The Hospodarske noviny daily reported, with reference to Zentiva’s Head of trading strategy, that the company is interested in buying Romania’s drug producer, Terapia. Zentiva did not release any further details regarding the potential acquisition. Terapia is a generic drug producer with sales of 1bn CZK compared with Zentiva’s 2004 sales of 10.7 CZK. Zentiva is mainly interested Terapia’s distribution network rather than drug production. Zentiva’s potential acquisition in Romania would confirm our previous expectations that the company is now increasing its focus on the Balkans and in particular Romania. Should the acquisition be completed we would take the news as positive given Zentiva’s unleveraged balance sheet (D/E of 0.06 in 1q2005) and its ability to generate strong free cash flows. Nevertheless, we would be able to evaluate the full impact based on the price and valuation of Terapia.