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  ZENTIVA N.V. FULL YEAR REPORT 2008

ZENTIVA PRODUCES STRONG 2008 0PERATING RESULTS

Larger, better balanced business delivers expected sales

 and efficiency benefits 

EBIT increased nearly 50% to CZK 3,3 billion¹ 

Free cash flow up 45% to 2.1 billion²

Zentiva's 2008 results clearly show that the Company has delivered on its two key targets, top line growth and enhanced operating profitability. 

In 2008 Zentiva's sales increased by 10.2% to CZK 18,377.9 million driven by the Eczacibasi-Zentiva business, which was acquired in Turkey in July 2007. Sales in 2008 would have increased by 20.0% on comparable basis despite the more difficult economic background, particularly in the latter part of the year.

Zentiva achieved higher sales in Turkey, Russia, the Ukraine, the other countries of the CIS, and Bulgaria in 2008.

In 2008, Zentiva increased EBIT by 49.9% to CZK 3,251.4 million (1) and free cash flow (2)  by 44.6% to CZK 2,117.6 million due to a significant improvement in all operational aspects of its business, including the integration of its recently acquired Turkish operations. 

  I    FINANCIAL HIGHLIGHTS 2008

• Net sales of CZK 18,377.9 million; +10.2% yoy, driven by growth in our businesses in Turkey, Russia, Ukraine and other CIS countries. Net sales would have grown by 20.0% excluding the negative impact of the stronger CZK.

• Gross profit of CZK 10,880.0 million; +11.1 % yoy, as the Company's efficiency drive combined with an improved product mix offset the lower margins of the Eczacibasi-Zentiva business

• Gross margin of 59.2%; excluding Eczacibasi-Zentiva the gross margin was 64.4%

• EBIT (1) of CZK 3,251.4 million, +49.9% yoy, due to improved operating efficiencies, particularly in the commercial area. This was partially offset by a CZK 228.3 million impairment to fixed assets charge. Excluding the impairment charge, EBIT increased by 60.4%. 

• EBIT margin of 17.7% was reported: excluding the impairment charge the EBIT margin was 18.9%

• Net profit (3) of CZK 948.0 million; a 32.9% decrease yoy, was mainly negatively affected by FX losses 

• EBITDA (4) reached CZK 4,803.6 million, up 35.5% yoy 

• Capital expenditure during 2008 was CZK 1,242.4 million representing 6.8% of sales

• Free cash flow (FCF)(5) for the twelve month period was CZK 2,117.6 million representing 65.1% EBIT Cash conversion

• Net Debt of CZK 11,519.5 mil., down 20.9% 

• Net Debt/EBITDA at 2.4 times down from 4.1 times in 2007

• Net debt to equity ratio of 115.4% as of December 31, 2008

Jiří Michal, Chairman of the Board and CEO, commenting today on the Company's Full Year results said: 

Our operating results for 2008 clearly show the strengths of Zentiva's organization which is now well diversified across the markets of Central and Eastern Europe. As expected, we have achieved a significant increase in operating profit, despite the increasingly difficult market environment. This improvement in operating profits has been driven by our sales growth and the excellent progress we have made in improving our overall efficiency. This strong operating performance has also contributed to a much improved cash flow that has allowed us to strengthen our financial position.

Our excellent operating performance in 2008 demonstrates the strength of the much enlarged, better balanced Zentiva organization that was created in 2007. This larger regional platform has given us access to a much increased patient population and provides us with important opportunities to generate economies of scale. Over the course of the last year we have started to benefit from our increased scale as we have worked hard to improve the efficiency of all aspects of our business. 

Key Figures 

	Three Months to Dec. 31			Twelve Months to Dec. 31
(in CZKm)	2008	2007	change	2008	2007	change
Gross Sales	6,417.3	6,850.4	(6.3%)	21,806.2	19,066.5	14.4%
Net Sales	5,281.0	5,543.0	(4.7%)	18,377.9	16,670.3	10.2%
COGS	(2,150.6)	(2,514.6)	(14.5%)	(7,497.9)	(6,877.1)	9.0%
Gross Profit	3,130.4	3,028.5	3.4%	10,880.0	9,793.3	11.1%
Marketing & Sales	(1,233.3)	(1,377.6)	(10.5%)	(4,577.4)	(4,694.5)	(2.5%)
Admin.& General	(583.7)	(502.5)	16.2%	(2,062.4)	(2,014.5)	2.4%
Impairment of Fixed Assets	(34.5)	(226.8)	(84.8%)	(228.3)	(226.8)	0.7%
R&D	(194.9)	(212.1)	(8.1%)	(760.6)	(687.9)	10.6%
EBITDA (1)	1,436.4	1,252.2	14.7%	4,803.6	3,545.8	35.5%
EBIT (2)	1,083.9	709.6	52.8%	3,251.4	2,169.6	49.9%
PBT	125.5	471.4	(73.4%)	1,739.2	1,971.7	(11.8%)
Profit for the Period	(158.6)	343.0	n/a	1,013.4	1,456.2	(30.4%)
Attributable to:
Equity holders of the Parent	(143.9)	349.7	n/a	948.0	1,412.4	(32.9%)
Minority Interest	(14.7)	(6.7)	118.8%	65.4	43.8	49.2%
EPS Basic(CZK) (3)				24.97	37.18
EPS Diluted (CZK) (4)				24.93	37.03
EPS Diluted (US$)(5)				1.46	1.82
Gross margin	59.3%	54.6%		59.2%	58.7%
EBIT margin	20.5%	12.8%		17.7%	13.0%
Net profit(6) margin	(2.7%)	6.3%		5.2%	8.5%
Net Debt/Equity (e.o.p.)	115.4%	121.8%		115.4%	121.8%
CAPEX	395.9	249.3	58.8%	1,242.4	1,369.4	(9.3%)
FCF before acquisitions	447.6	865.6	(48.2%)	2,117.6	1,464.5	44.6%

• EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization and Impairment charged

• EBIT - Profit before Tax and Finance costs

• Basic EPS is calculated by dividing Net profit for the period attributable to Equity holders of the parent by the weighted average number of ordinary shares outstanding during the period excluding treasury shares

• Diluted EPS is calculated by dividing Net profit for the period attributable to Equity holders of the parent by weighted average number of shares outstanding during the period (excluding treasury shares) which are adjusted for effect of dilutive potential shares

• For convenience the EPS figures have been translated into USD using the average exchange rate for 12M 2007 and 12M 2008 of 20.308  and 17.035 CZK/USD respectively 

• Profit for the period attributable to Equity holders of the parent

  II   Sales Overview(6)

• Total net sales in 2008 were up 10.2% to CZK 18,377.9 million from CZK 16,670.3 million in 2007. Zentiva's total net sales would have increased by 20.0% at constant exchange rates in 2008 versus 2007. This is in line with our expectations.

• Total net sales in the fourth quarter of 2008 declined by 4.7% to CZK 5,281.0 million in comparison to the same period in 2007. The strength of the Czech Koruna being the major factor in this overall sales decline. In constant currency terms fourth quarter net sales would have increased by 3.8%. 

• Net pharmaceutical sales in 2008 increased by 7.9% to CZK 15,914.2 million. In the fourth quarter net pharmaceutical sales decreased by 1.5% to CZK 4,644.7million.

