research-related audits or clinical trials.
On the demand side, a negative change in the income situation of regular customers (rising unemployment) is not good for nothing that costs money.
Although there is no doubt that people are less likely to stop buying their usual medicines than on their next vacation abroad.
It has to be sold differently
Like Gábor Orbán, CEO of Richter Gedeon Nyrt.
- There are no doctor-patient encounters, which is not vital, there are delays, studies are lost, doctors simply do not prescribe medications.
- Doctors also do not accept medical visits, this direct product information is removed from the usual system.
- Partner meetings and company promotional events are also lost. This may backfire later.
Long-term opportunities
Let’s leave Hungarian Richter for a moment and see how the industry situation can develop globally!
Investment specialist Ákos Kassai, according to the expert from DeltaLaboratories Inc. in California, can be simplified a lot, there can be four categories of industries depending on the situation caused by the virus.
- Some may be on their heads, even unable to avoid short-term collapse and medium-term disruption to their industry (aviation, international tourism, and related service businesses).
- Most industries are those that suffer severe short-term losses, but have the opportunity to return to near previous levels of production with adequate work and a high degree of adaptation. Businesses in such industries will also be affected by the crisis in the medium term, at most due to the general decline in demand as a result of the macroeconomic slowdown (such as the automotive industry). Bailouts of economic policies in these sectors can be really effective and efficient.
- Some people, even with a proper interpretation of the situation, have the potential for growth (European food industry, global health and pharmaceutical industry),
- Finally, there are those who are specifically the winners of the crisis with their existing services (Internet-based turnkey solutions, digital learning, online commerce).
The hopes of the pharmaceutical industry.
Therefore, the pharmaceutical industry is in the third favorable category. If the basis of the new global and social economic situation is that people get sick and, in addition, everyone who is healthy is also afraid of getting sick, then the industry that protects against them cannot go wrong.
The question is who is the direct winner. The one that adapts better and faster to the new environment. The key elements of adaptation are the development of the relevant product portfolio and the development of new types of sales processes.
Now, presumably first, there will be no cost competition between manufacturers, but relevance and flexibility will be the key factors. “
– Create our expert.
Each pharmaceutical company has a different product portfolio. In the short term, the main winners are those who can also identify with the disease and prevention, that is, they can say that they can help me avoid getting sick on an individual level: immune boosters, robbers, symptomatic treatment (antipyretics). These products can significantly increase income even if the specific disease itself is not directly cured.
Richter and Covid-19
Richter’s product portfolio, for example, is not directly related to virus treatment and prevention, but now the Hungarian factory is also involved in 4-5 issues with international pharmaceutical companies, typically based on consortia, sometimes between states.
An American company called Inovio, for example, is developing various types of vaccines with DNA-based drugs. There are several directions of research on the virus, the American company is looking for a genetic direction in which the production of antibodies in the human body can start, which is ahead of the other main direction, namely the administration of the attenuated virus . Richter is also involved in so-called small molecule and biotechnology research.
But how are we going to buy drugs from patients or sell them to pharmaceutical companies in the future? There is a wide range of OTC and prescription products available in the global pharmaceutical market. Richter executives said it was better to see consumers “rush to pharmacies” and refuel with over-the-counter products, but in fact, it’s also feasible for prescription products that a patient tries to prescribe a product during months before an impending epidemic. Of course, storage has the speed that in the last few months the patient will be up to the supplies and will not buy new drugs.
We will not have more stocks
In the pharmaceutical industry, for example, there is unlikely to be an effect on the durable food market that our stocks of flour, pasta and rice are constantly increasing, with a global change from 0-1 kg to 5-7 kg, which is A represents a large additional demand that will not necessarily fall from purchases in the coming months.
As Richter actually sells worldwide, it’s clear from his numbers where, when, the toughest action was taken. In the ECO region, bagging was already down in the numbers for the first quarter (second half of March), while in some Western European countries and the United States it will be more likely to drop in the second quarter (early April) .
Online medical visit
All digital channels will inevitably be more valuable in both drug use and drug sales. Also in Hungary, an entire country is learning what it is like to prescribe my medicine to the cloud, that is, how to get the usual medicines without visiting your doctor, but other countries have more experience in this.
In the United States, once a medication is prescribed for continuous use, you can practically subscribe at the pharmacy, and then monthly doses are taken out every month, just to indicate if there’s a change. At home, it is more common for patients to prescribe prescriptions every month or two.
Online solutions can also gain ground on doctor visits. As Erik Bogsch, president of Gedeon Richter says, the company has also tried to visit the doctor online, video chat, and the effectiveness of this will have to be examined more closely. Experiences so far:
- If such technology is developed, it may be useful, for example, in the future to be able to send messages to sparsely populated or uncovered areas that have not been visited by medical visitors.
- It may be more appropriate to communicate about an introduced product than to present a new product where personal presentation does not yet seem essential.
- There are also regional differences, to put it simply, doctors in Europe are more receptive to online channels in the north and less so in the south.
- And the future attitude of doctors is also questionable. Now, some areas of medical care are dangerously overwhelmed, while doctors in other branches are also at home. In the latter case, the doctors received the video messages well, but the question is, when they are busier because they work normally, what will they say to such consultations.
East closure policy
In the long run, the biggest problem for the pharmaceutical industry is probably China. In the light of current experience, can globalization be replaced by relocation, that is, what will happen to China and its suppliers, which are key in the pharmaceutical industry?
After recognizing the vulnerability. Will Europe or the United States allow themselves to stand in line again, laugh? Or will European states be able to move to national or European value chains instead of globally fragmented value chains? “
Internal economic policy can recognize an opportunity in this process. If it is accepted at European political level that security of supply in the pharmaceutical industry is a common European problem, countries with skilled labor and industrial traditions that produce at less than the European average cost can benefit by relocating production capacity . – says Ákos Kassai
It is not an individual matter
Of course, a smaller global player is always competing with other manufacturers, hardly anyone can afford to bear a higher level of costs individually than others, at their own cost, it may be a national or continental decision.
But if it starts, Hungary may have a chance to relocate, even the Hungarian vaccine factory may be a good address. A hotel doorman who suddenly lost his job is unlikely to become a pharmacist or chemist right away.
However, at the macroeconomic level, it may be worth paying attention to the pharmaceutical industry by representing European political interests, supporting industry investment, fostering the development of new manufacturing and development capabilities, and preserving jobs. Here is an opportunity to make up for lost jobs now in other sectors. In the coming weeks and months, however, no one will rewrite their supply sources yet. I mean, probably
- in the short term everything will stay the same
- relocation may come in the medium term,
- And in the long run, if we recover from the coronavirus and there are no new Eastern pandemics on a regular basis, we can forget the current turmoil in a decade or two and return to globalization now doomed.
(Cover image: queue in front of a pharmacy in Budapest on March 17, 2020. Photo: János Bődey / Index)
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