Slovak Parliament agreed on lowering VAT on drugs to 10% from the current 19% as of next year.
Our view: Lower VAT on drugs may stimulate demand for drugs; nevertheless, we believe it is primarily designed to lower the costs of insurance companies. Slovak healthcare system is suffering from the absence of so called class effect in the reimbursement, i.e. distinguishing between original and generic drugs, which are having an adverse impact on sales of generic companies. Slovakia contributes 13% to Zentiva's pharmaceutical sales and therefore a potentially higher demand for drugs may be mildly positive for the stock.