• Zentiva's core pharmaceutical business achieved the following performance in its key markets in 2008:

  • 11.7% decrease in Czech net sales to CZK 4,038.2 million 

  • 86.4% increase in Turkish net sales to CZK 3,187.2 million

  • 5.3% decrease in Slovakian net sales to CZK 2,013.2 million

  • 14.4% net sales growth in Russia to CZK 1,556.8 million

  • 7.1% decline in net sales in Poland to CZK 1,917.3 million

  • 1.7% decrease in Romanian net sales to CZK 1,681.1million  

  • 26.8% increase in net sales in Other markets to CZK 1,520.3 million 

• Third party API (Active Pharmaceutical Ingredient) net sales increased by 4.7% to CZK 300.0 million, due to the impact of the Turkish acquisition. 

• Other net sales, mainly contract manufacturing, increased by 31.9% to CZK 2,163.7 million in 2008. This was due to the consolidation of our Turkish business, where contract manufacturing is a large part of this business.

• Sales deductions grew 43.1% to CZK 3,428.3 million when compared to the previous year, mostly reflecting the consolidation of our Turkish business for the whole of 2008 versus only the last six months of 2007.

Net Sales overview

(in CZKm)	Three Months to Dec. 31			Twelve Months to Dec. 31
	2008	2007	change	2008	2007	change
Pharmaceuticals	4,644.7	4,716.0	(1.5%)	15,914.2	14,743.0	7.9%
API	91.0	88.8	2.5%	300.0	286.7	4.7%
Other Sales (7)	545.3	738.2	(26.1%)	2,163.7	1,640.6	31.9%
Net Sales	5,281.0	5,543.0	(4.7%)	18,377.9	16,670.3	10.2%

Pharmaceutical Sales

In 2008, Zentiva's pharmaceutical business saw its net sales increase by 7.9% to CZK 15,914.2 million. In the fourth quarter net pharmaceutical sales declined 1.5% to CZK 4,644.7 million in part due to the strength of the Czech Koruna.

Zentiva's continued focus on its modern promoted pharmaceutical portfolio led to its increased contribution to overall sales. This improvement in product mix led to part of the improvement in profitability achieved by our pharmaceuticals business. 

Zentiva's Top 15 Selling Brands - Gross Sales by Product 

(in CZKm)	Pharmaceutical compound	Therapeutic category	Twelve Months to Dec. 31
			2008	2007	change
Lozap	losartan	anti-hypertensive	1,079.2	849.7	27.0%
Helicid	omeprazole	anti-ulcerant	1,031.1	972.2	6.1%
Torvacard	atorvastatin	hypolipidemic	901.0	764.2	17.9%
Thiospa	thiocolchicoside	muscular skeletal	637.9	293.8	117.1%
Simvacard	simvastatin	hypolipidemic	611.7	680.9	(10.2%)
Ibalgin	ibuprofen	anti-inflamatory	502.7	432.2	16.3%
Vigrande	silfenadil citrate	urology	372.2	146.0	154.9%
Algocalmin	metamizol	pain	357.4	356.5	0.3%
Mycomax	fluconazole	anti-fungal	349.4	327.4	6.7%
Fokusin	tamsulosin	urology	330.4	288.2	14.6%
Penester	finasteride	urology	309.7	392.8	(21.2%)
Agen	amlodipine	cardiovascular	296.5	323.6	(8.4%)
Piogtan	pioglitazone	anti-diabetic	296.4	172.3	72.1%
Zoxon	doxazosin	urology	291.1	328.2	(11.3%)
Pinosol	herbal	nasal decongestant	289.0	380.0	(24.0%)
Total			7,655.7	6,707.8	14.1%

Net Pharmaceutical Sales by Geography 

(in CZKm)	Three Months to Dec. 31				Twelve Months to Dec. 31
	2008	2007	change		2008	2007	change
Pharmaceuticals	4 644.7	4,716.0		(1.5%)	15 914.2	14,743.0	7.9%
Czech Republic	1 105.8	1,281.8		(13.7%)	4 038.2	4,571.9	(11.7%)
Turkey	888.7	1,085.1		(18.1%)	3 187.2	1,710.0	86.4%
Slovakia	554.2	542.9		2.1%	2 013.2	2,126.6	(5.3%)
Russia	559.5	477.2		17.2%	1 556.8	1,360.8	14.4%
Poland	491.8	638.2		(22.9%)	1 917.3	2,064.3	(7.1%)
Romania	546.3	314.0		74.0%	1 681.1	1,710.0	(1.7%)
Other markets	498.5	376.7		32.3%	1 520.3	1,199.5	26.8%
Ukraine	206.5	176.4		17.0%	495.8	428.8	15.6%
Other CIS	54.7	45.1		21.2%	210.6	158.8	32.6%
Baltic	74.0	57.3		29.2%	266.6	245.3	8.7%
Bulgaria	81.3	28.4		186.7%	255.2	115.6	120.8%
Hungary	58.7	55.6		5.6%	231.3	214.5	7.8%
Other	23.3	13.9		67.3%	60.8	36.4	66.9%

Czech Republic 

Zentiva's net sales in the Czech market declined by 11.7% to CZK 4,038.2 million during 2008 due to a number of regulatory changes which became effective from the beginning of the year. In the fourth quarter, Zentiva's net sales in the Czech Republic fell by 13.7% yoy to CZK 1,105.8 million. 

Zentiva's key Rx brands in the Czech market in 2008 were the anti-ulcer drug Helicid (omeprazole), the cardiovascular drugs Torvacard (atorvastatin), Lozap (losartan) and Agen (amlodipine) as well as the anti-depressant Citalec (citalopram). A number of Zentiva's CHC products including the pain killers Ibalgin (ibuprofen) and Paralen (paracetamol) saw higher sales.

At the end of 2008, the commercial team in the Czech Republic comprised 177 employees down from 211 a year earlier. 

Zentiva launched 1 new product, Ultracod (paracetamol/codeine) in the pain segment during 2008. Zentiva received 6 new marketing authorizations in 2008.

Turkey

Our Turkish pharmaceutical business contributed net sales of CZK 3,187.2 million during 2008, up 86.4% from 2007. This large increase reflects the fact that Zentiva began consolidating its business in Turkey from July 2007.

In the fourth quarter of 2008, net pharmaceutical sales in Turkey amounted to CZK 888.7 million, a decrease of 18.1% versus the same period last year. However, in local currency terms fourth quarter sales increased by 4.5%, underlining the negative impact of CZK/TRY fluctuations on our reported Turkish sales.

The leading products in Turkey in 2008 in terms of sales were the muscular skeletal drug Thiospa (thiocolchicoside), the erectile dysfunction drug, Vigrande (sildenafil citrate) and the anti-diabetic drug Piogtan (pioglitazone).

At the end of December 2008, the Turkish commercial team headcount was 541, down from 586 at the end of 2007.

During 2008, 5 new drugs were introduced including the urology drug Tamprost (tamsulosin), the respiratory drug Monax (montelukast), and the CNS drugs Memorix (memantine), Zophix (olanzaphin) and Divare (donepezil). Zentiva received 15 new marketing authorizations in Turkey during 2008.  

Slovakia

In Slovakia, net sales decreased by 5.3% to CZK 2,013.2 million during 2008. In the fourth quarter, net pharmaceutical sales in Slovakia increased by 2.1% to CZK 554.2 million. 

In local currency terms, Slovakian net pharma sales decreased by 2.8% in 2008. In the fourth quarter local currency sales fell 2.2%. 

The modern branded prescription drugs that made the biggest contribution to the Company's sales in Slovakia were the lipid lowering drug Torvacard (atorvastatin), the anti-ulcer drug Helicid (omeprazole) and the cardiovascular drug Agen (amlodipine). These drugs are all now amongst Zentiva's top products in the Slovak market. The respiratory drug Zodac (cetirizine), the pain killer Tralgit (tramadol) as well as the anti-hypertensive Lozap (losartan) also made important sales contributions.  

