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Citigroup cuts Richter, Egis, Zentiva targets on Russian budget

Citigroup cut its share price targets for eastern European drugmakers Gedeon Richter, Egis and Zentiva after Hungary reduced medical spending and Russia slashed its state-subsidized drug program's budget.

Robert Bonte-Friedheim, who follows eastern European drugmakers at Citigroup, today lowered his price estimate for Richter, the region's biggest pharmaceutical company, 25% to Ft 45,000 ($228.83). Egis's price estimate was cut 15% to 23,000 forint, while Zentiva's price estimate dropped 6% to 1,500 koruna ($69.61).

Russia spent nearly double the amount it budgeted last year for drugs through its state subsidy program, known as the DLO. The concern is that the program now has 30 billion rubles ($1.1 billion) in unpaid receivables from last year, and its budget for 2007 is 35 billion rubles, Bonte-Friedheim said in a report.

Rising drug consumption in Russia had been a major driver of sales growth for all three eastern European companies. Bonte- Friedheim cut his rating on Richter and Zentiva to „hold” from „buy,” while keeping a „sell” rating on Egis. Shares of Richter sank 1,590 forint, or 3.8%, to 40,000 forint at 11:40 a.m. in Budapest. Egis's share price dropped 995 forint, or 3.8%, to 24,995 forint in Budapest. Shares of Zentiva slid 13 koruna, or 1%, to 1,266 koruna in Prague. (Bloomberg)