UPDATE 2-Zentiva first-half forecast falls short, shares drop

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By Marek Petrus

PRAGUE, July 27 (Reuters) - Czech generic drugmaker Zentiva forecast weaker-than-expected first-half results on Friday, sending its shares down as much as 12.6 percent to a near five-month low.

Zentiva, one of the largest pharmaceutical firms in central Europe, said its results would be hit by price erosion at home, investments in its sales network and one-off costs in Romania .

The company, 25-percent owned by France's Sanofi-Aventis , forecast first-half net income of about 800 million crowns ($39.1 million), operating profit of around 1.1 billion and net sales of around 6.8 billion.

It had previously forecast a "slightly more than 10 percent" sales growth for this year, suggesting full-year sales of at least 15.4 billion crowns after last year's 14 billion.

"The preliminary results are worse than expected by us in all items," said analysts at broking house Atlantik FT.

Zentiva shares fell as low as 1,240 crowns and were down 11.9 percent at 1,250 crowns by 0915 GMT, by far the biggest losers on the falling Prague stock market whose blue chip PX index shed 1.8 percent to probe three-month lows.

MSCI's East European index <.MIME00000PUS> fell 0.8 percent amid a global equity sell-off.

Zentiva will release first-half results on Aug. 6, when it also plans to give an update on the outlook for the full year.

"The lower-than-anticipated operating performance is due to the higher than expected price erosion in Zentiva's home market, continued investment in its sales and marketing organisation ... and one-off costs in Romania," the company said in a statement.

It said the one-off costs stemmed from a provision against receivables and an inventory write-off and amounted to some 200 million crowns.

Analysts were looking for a sharp cut in full-year earnings forecasts.

"Without the Romanian write-offs, (second-quarter) earnings would have been about 8 percent less than expected," said Bram Buring, analyst at investment boutique Wood & Company in Prague.

"We expect 2007 earnings to fall short of our target of 2.5 billion crowns by around 20 percent to 2.0 billion crowns." ($1=20.48 Czech Crown)

Keywords: ZENTIVA RESULTS/