The CHC products Ibalgin (ibuprofen), Paralen (paracetamol) and Anopyrin (acetylsalicylic acid) were also key sales contributors in 2008. 

The commercial team headcount in Slovakia stood at 114 at the end of 2008 compared to 117 one year earlier.

Zentiva launched three new products, the female drug Risendros (risendronate); Lindaxa (sibutramine) and CNS drug Argofan (venlafaxine) in the Slovak market in 2008. Zentiva received 12 new marketing authorizations in 2008.

Russia

In Russia, Zentiva's total net sales of pharmaceutical products increased by 14.4% to CZK 1,556.8 million compared to CZK 1,360.8 million in 2007. In local currency terms, Zentiva's Russian net pharma sales grew by 31.6% in 2008.

In the fourth quarter Zentiva's sales in Russia grew by 17.2% to CZK 559.5 million, however in local currency terms, Zentiva's Russian net pharma sales grew by 27.6%.

Zentiva's 'in market' sales performance ranked the Company amongst the volume and value leaders in a number of therapeutic areas where modern treatments are important including 'sartans', BPH (benign prostatic hypertrophy), hypolipidemia, anti-hypertensives and anti-mycotics. (8)

Zentiva's organic growth strategy in the Russian market has continued to be successful due to the Company's modern product portfolio. The most significant contributors to Zentiva's sales in 2008 were the anti-hypertensive drugs Lozap (losartan) and Coronal (bisoprolol), the lipid lowering drug Torvacard (atorvastatin), and the urological products Zoxon (doxazosin) and Fokusin (tamsulosin). These drugs rank Zentiva as a leader in their respective therapeutic areas.(1) 

Within the CHC segment the nasal decongestant Pinosol and the antimycotics Mycomax (fluconazole) and Vitamin E were important contributors to Zentiva's sales. 

Zentiva's Russian commercial team headcount was 341 at the end of 2008 vs. 296 at the same time in 2007.

During 2008 the Company launched one new product the contraceptive, Chloe. Zentiva also received 6 new marketing authorizations in 2008. 

Poland

In 2008, Zentiva's business in Poland saw its sales decline despite higher volumes. This was the result of lower prices resulting from a number of changes to product categorizations that took place in 2007 and 2008 as well as adverse currency movements. Net sales in 2008 were 7.1% lower at CZK 1,917.3 million, in comparison to the same period in 2007. In local currency terms sales were 4.1% lower yoy. 

In the fourth quarter, net pharma sales fell by 22.9% to CZK 491.8 million and by 16.9% in local currency terms, reflecting a slow-down in deliveries to the market in this quarter. 

In Poland, the Company continued to rank as a volume and value leader in a number of selected therapeutic areas such as BPH treatment, hypolipidemia, anti-ulcerants as well as anti-hypertensives.(9)

In 2008, the anti-ulcer drug Helicid (omeprazole), the lipid lowering drugs Torvacard (atorvastatin) and Simvacard (simvastatin), the anti-hypertensive drug Lozap (losartan) and the urology drug Penester (finasteride) were the main contributors to sales. 

At the end of 2008, Zentiva's commercial team headcount had been reduced to 390 compared to 467 at the end of 2007.

Zentiva launched 5 new products in the Polish market in 2008; Endiex (nifuroxazidem) for the treatment of diarrhoea, the female drug Risendros (risendronate), Lozap H (losartan plus a diurectic) and Coronal (bisoprolol) for the treatment of hypertension and the urology drug Uroflow (tolterodin). Zentiva received 13 new marketing authorizations in 2008.

Romania

Zentiva's net sales declined by 1.7% to CZK 1,681.1 million in 2008. However, in the second half of the year net sales increased by 70.1% to CZK 883.2 million. This stronger performance in the second half of the year was achieved despite the strength of the CZK vs. RON during this period.  In the fourth quarter, net pharmaceutical sales in Romania increased by 74.0% to CZK 546.3 million.

In local currency terms, Zentiva's net pharmaceutical sales increased by 20.1% during 2008. In the fourth quarter sales in RON terms increased by 91.8%.

The largest contributors to Zentiva's pharmaceutical sales in Romania were the Company's established local brands, most of which are CHC products, including Algocalmin (metamizole), the analgesic Antinevralgic P (paracetamol, codeine and acetylosalicylic acid) and the CNS drug Extraveral (phenobarbital, valerian). The lipid lowering drug Simvacard (simvastatin) also made an important contribution to sales in 2008 as did the pain killer Modafen (ibuprofen)

The Romanian commercial team headcount declined by 14% to 167 at the end of 2008 vs. 195 at theend of 2007. 

In 2008, two new drugs were introduced, the female drug Risendros (risendronate) and the cardiovascular drug Agen (amlodipine). Zentiva received 14 new marketing authorizations in Romania in 2008.

Other Markets

In addition to its six core markets, Zentiva has been rapidly developing its business in a number of other important countries in Central and Eastern Europe. In aggregate these markets grew net sales 26.8% to CZK 1,520.3 million in 2008 and together they now account for 9.6% of Zentiva's total net pharmaceutical sales. 

In the fourth quarter these markets achieved sales of CZK 498.5 million, a 32.3% increase over the same period last year.

During 2008, growth was achieved in the Ukraine with net sales up 15.6% to CZK 495.8 million, in Bulgaria where net sales were up 120.8% to CZK 255.2 million and in other markets of the CIS, where net sales grew by 32.6% to CZK 210.6 million. In Hungary net sales in 2008 increased 7.8% to CZK 231.3 million.

  III    RESEARCH AND DEVELOPMENT 

Introduction

Zentiva's international growth strategy is dependent on bringing a continuous flow of new self-developed modern affordable medicines to market. This means that new product development is a key determinant of the Company's success. In recent years, Zentiva has been investing in its research and development capability to provide the new branded products needed to support its much enlarged geographic footprint. Zentiva's primary care focus means that its product pipeline is centered on therapeutic areas which are mainly treated by primary care physicians. 

Marketing Authorization

The Company received 66 new marketing authorizations including 23 via MRP (Mutual Recognition Procedure) and 8 via DCP (Decentralized Procedure) in 2008 in Zentiva's six core markets (CZ, TR, RO, PL, SK, RU). These include registrations of new products and line extensions of existing products. In all of the markets in which Zentiva operates the Company received a total of 174 new marketing authorizations in 2008, of which 40 were via MRP and 12 via DCP. 

The Company submitted a total of 110 marketing authorization applications in 2008 in Zentiva's six core markets, 7 of which were via MRP and 82 via DCP. Across all of the markets in which it operates Zentiva submitted 253 marketing authorization applications during 2008 of which 13 were MRP applications and 174 DCP applications. 

As of December 31, 2008 the Company had a total of 167 marketing authorization applications pending in its six core markets for the sale of pharmaceutical products. This figure includes the registration of new products, the registration of existing products in new territories, and line extensions on existing products, 5 of these pending applications were made using MRP and 98 using DCP. Across all of the markets in which it operates, Zentiva had 327 marketing authorization applications pending at the end of December 2008, of which 9 were via MRP and 202 via DCP. 

  IV   MANAGEMENT'S DISCUSSION & ANALYSIS 

Sales

In 2008, Zentiva's net sales increased by 10.2% to CZK 18,377.9 million from the CZK 16,670.3 million achieved in 2007. Excluding the negative impact of the appreciation of the Czech Koruna, sales in the in 2008 would have increased by 20.0%.

The key factor behind the growth in sales was the consolidation of the Company's Turkish acquisition. Higher net sales were also achieved in Russia as well as a number of the newer markets, which the Company is targeting. These include the Ukraine, other CIS countries and Bulgaria. Sales in the Czech Republic, Slovakia, Poland and Romania declined. 

