Sanofi Cuts Outlook After FDA Approves Lovenox Copy
Sanofi-Aventis SA chief executive officer Chris Viehbacher. Photographer: Nelson Ching/Bloomberg
Sanofi-Aventis SA, the French drugmaker that made a takeover approach to Genzyme Corp. two weeks ago, said profit may fall this year after U.S. regulators approved a generic rival to its Lovenox blood thinner.
Earnings per share at France’s biggest drugmaker will be unchanged at best and may decline as much as 4 percent at constant exchange rates, the Paris-based drugmaker said in an e- mailed statement. Sanofi’s previous estimate was for an increase of 2 percent to 5 percent this year.
The loss of U.S. marketing exclusivity on Lovenox shows why Sanofi is interested in buying Cambridge, Massachusetts-based Genzyme, said Gbola Amusa, a UBS AG analyst in London. The company made a takeover approach to Genzyme about two weeks ago, two people with knowledge of the matter said July 23. Genzyme rebuffed the approach, two people with knowledge of the matter said. Jean-Marc Podvin, a spokesman for Sanofi, declined to comment today.
“Five or six of their top eight drugs are in the process of or will go generic this year and companies losing drugs are under more pressure to fill that gap,” Amusa said in a phone interview. He has a “neutral” rating on Sanofi shares and doesn’t cover Genzyme, which is the largest maker of medicines for genetic diseases.
Sanofi shares rose 8 cents, or 0.2 percent, to 45.59 euros in Paris trading. The stock slid 4.3 percent on July 23 after the U.S. Food and Drug Administration approved a lower-cost copy of Lovenox from Novartis AG and Momenta Pharmaceuticals Inc.
Five-Year Wait
The decision ended a five-year wait to challenge the $3.9 billion-a-year product. Lovenox, an injection used to help prevent blood clots that can cause strokes, was Sanofi’s second- biggest product last year.
The loss of patent protection is already reflected in Sanofi’s share price, according to Graham Parry, an analyst at Bank of America Merrill Lynch in London. He raised his rating on Sanofi to “buy” from “neutral” today. “We now see Sanofi’s valuation as too compelling to ignore,” Parry wrote in a report to clients. An acquisition of Genzyme also may boost earnings per share, he wrote.
The French drugmaker “has reservations” about the approval, Sanofi said in the statement. The company “is concerned by potential implications to patient safety, since the product approved has not been subjected to extensive clinical trials to demonstrate its efficacy and safety.”
Genzyme Approaches
Chief Executive Officer Chris Viehbacher, who joined Sanofi in 2008, sought new products, shut plants and canceled the least promising research projects in a bid to trim 2 billion euros ($2.59 billion) in costs as competition from generic drugs hurts sales. He pledged that 2013 earnings would be at least equal to 2008 profit, an objective that the company reiterated in its statement on Lovenox.
London-based GlaxoSmithKline Plc recently made a “very casual” overture to Genzyme, asking the biotechnology company to keep it in mind if Genzyme considered selling itself, the Wall Street Journal reported, citing an unidentified person familiar with the matter. Alex Harrison, a Glaxo spokeswoman, declined to comment.
Glaxo fell 15 pence, or 1.3 percent, to 1,172 pence in London. The stock has lost 8.7 percent including reinvested dividends this year, compared with an increase of less than 0.3 percent for the Bloomberg European Pharmaceutical Index.
Sanofi’s Invitation
Sanofi’s approach to Genzyme was an invitation to enter into merger talks, without any discussion of price, said two people with knowledge of the matter, who declined to be named because the talks are private. Genzyme surged 15 percent to $62.52 at 4 p.m. New York time July 23 in Nasdaq Stock Market composite trading.
Acquiring Genzyme would help Sanofi expand in biotechnology. Viehbacher briefed Sanofi’s board the week of June 28 on plans for a major acquisition in the U.S., two other people with knowledge of the situation said.
Viehbacher is counting on acquisitions to help replace revenue lost to generic competition. Sanofi has spent about $17 billion on 25 acquisitions since he joined, according to data compiled by Bloomberg.
To contact the reporter on this story: Marthe Fourcade at mfourcade@bloomberg.net
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