Parliament has approved yesterday a 12% flat tax on drug subsidies, an annual HUF 5m/ sales representative tax and that the financing of drug subsidy budget gap will be based upon the drugmakers’ subsidy usage.
Our view:
We see it as a positive surprise, that the final decision diluted the original intention of the government. We could see positive market reaction in the Hungarian pharmaceutical companies today. We see that the flat 12% tax on drug subsidies is more beneficial than the average tax rate calculated from the earlier approved 14-16% and bracket version of 11%-17-19% systems. Moreover, we see it a huge positive step forward, that drugmakers’ contribution to the drug subsidy budget gap will be based on the subsidy usage when compared to a market share based split, as generic companies usually assume less subsidies for their sales than
originals.
On the back of these changes we could revise our net profit estimate for Richter upwards by HUF 1.9bn (from HUF 42.9bn to HUF 44.9 bn) for 2007 and by HUF 1.2bn (from HUF 51.2bn to HUF 52.4 bn) for 2008. We could also revise our net profit estimate for Egis upwards by HUF 0.9bn (from HUF 15.2bn to HUF 16.0 bn) for 2007/06 and by HUF 0.5bn (from HUF 19.8bn to HUF 20.3 bn) for 2008/07.