In the fourth quarter, Zentiva's net sales decreased by 4.7% to CZK 5,281.0 million due to the negative impact of the stronger Czech Koruna. At constant exchange rates fourth quarter sales would have increased by 3.8%.

In 2008, Zentiva's core pharmaceutical business increased net sales by 7.9% to CZK 15,914.2 million. The Company's non-pharmaceutical business, comprising sales of APIs, contract manufacturing and other sales, increased revenues by 27.8% to CZK 2,463.7 million due to the inclusion of Eczacibasi-Zentiva's net sales of APIs, contract manufacturing and services. 

Gross Profit

In 2008, Zentiva's gross profit increased by 11.1% to CZK 10,880.0 million. The gross margin improved to 59.2% from 58.7% in 2007. This improved margin was due to actions we have taken to improve the efficiency of our supply chain. These enabled us to offset the impact of the consolidation of Eczacibasi-Zentiva, with its lower gross margins for the whole of 2008 vs. only the last six months of 2007. In 2008, considerable progress has been made in increasing the margins of our Turkish business. This is the result of an improvement in product mix, which in turn has led to lower discounts, as well as the increased efficiency of our Turkish commercial organization. 

In the fourth quarter, gross profit increased by 3.4% to CZK 3,130.4 million despite the reduction in sales. This was the result of our gross margin improving from 54.6% to 59.3%, as our focus on greater efficiency continued to deliver positive results.  

Operating expenses

Sales & Marketing

The Company's sales and marketing expenses declined by 2.5% during 2008 to CZK 4,577.4 million. This is a result of the successful cost containment measures taken to reduce our sales and marketing expenses that started in the latter part of 2007. The success of these actions is clear from the fact that in 2008, sales and marketing expenses amounted to 24.9% of net sales compared to 28.2% in 2007. 

The reduction in actual expenditure was achieved despite the consolidation of Eczacibasi-Zentiva, our larger commercial organizations in growth markets such as Russia and Ukraine, as well as the start of the Company's commercial operations in Hungary from March 2007. This was due to the reduced expenditure on sales and marketing in our other core markets. At the end of 2008, the commercial team headcount stood at 2,150 which represents a 6.6% reduction from 2,302 people (10) in commercial activities at the end of 2007. It was in the final quarter of 2007 when Zentiva started the activities needed to integrate its Turkish acquisition and adapt to the changing business environment in number of our markets. 

In the fourth quarter of 2008, Zentiva's sales and marketing expenses declined by 10.5% to CZK 1,233.3 million. This figure represents 23.4% of net sales during the period.

Research & Development

Zentiva's research and development expenses increased by 10.6% to CZK 760.6 million in 2008 representing 4.1% of net sales. This is approximately the same proportion of sales as in 2007. The growth in spending is due to the consolidation of our R&D operation in Turkey and our increased number of registrations. 

In the fourth quarter, overall R&D expenses amounted to CZK 194.9 million, a decline of 8.1% due to our actions to improve the efficiency of our overall research activities.

General & Administrative

In 2008, the Company's general and administrative expenses increased by 2.4% compared to 2007 to CZK 2,062.4 million, despite the consolidation of Eczacibasi-Zentiva (whole year 2008 vs. only second half of 2007). This represents 11.2% of net sales vs. 12.1% in 2007. This is mainly due to higher general and administrative expenses in the comparable period last year as a result of allowances for doubtful debts relating to Romanian customers of CZK 136.4 million. In 2008, the net impact of release of allowances for doubtful debts and bad debt write-offs positively influenced administrative expenses by CZK 39.3 million.  

In the fourth quarter, the Company's general and administrative expenses increased 16.2% to CZK 583.7 million mainly due to release of allowances for doubtful debts of CZK 98.7 million in the fourth quarter of 2007 caused by improved collection of receivables in Romania.

Impairment of Fixed Assets

In 2008, Zentiva made an impairment charge of CZK 228.3 million. This is 0.7% higher than the impairment charge of CZK 226.8 million made in 2007. 

In 2008, this charge was mainly due to the impairment of fixed assets related to our acquisitions in Turkey and Romania of CZK 176.8 million and CZK 58.2 million, respectively. In both countries nearly all of these impairment charges were made in Q2 2008 in respect of certain intangible assets (products, projects) as the Company made the strategic decision to focus on other more profitable brands and molecules. 

There is no goodwill impairment included in this figure and the decisions that have led to above mentioned impairment charge are expected to contribute to Zentiva's future profitability.

In Turkey the impairment charge relates mainly to the discontinuation of certain development projects, for commercial reasons. The remaining part is due to the impairment of the value of several brands, whose performance is expected to be lower than had been expected at the time of the original asset value allocation. This is because these brands have been intentionally replaced by newer molecules in the same therapeutic area, from either Zentiva's pipeline or Eczacibasi-Zentiva's own pipeline or due to our decision to reduce the discounts on some products for efficiency reasons. The lower expectations of future economic benefits, which have resulted in impairment of these intangible assets in Turkey, are more than compensated for by the higher sales of more profitable brands. Similar reasons are behind the impairment of brands in Romania, where the brands concerned are being replaced by newer, higher margin products.

Profit before Tax and Finance Costs (EBIT)

The Company's EBIT increased by 49.9% to CZK 3,251.4 million in comparison to 2007. In 2008 the EBIT margin increased from 13.0% to 17.7%, including the impact of the impairment charge. 2008 EBIT would have increased by 60.4 % to CZK 3,479.7 million excluding the impairment charge, representing a margin of 18.9 %. 

In the fourth quarter of 2008 EBIT increased by 52.8% to CZK 1,083.9 million due the positive impact of the efficiency improvements that the Company has made over the last eighteen months.

Net Interest and Other Financial Results 

In 2008 Zentiva had a net interest expense of CZK 820.0 million. This compares with a net interest expense in 2007 of CZK 488.1 million. This much higher net interest expense is due to the debt finance that Zentiva used for its acquisition in Turkey, which was made in July 2007. 

In the fourth quarter of 2008, net interest expense decreased by 16.8% to CZK 185.2 million due to the reduction in the Company's net debt levels as a result of its strong operating cash flow.

In 2008, Zentiva recorded other net financial costs of CZK 692.2 million versus other net financial income of CZK 290.1 million in 2007. These net financial costs in 2008 were largely due to negative net foreign exchange translation effects of CZK 535.7 million and also due to other net financial losses in the amount of CZK 156.5 million which are driven mainly by settlement of certain financial instruments in second half of 2008.  

In the fourth quarter of 2008, Zentiva recorded other net financial losses of CZK 773.2 million due to negative net foreign exchange translation effects of CZK 703.9 million. 

 

Profit before tax

The Company's profit before tax of CZK 1,739.2 million in 2008 was 11.8% lower than in 2007 as the much improved operating performance was more than offset by the negative financial items mentioned above. 

In the fourth quarter, profit before tax was CZK 125.5 million, 73.4% lower than the corresponding period in 2007 despite the 52.8% EBIT margin improvement due to the financial items discussed earlier.

Income tax expense

The Company's tax charge increased by 40.8% in 2008 to CZK 725.8 million from CZK 515.5 million in 2007. The effective tax rate was 41.7% versus 26.1% in 2007. The increase in effective tax rate was driven by a loss at the Group holding company holding level (Zentiva N.V.) in the second half of 2008 due to the negative financial result. This could not be offset through deferred tax asset recognition, therefore, it significantly increased the effective tax rate of the Group. Whilst the FX gains offset the value of other financial expenses (represented mainly by the interest expense) during H1 2008, in H2 2008 the position turned and the FX losses added to the other financial expenses. This has resulted in Zentiva's effective tax rate being significantly lower during the H1 2008 and significantly higher in H2 2008.  

