UPDATE 3-Zentiva H1 forecast falls short, shares lose 16 pct

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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 16.3 percent in the worst slide in its three years as a publicly traded company.

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

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 expected adjusted results are worse mainly on the operating level, where the shortfall is expected to total some 500 million crowns," said analyst Vladimira Urbankova at Erste Bank, which has rated Zentiva as a "buy" at a 1,760 price target .

"We would rather wait for the actual results before we include these figures in our model, but in any case we expect to cut our valuation. Based on current information, we estimate the cut to be 5 to 10 percent," she added.

Zentiva shares closed at a near five-month low of 1,188 crowns, becoming by far the biggest losers on the falling Prague stock market, whose blue chip PX index shed 2.4 percent in the second-biggest decline this year.

MSCI's East European index <.MIME00000PUS> fell 1.2 percent as investors sold off riskier assets across emerging markets.

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

Analysts were looking for a sharp cut in earnings forecasts.

Zentiva incurred one-off costs worth some 200 million crowns in Romania due to a provision against receivables and an inventory write-off.

"Without the Romanian write-offs, (second-quarter) earnings would have been about 8 percent less than expected," said Bram Buring, an 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/