July 31 (Bloomberg) -- Sanofi-Aventis SA, France's largest drugmaker, reported second-quarter earnings that missed analyst estimates as savings from job cuts failed to offset a decline in sales.

The shares fell the most in 6 years after the Paris-based company said profit excluding some one-time costs dropped 4.4 percent to 1.61 billion euros ($2.5 billion). Sanofi's three top- selling products, the Plavix and Lovenox clot drugs and Lantus for diabetes, were all below analyst forecasts.

Plavix sales declined 5.3 percent to 637 million euros. Sanofi lost a court case against Zurich-based Schweizerhall Holding AG this week that will allow generic versions of the medicine in Germany. Plavix, which Sanofi markets with Bristol- Myers Squibb Co., brought in $8.1 billion last year. Executives said today that they're ``cautiously optimistic'' that the competition can be limited to Germany.

``The Plavix issue in Europe is still very unclear both in terms of the current situation and for the future in terms of how fast and how far this can go,'' ABN Amro analyst Michael Leacock, who rates the shares ``hold,'' said in an interview. ``Clarity on that from management would have been very welcome.''

Sanofi fell as much as 3.93 euros, or 8.4 percent, in Paris trading. The stock dropped 5.9 percent to 44.49 euros at 11:03 a.m. The shares have declined 29 percent this year, lagging behind the Bloomberg Europe Pharmaceutical Index, which is down 11 percent.

Dire

The company needs new revenue to overcome generic competition to products, including Lovenox and Plavix, that bring in more than a third of drug sales. Revenue fell 3.6 percent to 6.89 billion euros in the quarter, hurt by lower than expected sales of Lovenox after the company recalled some contaminated batches.

``The revenue performance was dire and the pipeline is unimpressive,'' said Jeremy Batstone-Carr, an analyst at Charles Stanley & Co. in London, said in an e-mail interview. The ``upside is very limited.''

Sanofi raised its 2008 adjusted earnings per share target to an increase of ``around 8 percent,'' up from a forecast of a 7 percent rise reiterated in April.

The drugmaker was expected to earn 1.79 billion euros, the median estimate of five analysts surveyed by Bloomberg. Sanofi reported second-quarter earnings per share of 1.23 euros, down from 1.68 billion euros, or 1.24 euros a share, a year earlier.

Product Sales

Lovenox generated 637 million euros, missing a median analyst estimate of 718 million euros as recalls of contaminated heparin during the quarter hindered supply of the drug. Plavix sales were 664 million euros, while the Lantus diabetes medicine brought in 576 million euros.

``Some products were a bit under expectations, like Lovenox,'' Natixis analyst Philippe Lanone said in an interview from Paris. ``The cost-cutting effort has been strong, but the focus should be on the pipeline developments.''

Schweizerhall won German approval for Plavix in May, and Sanofi and New York-based Bristol-Myers went to court to block the competition. After a delay earlier this month, the court approved the generic copy on July 29.

Germany accounts for about 350 million euros, Sanofi said, and as much as 45 percent of that may face cheaper copies.

``It's impossible to give a precise outlook for Europe, but I'm overall cautiously optimistic that there will be no overall acceptance of the German situation,'' Hanspeter Spek, who runs Sanofi's pharmaceutical operations, said on a conference call today.

Drug Development

Sanofi today said it submitted its experimental Multaq irregular heartbeat treatment to U.S. and European regulators. In May, the company said it expected to enter the U.S. in the first quarter of next year, and Europe in the third quarter of 2009.

The French company also said today that the experimental depression treatment saredutant showed no significant benefit versus a placebo in a late-stage study called Magenta. The company, which had expected to win approval in the first half of 2009, said submission now depends on two more tests.

``There is now a question on the chances of this being filed at all,'' Lanone said.

On July 25, the maker of the Ambien sleeping pill agreed to buy U.K. partner Acambis Plc for 276 million pounds ($547 million) in cash to gain a smallpox vaccine ordered by the U.S. government for use during a terrorist attack. The companies already work together on vaccines for Japanese Encephalitis, dengue and West Nile virus.

Sanofi has been seeking new products amid growing competition from generic-drug makers. The acquisition will give Sanofi a decade-long $425 million contract that Cambridge, England-based Acambis won in April to supply the U.S. with the ACAM2000 smallpox vaccine.

Zentiva Offer

Sanofi is also trying to buy the rest of Zentiva NV, a Czech generic-drug maker. On July 18, Zentiva rejected Sanofi's $2.02 billion-offer as too low, saying the bid doesn't value Zentiva's improving operations or the potential of its eastern European markets.

Sanofi already owns a 24.9 percent stake and published its 1,050 koruna a share bid on July 11. The offer values Zentiva at 40 billion koruna ($2.6 billion). Shareholders have until Sept. 19 to decide on the offer, Sanofi spokesman Jean Marc Podvin said.

To contact the reporter on this story: Trista Kelley in London at tkelley2@bloomberg.net.

Last Updated: July 31, 2008 05:32 EDT