In the fourth quarter, Zentiva's income tax expense was CZK 284.1 million and its effective tax rate was 226.4% versus 27.2% in the same period in 2007. This increase was due to the above mentioned position at the holding level of Zentiva NV which could not be reflected through deferred tax asset recognition.

.

Net profit for the period attributable to equity holders of the parent (Net profit)

The Company's net profit declined by 32.9% to CZK 948.0 million in 2008. The net profit margin decreased to 5.2% from 8.5% in 2007. 

In the fourth quarter, Zentiva made a net loss of CZK 143.9 million, compared to net income of CZK 349.7 million the corresponding period in 2007. The net margin in the fourth quarter 2008 was (2.7%.) 

Balance Sheet 

At the end of December 2008, Zentiva's net debt had decreased by 20.9% to CZK 11,519.5 million from CZK 14,570.3 million at the end of December 2007. The Net debt to Equity ratio stood at 115.4% at the end of December 2008 vs.121.8% at the end of 2007. The Company has continued to improve its net debt position during the course of 2008 due to an improvement in its operating cash flow and to an agreed-upon post-closing adjustment to the price of Eczacibasi Generic Pharmaceuticals, its Turkish acquisition, amounting to EUR 58 million. 

In Q3 2008, the Company paid a dividend of CZK 239 million (net of withholding taxes).

Cash Flow

In 2008, Zentiva's free cash flow before acquisitions continued the much improved trend that began in the second half of 2007. In 2008, free cash flow before acquisitions increased by 44.6% to CZK 2,117.6 million, representing 65.1% of EBIT (profit before tax and finance costs) in terms of cash conversion. This compares with cash conversion of 67.5% on free cash flow of CZK 1,464.5 million in 2007. 

Capital Expenditures 

The Company's capital expenditure in 2008 fell by 9.3% to CZK 1,242.4 million. Capital expenditure represented 6.8% of net sales in 2008 vs. 8.2% in 2007. The largest investments in 2008 were the reconstruction of tablet packaging and the extension of Helicid production. The decrease in the capex-to-sales ratio reflects efforts to rationalize overall spending. 

  V  Takeover offers 

• Since the beginning of May, Zentiva has been the subject of offers from its two largest shareholders, PPF and Sanofi-Aventis. 

• On June 17, 2008 PPF, via a wholly owned subsidiary, Anthiarose Limited, made a voluntary offer to acquire all of the outstanding shares of Zentiva at a price of CZK 950 per share.

• On July 11, 2008, Sanofi-Aventis Europe launched a competing bid for Zentiva at a price of CZK 1,050 per share valid until September 19, 2008. 

• The Board welcomed interest in the Company and was willing to explore any opportunities that were in the best interests of Zentiva, its shareholders and all other stakeholders. 

• Based on this principle, Zentiva' Board evaluated both of these offers carefully and issued Position Statements on June 20, 2008 and July 18, 2008 rejecting the PPF and Sanofi-Aventis Offers, respectively. A major reason for the rejection of the Offers was the fact that they failed to reflect the underlying value of Zentiva's business. As such it was the Board's view that they were not in the best interests of shareholders and the Company's other stakeholders.

• On July 30, 2008, PPF formally withdrew its offer. 

• The offer from Sanofi-Aventis was extended to November 28, 2008, unless further extended.

• On September 22, 2008, Sanofi-Aventis announced its intention to raise the offer for Zentiva to CZK 1,150 in cash per share and officially announced its improved offer on October 1, 2008.

• On October 1, Zentiva's Board recommended shareholders accept the Improved Offer from Sanofi-Aventis and tender their shares into the Improved Offer. This recommendation has been made after the Board had given due and careful consideration to the strategic, financial and social aspects and consequences of the Improved Offer and has reviewed other alternatives available to the Company. On the basis of these considerations, the Board having received legal and financial advice, and taking into account the identity, certainty of financing and track record of Sanofi-Aventis Europe, certainty of execution, conditionality, the nature of the consideration, and the future plans of Sanofi-Aventis Europe with respect to the Company and its strategy, management, employees and other stakeholders, unanimously reached the conclusion that the Improved Offer is in the best interests of the Company, the shareholders and all other stakeholders of the Company.

• On November 26, 2008, the offer from Sanofi-Aventis was extended to February 20, 2009

• On February 4, 2009, The European Commission granted competition law clearance to the acquisition of Zentiva by Sanofi-Aventis Europe.

• On February 25, 2009, Sanofi-Aventis announced the success of the Zentiva Offer.

• On March 11, 2009, Zentiva Board decided to initiate the delisting of the Company's shares from the Prague stock Exchange. 

• On March 12, 2009, Sanofi-Aventis announced that it now held 96.8% of Zentiva shares and that this shareholding satisfies the statutory 95% threshold for a squeeze-out procedure of remaining minority shareholders in accordance with the applicable provisions of Dutch law. Sanofi-Aventis announced that it intends to initiate such a procedure in the near future.
  
  

  VI  DIVIDEND 

The Company paid dividends of CZK 8.0, CZK 9.5, CZK 11.50 and CZK 7.40 per share in 2005, 2006, 2007, and 2008 respectively, representing a pay-out ratio of approx. 19% - 20%.

   VII    Important announcements MADE during 2008 AND AT THE BEGINNING OF 2009 (11)

Year 2008 Date	Announcement
January 28, 2008	Notification of Change in Shareholders' Structure (J&T Financial Services Limited)
January 30, 2008	Notification of Change in Shareholders' Structure (Generali PPF Holding B.V.)
February 14, 2008	12 Month 2007 Sales Report
March 6, 2008	Turkish acquisition - Post-closing adjustment agreement
March 10, 2008	Preliminary 2007 results
April 24, 2008	3 Month 2008 Sales Report
April 30, 2008	2007 Audited results and 2007 Annual Report
April 30, 2008	Dividend of CZK 7.40 (Gross) per Share for 2007 Proposed to Shareholders
May 5, 2008	Statement regarding Approach by Anthiarose Limited
May 5, 2008	Change in the Board of Zentiva N.V.
May 5, 2008	Notice of Annual General Meeting
May 19, 2008	Consolidated results for the first quarter 2008
June 5, 2008	Results of Annual General Meeting
June 11, 2008	Results of Annual General Meeting - update
June 17, 2008	Statement regarding official publication of voluntary takeover offer by Anthiarose Limited
June 18, 2008	Statement regarding intended competing offer by sanofi-aventis
June 20, 2008	Zentiva Responds to Anthiarose CZK 950 per Share Voluntary Offer
June 20, 2008	Notice of Extraordinary General Meeting
June 26, 2008	Termination of the shareholders agreement between Sanofi-Aventis Europe and certain management shareholders
July 9, 2008	Results of Extraordinary General Meeting
July 11, 2008	Statement regarding Official Publication of Voluntary Takeover Offer by Sanofi Aventis Europe
July 18, 2008	Zentiva Responds to Sanofi-Aventis CZK 1,050 per Share Voluntary Offer
July 21, 2008	Results of Extraordinary General Meeting - update
July 22, 2008	6 Month 2008 Sales Report
August 4, 2008	Consolidated results for the first six months 2008 and 2008 Half year report
August 12, 2008	Notice of Extraordinary General Meeting
September 3, 2008	Results of Extraordinary General Meeting
September 3, 2008	Statement regarding Sanofi-Aventis Europe CZK 1,050 per Share Voluntary Offer
September 5, 2008	Results of Extraordinary General Meeting - update
September 22, 2008	Statement regarding Intended Improved Offer of CZK 1,150 per Share by Sanofi Aventis Europe. The Board of Directors of Zentiva recommended the Intended Improved Offer.
September 26, 2008	Notification of Change in Shareholders' Structure (Belviport Trading Ltd.)
October 1, 2008	Notification of Change in Shareholders' Structure (PPF Group N.V. and Generali PPF Holding B.V. acting in concert and Belviport Trading Ltd.)

