UPDATE 2-Zentiva 2006 profit jumps, makes Turkey buy

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By Marek Petrus

PRAGUE, March 5 (Reuters) - Czech drug maker Zentiva posted a slightly bigger-than-forecast 17.3 percent rise in 2006 net profits on Monday and said it was buying a Turkish generic drug producer in its largest acquisition ever.

Zentiva also said it acquired a 75 percent stake in Turkish Eczacibasi Generic Pharmaceuticals from EIS Eczacibasi Ilac Sanayi for 460 million euros in cash as part of its drive to expand across eastern Europe.

Shares in Zentiva rose 2 percent to 1,241 crowns by 0930 GMT, the only gainer on the Prague blue-chip index and outperforming a 1.5 percent fall in the DJ Stoxx European health sector index amid a global stock market sell-off.

"The price does not appear out of line," said Bram Buring, analyst at Wood & Company. "The stock is down because the whole market is down, but it's already outperforming the rest of its peers."

He said the purchase price valued Eczacibasi at 3.1 times sales, compared with about 3.5 times on Zentiva, based on its current market valuation.

The takeover of the third largest generics company in Turkey boosts Zentiva's overall sales by two-fifths based on 2006 data.

Zentiva, one of central Europe's biggest pharmaceutical firms and 25-percent owned by France's Sanofi-Aventis , reported net profit of 2.20 billion crowns ($102.9 million), above an average forecast of 2.15 billion in a Reuters poll.

Sales jumped 18.3 percent to 14.00 billion crowns, a touch below the consensus forecast of 14.04 billion crowns. Sales growth reflected in part a boost from the acquisition of Romanian drug maker Sicomed in late 2005.

Zentiva said it took a five-year loan to fund the purchase of Eczacibasi, which it expects immediately to boost cash profits and increase earnings growth.

The Czech company will have the right of first refusal on the 25 percent stake that the Eczacibasi Ilac retained.

"The acquisition ... provides us with an even stronger platform for organic growth from which to pursue further acquisition opportunities," Zentiva Chairman and Chief Executive Jiri Michal was quoted as saying in the company's statement.

Zentiva forecast sales growth of "slightly more than 10 percent" for 2007. "This organic sales and net profits growth will be enhanced by the acquisition of Eczacibasi," it said.

Zentiva, whose dividend policy is to pay out between 15 and 20 percent of net income, said it would make a dividend announcement on Apr. 27.