A decision by the US Food and Drug Administration (FDA) on Thursday approved over-the-counter (OTC) sales of a "morning-after" contraceptive pill sold by Barr Pharmaceuticals, which is expected to boost sales of Hungarian drug maker Richter producing the finished form of the drug. Barr expects its current USD30m market of the contraceptive to double next year on the back of the approval.
Our view: We would see the long pending OTC approval of Plan B as positive for Richter. Richter doesn't provide sales guidance for its Plan B sales within it’s US exports. However, according to our estimate the value of Richter’s finished form drug deliveries could be roughly one third of the total US market of the drug, as Barr’s margin and marketing & distribution costs have to be subtracted. If Richter was to deliver Plan B worth USD 5-10m in 2006 to Barr, we could see Richter’s sales doubling to some USD 15-20m next year on the back of growing US market for the drug. Assuming 25% EBIT margin on the finished form drug for Richter, the additional profit on Richter’s bottom-line could be USD 1-2m, less than 1% of Richter's expected 2007 profit. However, market reaction might be a bit more positive seeing further turnover growth of Plan B beyond 2007.