Year 2008 Date	Announcement
October 1, 2008	Statement regarding the officially announced Improved Offer of CZK 1,150 per Share by Sanofi Aventis Europe
October 22, 2008	9 Month 2008 Sales Report
November 10, 2008	Consolidated results for the first nine months 2008

Beginning of 2009 Date	Announcement
January 7, 2009	Notice of Extraordinary General Meeting
February 4, 2009	The European Commission clears acquisition of Zentiva by Sanofi-Aventis
February 9, 2009	Results of Extraordinary General Meeting
February 13, 2009	Results of Extraordinary General Meeting - update
February 13, 2009	Zentiva to issue new shares to cover exercised employee stock options
February 25, 2009	Sanofi-Aventis announces successful takeover of Zentiva
March 11, 2009	Issue of new shares Zentiva Board decides to initiate delisting from the Prague stock Exchange
March 12, 2009	Sanofi-Aventis becomes majority shareholder of Zentiva
March 17, 2009	Notice of Extraordinary General Meeting
March 23, 2009	Consolidated preliminary unaudited results for 2008

Other announcement

On March 20, 2009, Zentiva received a letter from EIS Eczacibasi Ilac Sanai ve Finansal Yatirimlar Sanayi ve Ticaret A.S. ('EIS') whereby EIS informed Zentiva of its exercise of the put option, which EIS holds under the Shareholders' Agreement, dated April 17, 2007, executed between Zentiva and EIS in connection with Zentiva's acquisition from EIS of the 75% share in Zentiva's current Turkish operations in 2007 (the 'Shareholders' Agreement'). The put option gives EIS a right to sell to Zentiva the remaining 25% in Zentiva's current Turkish operations, for a price which was pre-agreed in the Shareholders' Agreement (for details, please see page 72 of Zentiva's Annual Report 2007). Under the letter received from EIS, EIS exercises its put option as of March 27, 2009. Zentiva is in the process of carefully analyzing the EIS's notice and the ensuing legal situation, and will enter into discussions with EIS about the process leading towards the purchase by Zentiva of the remaining 25% in its Turkish operations.

  VIII  SHAREHOLDER STRUCTURE 

Shareholder structure as of December 31, 20081:

Shareholder	Capital interest	Voting Rights
Sanofi-Aventis Group	24.9%	24.9%
PPF Group N.V. and Generali PPF Holding B.V. acting in concert	24.3%	24.3%
Belviport Trading Ltd.	10.1%	10.1%
Fervent Holdings Limited	7.6%	7.6%
Management and employees	5.9%	5.9%
Other Institutional & Private investors	27.2%	27.2%
Total	100.0%	100.0%

      Source: Zentiva, AFM

1 Under Dutch law, if any person or entity actively or passively, directly or indirectly, acquires or disposes of shares and/or voting rights relating to Zentiva and such person or entity knows or should reasonably know that the shares and/or voting rights that are at its disposal reach, exceed or fall below any of the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75%, or 95%, that person or entity must promptly notify the same to the AFM. Notifications received by AFM are then published by AFM on its website at www.afm.nl. Shareholder's disclosure obligation only applies if one of the relevant thresholds is crossed. Movements in shareholding within the thresholds are not required to be disclosed. Publicly disclosed information relates only to a specific date and may no longer be completely accurate as of a later date. Zentiva's information about its shareholders' structure is based only on publicly disclosed information..

Current Shareholder structure:

Shareholder	Capital interest	Voting Rights
Sanofi-Aventis Group	98.6%	98.6%
Other Institutional & Private investors	1.4%	1.4%
Total	100.0%	100.0%

Source: Sanofi-Aventis

  IX  Shares

On March 11, 2009, Zentiva issued 986,520 new ordinary shares ('New Shares'), par value EUR 0.01 per New Share. As announced by Zentiva in its press release of February 13, 2009, the purpose of this issue of the New Shares was to cover certain in-the-money employee stock options. All the New Shares were tendered into the Sanofi-Aventis Offer. Issuance of the New Shares resulted in the Company's issued share capital being increased to EUR 391,227.50, divided into 39,122,750 ordinary shares.

On March 11, 2009, the Board of Zentiva decided to initiate necessary regulatory steps for delisting of Zentiva shares from the Prague Stock Exchange. The Board also decided to initiate necessary steps for delisting of Zentiva global depositary shares ('GDS') from the London Stock Exchange and for terminating the GDS program in full both in respect of Regulation S GDS and Rule 144A GDS. The Board's intention is to achieve the delisting of the shares and GDS, and the termination of the GDS program, as soon as practicable.

Treasury Shares

Number of treasury shares stood at 143,720 shares at the end of 2008, which is 27,280 shares less than the 171,000 shares held at the end of 2007. The difference is a result of their use in the Company's employee stock option plan adopted in 2005. No treasury shares had been purchased during 2008. The treasury shares had been purchased to be used as part of the Company's employee stock option plan. All treasury shares were tendered into the Sanofi-Aventis Offer. As of the date of this Report, no treasury shares were held by Zentiva. 

  X    BOARD STRUCTURE 

Board structure as of December 31, 2008 and current Board structure 

Jiří Michal, Chairman	Director A
Brad Wilson, Vice Chairman	Director B
Urs Kamber	Director B
Jean-Michel Levy	Director B
Johannes Scholts	Director B
Hanspeter Spek	Director B

Note: According to the Articles of Association Director A represents an Executive Director, Director B is a Non-executive Director. 

Changes to the Board structure in 2008

On May 5, 2008, Zentiva announced that Mr. Bülent Eczacibaşi had resigned from the Board of Managing Directors (the 'Board') of Zentiva N.V. as of May 1, 2008.

On June 5, 2008, the Annual General Meeting (the 'AGM') was informed that in 2008, terms of three Directors A of the Board, i.e., of Petr Šulc, Lars Ramneborn, and Jiří Michal, would expire in accordance with the Dutch corporate governance code. On April 23, 2008 the Board resolved to decrease the number of Directors A from three to one, and therefore there was one Director A vacancy open for election by the AGM. The Board recommended the re-appointment of Mr. Jiří Michal, the Chief Executive Officer of the Company, as Director A. The AGM resolved to appoint Mr. Jiří Michal as Director A for the term starting on June 6, 2008 and expiring at the end of the day of the annual general meeting to be held in the year 2012.

On June 5, 2008, the AGM was informed that in 2008, terms of two Directors B of the Board, i.e., of Messrs. Brad Wilson and Johannes Scholts would expire in accordance with the Dutch corporate governance code. The AGM appointed Messrs. Brad Wilson and Johannes Scholts as Directors B for the term starting on June 6, 2008 and expiring at the end of the day of the annual general meeting to be held in the year 2012. The AGM failed to appoint Mr. Marcel Dostal, a Director B. Currently, one Director B seat on the Board is vacant.

On June 17, 2009, Zentiva published Extraordinary General Meeting convening notice to be held on April 2, 2009. Following the successful outcome of the takeover offer by Sanofi-Aventis Europe and/or for personal reasons, three of the current Directors B, Messrs. Brad Wilson, Johannes Scholts, and Jean-Michel Levy, resigned from the Board, such resignation to be effective as of the end of the day of the Extraordinary General Meeting. The Board recommends appointment of Ms. Laurence Debroux, Mr. Bart Filius, Ms. Belén Garijo, and Mr. Philippe Luscan. 

