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Egis projects 2-4% revenue rise in 2011/2012

Hungarian drugmaker Egis, majority owned by France's Servier, expects a 2-4% revenue rise in its business year starting October 1, CFO Csaba Poroszlai said at a press conference on Wednesday, a day after the company published its Q3 report.

Egis expects a rise in export revenue to offset a 6-8% fall in domestic sales in the 2011/2012 business year, Poroszlai said. Sales in CIS countries are set to rise 10-12%, much like in the current business year, and sales in Eastern Europe are seen increasing 3-5%. Turnover from the sale of finished products and active ingredients on western markets should stay flat.

Egis is standing by its projections for the 2010/2011 business year: a 7-9% revenue rise ,with domestic sales up 5%, sales in CIS countries climbing 12% and a 4% rise in exports to other countries in Eastern Europe.

Egis had consolidated net profit of HUF 2.31 billion in the third quarter of its business year, down 55% from the same period a year earlier because of changes to regulations on deductions of R+D spending, the company said in its Q3 report published late Tuesday. Egis booked HUF 2.5 billion in extra costs during the quarter, because of changes to legislation.

Hungary's parliament approved in June an amendment that eliminates, with retroactive effect, tax preferences for R&D spending by drugmakers for the 2011 calendar year. The amendment also reduces the amount of R&D spending drugmakers may deduct from the sector tax they pay from 100% to 50% for the 2010 calendar year.

Without the unforeseen costs due to the legal changes, Egis said its Q3 profit would have fallen just 19%.

Revenue was up 7% at HUF 32.4 billion.

Poroszlai said on Wednesday that the legal changes would cost the company an annual HUF 5 billion. The rules in force from the start of the next calendar year will raise the amount to HUF 7-8 billion, he added.

Egis achieved growth on all of its markets in both Q3 and in Q1-Q3, Poroszlai said. Costs rose at a slower rate than revenue, he added.

Spending on R&D was up 8% in Q1-Q3, but Egis kept other costs under strict control, he said.