Hungary's Richter says some US exports face tariff challenges, but flagship drug exempt

Hungarian pharmaceutical company Richter announced that while potential higher U.S. tariffs on drug imports, capped at 15% under an EU-U.S. framework, will impact less than $50 million of its direct exports and could hinder U.S. expansion plans, its flagship antipsychotic drug Vraylar is unaffected due to its U.S. production by AbbVie. CEO Gabor Orban indicated the company might shift some production to U.S. partners to mitigate tariff effects. Richter reported an 11% rise in Q2 pharma revenue and maintained its full-year revenue and adjusted profit growth forecast of around 10%.

Analysis

Hungarian pharmaceutical company Richter faces manageable headwinds from proposed U.S. tariffs on drug imports. While the headline risk involves tariffs potentially rising to 250%, a U.S.-EU framework agreement caps them at 15%, a level CEO Gabor Orban described as painful but not catastrophic. Crucially, Richter's flagship antipsychotic drug, Vraylar, is entirely exempt from these tariffs as it is produced and sold within the U.S. by partner AbbVie (ABBV). The significance of this exemption is underscored by Vraylar's robust performance, with royalty income for Richter growing 18% to $665.6 million in 2024, forming a core part of its revenue. In contrast, the direct impact of the tariffs is limited, affecting less than $50 million of Richter's U.S. exports, though this could still impede future expansion plans in areas like women's healthcare. The company's underlying financial health appears strong, evidenced by an 11% year-on-year growth in Q2 pharmaceutical revenue and the reaffirmation of its full-year forecast for approximately 10% growth in revenue and adjusted EBIT, indicating that management views the tariff impact as contained.

Key Decisions for Investors

• For investors in AbbVie (ABBV), the confirmation that its U.S.-produced Vraylar is shielded from proposed import tariffs removes a key uncertainty and reinforces the stability of a significant revenue-generating asset.
• Monitor the developments in U.S. trade policy, as the 15% tariff cap under the U.S.-EU framework is the key variable mitigating the financial impact on Richter's smaller, directly exported products.
• Richter's decision to maintain its full-year guidance of ~10% growth despite the tariff news signals strong confidence in its core business, suggesting the direct financial impact is likely minimal and already factored into its outlook.