The current composition of the key Board Committees is as follows: 

Audit committee: 
Urs Kamber (chairman)
Jean-Michel Levy
Brad Wilson

Remuneration committee:
Brad Wilson (chairman)
Hanspeter Spek
Jan Scholts

Selection & Appointment committee:
Jan Scholts (chairman)
Hanspeter Spek
Brad Wilson

   XI  METHOD OF CONSOLIDATION

The consolidated financial statements are in accordance with IFRS and comprise the financial statements of Zentiva N.V. and its subsidiaries. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Group companies are those companies in which the parent company has a controlling financial interest through direct and indirect ownership of a majority voting interest or effective managerial and contractual control. The subsidiaries held or acquired exclusively with a view to subsequent resale are excluded from consolidation and are included as available-for-sale investments and measured at fair value where this can be reliably measured or at cost less impairment losses where fair value cannot be reliably measured. All material inter-company accounts and transactions have been eliminated in consolidation. The equity and net profit for the period attributable to minority interests are shown as separate items in the consolidated financial statements.

The impairment test of goodwill was performed in accordance with IAS 36 Impairment of assets before year end 2008.

Impairment test of goodwill allocated to segment 'Turkey'

The goodwill in the amount of CZK 6,109.7 million (TRY 486.0 million) as of December 31, 2008 was tested in November 2008 for impairment. The budgets used for identifiable asset valuation (prepared for provisional acquisition accounting in summer 2007) were updated in order to calculate the recoverable amount and test goodwill impairment taking into account revised plans, expectations and intentions of Zentiva in Turkey. These revised budgets prepared in accordance with the business strategy of Zentiva Group which will be applied in Turkey were also used for intangible assets impairment testing and the valuation of the financial liability resulting from the put-call option related to the remaining 25% stake acquisition. 

Detailed budgets were prepared on a 3 year basis extended up to 10 years using projections. The growth rate used to extrapolate cash flow projections beyond this period was assumed to be 2%, discount rate was estimated to be 10%.

The results of the test lead to a conclusion that no impairment needs to be recognized in 2008. 

  XII CONSOLIDATED STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007

Financial statements in accordance with IFRS

	Twelve month period ending
(all figures in CZK ´000)	December 31, 2008 (unaudited)	December 31, 2007 (audited)	% change
Total sales	18 377 921	16 670 318	10,2%
Costs of Goods Sold	(7 497 929)	(6 877 063)	9,0%
Gross Profit	10 879 992	9 793 255	11,1%
Sales and Marketing Expenses	(4 577 350)	(4 694 475)	(2,5%)
General and Administrative Expenses, net	(2 062 379)	(2 014 492)	2,4%
Impairment of fixed assets	(228 304)	(226 764)	0,7%
Research and Development	(760 605)	(687 883)	10,6%
Profit Before Tax and Finance Costs	3 251 354	2 169 641	49,9%
Interest Income	170 468	54 650	211,9%
Interest Expenses	(990 467)	(542 735)	82,5%
Financial income/(expenses), net	(692 182)	290 148	(338,6%)
Profit Before Tax	1 739 173	1 971 704	(11,8%)
Income Tax Expense	(725 782)	(515 473)	40,8%
Net Profit for the Period	1 013 391	1 456 231	(30,4%)
Attributable to:
Equity Holders of the parent	948 039	1 412 434	(32,9%)
Minority Interest	65 352	43 797	49,2%

  XIII   CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007

Financial statements in accordance with IFRS

	Three month period ending
(all figures in CZK ´000)	December 31, 2008 (unaudited)	December 31, 2007 (unaudited)	% change
Total sales	5 281 028	5 543 041	(4,7%)
Costs of Goods Sold	(2 150 630)	(2 514 574)	(14,5%)
Gross Profit	3 130 398	3 028 467	3,4%
Sales and Marketing Expenses	(1 233 323)	(1 377 568)	(10,5%)
General and Administrative Expenses, net	(583 720)	(502 494)	16,2%
Impairment of fixed assets	(34 535)	(226 764)	(84.8%)
Research and Development	(194 910)	(212 075)	(8,1%)
Profit Before Tax and Finance Costs	1 083 910	709 566	52,8%
Interest Income	61 791	18 855	227,7%
Interest Expenses	(247 030)	(241 399)	2,3%
Financial income/(expenses), net	(773 185)	(15 642)	4 843,0%
Profit Before Tax	125 486	471 380	(73,4%)
Income Tax Expense	(284 065)	(128 410)	121,2%
Net Profit for the Period	(158 579)	342 970	(146,2%)
Attributable to:
Equity Holders of the parent	(143 866)	349 695	(141,1%)
Minority Interest	(14 713)	(6 725)	118,8%

  XIV   CONSOLIDATED BALANCE SHEETS AS AT decEMBER 31, 2008 AND 2007  

Financial statements in accordance with IFRS 

Balance Sheets as at	December 31, 2008	December 31, 2007
(all figures in CZK ´000)	(Unaudited)	(Audited)
ASSETS
Non-Current Assets
Property, Plant and Equipment, net	8 378 529	8 643 798
Intangible Assets, net	3 583 243	4 802 897
Investments	26 206	24 977
Long Term Receivables1	68 641	133 318
Deferred Tax Asset	322 106	254 601
Goodwill	7 466 185	9 038 007
Total Non-Current Assets	19 844 910	22 897 598
Current Assets
Inventory	2 530 246	3 000 887
Accounts Receivables, net	7 362 301	7 081 659
Purchase Price Adjustment Receivable	-	1 634 720
Prepayments and Other Current Assets	232 957	205 907
Marketable securities	35	21
Assets Held for Sale	-	5 565
Cash and Cash Equivalents	2 832 029	2 213 613
Cash restricted more than 3 months	14 316	13 970
Total Current Assets	12 971 884	14 156 342
TOTAL ASSETS	32 816 794	37 053 940
EQUITY AND LIABILITIES
Equity
Share Capital	12 112	12 112
Treasury Shares	(153 018)	(182 592)
Share Premium	2 514 784	2 514 784
Share Options Granted	162 955	103 101
Retained Earnings	9 996 158	9 335 127
Other Reserves	(117 718)	-
Cumulative Translation Adjustment	(3 478 382)	(860 737)
Total Shareholders' Equity	8 936 891	10 921 795
Minority interest	1 041 859	1 037 607
Total Equity	9 978 750	11 959 402
Non-Current Liabilities
Obligations Under Capital Lease	-	3 339
Interest Bearing Loans and Borrowings	9 860 300	13 172 128
Financial Liability to Minorities1	-	4 195 026
Provisions and Other Long Term Liabilities	247 009	279 491
Deferred Tax Liability	507 099	699 395
Total Non-Current Liabilities	10 614 408	18 349 379
Current Liabilities
Accounts Payables	1 875 965	2 152 776
Other Taxes Payables	186 414	117 036
Accruals and Other Current Liabilities	1 006 451	784 763
Current Tax Accrual	148 760	34 877
Interest Bearing Loans and Borrowings	4 505 561	3 625 718
Financial Liability to Minorities	4 477 592	-
Dividends Payable	21 579	20 468
Current Capital Lease Obligation	1 314	9 521
Total Current Liabilities	12 223 636	6 745 159
TOTAL EQUITY AND LIABILITIES	32 816 794	37 053 940

1 The BS as of 31.12.2007 was revised to conform with 2008 presentation. Contingent consideration receivable which was originally presented as deduction from the financial liability to minorities is currently shown under long term receivables.

