Other major Fund activity included the full sale of Chemical Works of Gedeon Richter (BUD:RICHTER), a Hungary-based manufacturer of both branded and generic pharmaceutical products. In recent years, the company has been transitioning its business model to become more of a “specialty pharma” with a stronger emphasis on branded drugs, an area that requires more research & development (R&D) effort but historically has been more profitable.
We began purchasing Gedeon Richter during the first half of 2014. At the time, geopolitical concerns in Russia, Ukraine and other member countries of the Commonwealth of Independent States (CIS), which collectively accounted for over 40% of Gedeon Richter’s revenue, appeared to be overly discounted for in the company’s share price. We took comfort in Gedeon Richter’s long history of local operations in the region, including local manufacturing in Russia, which should support its foothold there. Moreover, we believed the market underappreciated the prospects offered by Gedeon Richter’s women’s health division, its diversified exposure to regions with positive secular growth potential, as well as its R&D optionality. Continue Reading »