  XV   CONSOLIDATED CASH FLOWS FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 2008 AND 2007

 Financial statements in accordance with IFRS

(all figures in CZK ´000)	Twelve month period ending
	December 31, 2008 (unaudited)	December 31, 2007 (audited)
Cash flows from operating activities
Profit before income taxes	1 739 173	1 971 704
Adjustment for:
Depreciation, amortization expense and impairment	1 552 199	1 376 138
Net interest costs	819 999	488 085
(Gain)/Loss on disposal of property, plant and equipment	7 875	(13 582)
Other non-cash (gains)/charges, net	380 500	(247 070)
Operating cash flows before working capital changes	4 499 746	3 575 275
Changes in:
Accounts receivables	(527 204)	(423 173)
Inventory	443 900	312 755
Accounts payables	(103 971)	474 165
Other assets	(14 567)	42 785
Other liabilities and provisions	147 151	(47 401)
Cash generated from operations	4 445 055	3 934 406
Interest paid	(753 904)	(424 152)
Income taxes paid	(444 725)	(776 074)
Net cash flows from operating activities	3 246 426	2 734 180
Cash flows from/(used in) investing activities
Purchase of tangible and intangible assets	(1 242 434)	(1 369 356)
Proceeds from disposal of property, plant and equipment	38 155	52 814
Proceeds from/(Payments for) settlement of financial derivatives	(100 275)	-
Proceeds from disposal of assets held-for-sale	6 521	-
Proceeds from/Purchase of long-term receivables	(142)	(6 806)
Acquisitions, net of cash acquired	1 510 363	(12 966 682)
Interest received	169 365	53 699
Net cash flows from/(used in) investing activities	381 553	(14 236 331)
Cash flows from/(used in) financing activities
Proceeds from/(Purchase of) treasury shares	23 509	(59 687)
Proceeds from borrowings	1 274 688	16 262 151
Repayment of borrowings	(3 743 202)	(3 069 522)
Dividends paid to equity holder of the parent	(280 943)	(437 217)
Dividends paid to minority interests	(46 470)	(35 468)
Net cash flows from/(used in) financing activities	(2 772 418)	12 660 257
Net increase/(decrease) in cash and cash equivalents	855 561	1 158 106
Net foreign exchange difference	(236 799)	(120 021)
Cash and cash equivalents at the beginning of the period (12)	2 227 583	1 189 498
Cash and cash equivalents at the end of the period (1)	2 846 345	2 227 583
Free cash flow YTD (before acquisitions)	2 117 616	1 464 531

Footnotes

• Profit before Tax and Finance costs

• Free Cash Flow before acquisitions

• Profit for the period attributable to equity holders of the parent

• Earnings efore Interest, Tax, Depreciation, Amortization and impairment charged

• Free Cash Flow before acquisitions 

• 12M/4Q 2007 Sales and Commercial staff were revised to conform with 2008 reporting

• Includes contract manufacturing sales and other sales

• Source: RMBC (Retail market), December 2008, YTD data

• Source: IMS (Retail market), December 2008, YTD data

• 12M/4Q 2007 Commercial staff was revised to conform with 2008 reporting

• Full wording of the Announcements is available on www.zentiva.cz in the section 'Investors'

• Cash and cash equivalents and Cash restricted more than 3 months

Investor Relations		Media Relations
Petr Šulc Chief Financial Officer Tel: +420 267 242 737 petr.sulc@zentiva.cz	Alexander Marček Corporate Finance Director Tel: +420 267 243 745 alexander.marcek@zentiva.cz	Věra Kudynová PR Manager Tel: +420 267 242 312 vera.kudynova@zentiva.cz
Liběna Stiebitzová Investor Relations Specialist Tel: +420 267 243 055 libena.stiebitzova@zentiva.cz	General Inquiries Tel: +420 267 243 888 Fax: +420 272 702 869 investor.relations@zentiva.cz	Citigate Dewe Rogerson  Tel: +44 (0)20 7638 9571     David Dible david.dible@citigatedr.co.uk Chris Gardner  chris.gardner@citigatedr.co.uk

IMPORTANT NOTICES

Forward-looking Statements

This document contains 'forward-looking statements'. These forward-looking statements include all statements that are not historically known facts. They appear in a number of places throughout this document and include, but are not limited to, statements and underlying assumptions regarding Zentiva's intentions, beliefs, projections, plans, objectives, estimates, and current expectations concerning, amongst other things, Zentiva's results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the countries and industries in which Zentiva operates. Forward-looking statements are generally identified by the words 'expects,' 'anticipates,' 'believes,' 'intends,' 'estimates,' 'plans' and similar expressions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, many of which are difficult to predict and generally beyond the control of Zentiva. Forward-looking statements are not guarantees of future performance, and the actual results of Zentiva's operations, financial condition, liquidity, performance, prospects, growth, strategies, and the development of the countries and the industries in which Zentiva operates may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. Other than as required by applicable law, Zentiva does not undertake any obligation to update or revise any forward-looking information or statements.

Other Important Notices

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or global depositary shares in Zentiva, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. 

Recipients of this document, or any part or any copy of it, may not, directly or indirectly, take, or transmit into, or further distribute the document in, the United States, Canada, Australia, or Japan, or to any resident thereof. The distribution of this document in other jurisdictions may also be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of US, Canadian, Japanese, Australian or other securities laws.

Zentiva's ordinary shares and global depositary shares have not been and will not be registered under the US Securities Act of 1933 (the 'Securities Act') and may not be offered or sold in the US except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

For the purpose of Section 21 of the Financial Services and Markets Act 2000 of the United Kingdom (the 'FSMA'), any potential invitation or inducement to engage in any investment activity included within this document (which Zentiva believes there is none) is directed only at (i) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) of the United Kingdom (the 'Financial Promotion Order'); (ii) persons who fall within Articles 49(2)(a) to (d) ('high net worth companies, unincorporated associations etc.') of the Financial Promotion Order; and (iii) any other persons to whom this document for the purposes of Section 21 of FSMA can otherwise lawfully be made (all such persons together being referred to as 'relevant persons'), and must not be acted on or relied upon by persons other than relevant persons. Any potential invitation or inducement to engage in any investment activity included within this document (which Zentiva believes there is none) is available only to relevant persons and will be engaged in only with relevant persons.

This document is published in both English and Czech version, however, only its English version should be considered the official one. Its Czech version is published solely for information purposes, and no representation is made and no warranty is given as to the accuracy of the Czech translation. Should there be any difference between the English and Czech version of this document, the English version shall always prevail.

NOTE FOR EDITORS

Zentiva N.V. is an international pharmaceutical company focused on developing, manufacturing and marketing modern generic pharmaceutical products. The Company has leading positions in the pharmaceutical markets in the Czech Republic, Slovakia, Romania, and Turkey and is growing rapidly in Poland, Russia, Bulgaria, Hungary, the Ukraine and the Baltic States. Zentiva's strategy is to further this growth by increasing patient access to modern medicines through primary care providers within the EU and Eastern Europe. This growth will be based on further organic development of Zentiva's existing business and through selective acquisitions, whilst maintaining profitable growth.

The Company addresses a wide range of therapeutic areas but has a particular focus on cardiovascular disorders, inflammatory conditions, pain, infections and diseases of the central nervous system and the gastrointestinal and urology fields.

The Zentiva Group employs almost 6,000 people and has production sites in the Czech Republic, Slovakia, Romania, and Turkey.

Zentiva is listed on the Prague and London Stock Exchange.

ENDFR BBGDXLGDGGCX