Sanofi Narrows Full-Year Forecast as Quarterly Profit Drops

Sanofi CEO Chris Viehbacher
Chris Viehbacher, chief executive officer of Sanofi. Photographer: Fabrice Dimier/Bloomberg

Sanofi reported third-quarter profit that fell less than analysts estimated and said earnings may drop less than previously forecast this year.

Business net income, meaning earnings excluding some costs, fell 7.4 percent to 2.22 billion euros ($2.88 billion), or 1.68 euros a share, in the quarter, from 2.4 billion euros, or 1.79 euros a share, a year earlier, Paris-based Sanofi said in an e-mailed statement today. That exceeded the 2.01 billion-euro estimate of 14 analysts compiled by Bloomberg.

France’s largest drugmaker, which faces generic competition to three crucial drugs, expects profit to drop about 12 percent at constant exchange rates this year. Previously it had forecast a decline of between 12 percent and 15 percent.

“The long-expected impact of generic competition is having its way but we are really seeing a light at the end of the tunnel,” Chief Executive Officer Chris Viehbacher said on a conference call today.

Viehbacher has been cutting costs and resorting to acquisitions to make up for generic competition to Sanofi’s best-sellers. The blood thinner Plavix lost U.S. market exclusivity on May 17. Generic competition to Plavix and the hypertension medicine Avapro wiped out 469 million euros of profit there last quarter, Sanofi said. Cheaper copies of its drugs also shaved 448 million euros off sales, mainly due to competition to the cancer drug Eloxatin.

Plavix Slumps

Sanofi shares gained 1.4 percent, to 67.04 euros in Paris trading, giving the drugmaker a market value of 89 billion euros. Through yesterday, the stock returned 38 percent over the past year including reinvested dividends, beating the 29 percent increase of the Bloomberg Europe Pharmaceutical Index.

The quarter was “good” for Sanofi, “with raised 2012 guidance,” Tim Anderson, an analyst with Sanford C. Bernstein & Co. in New York, wrote in note to investors.

Net sales slipped 3.1 percent to 9.04 billion euros at constant exchange rates, beating analysts’ estimates.

Overall revenue from Plavix, which includes non-consolidated sales from U.S. partner Bristol-Myers Squibb Co., plunged 70 percent to 568 million euros at constant exchange rates, led by a 98 percent decline in the U.S. Avapro retreated 84 percent to 16 million euros there.

Eloxatin sales fell 58 percent to 129 million euros during the quarter.

‘Growth Trajectory’

The three months ended on Sept. 30 were “the first full quarter with all three major patent expiries in 2012,” Stephen McGarry, an analyst at Societe Generale in London, wrote in a note to clients yesterday. This year “represents the trough year for Sanofi’s earnings.”

Sales from the Lantus diabetes treatment surged 32 percent to 1.28 billion euros, led by gains in the U.S., emerging markets and Japan, Sanofi said. Lantus faces competition from Novo Nordisk A/S’s new insulin Tresiba, which was approved in Japan last month and won backing from a European Union advisory panel on Oct. 19. The U.S. Food and Drug Administration will hold an advisory committee meeting on Nov. 8 to discuss Tresiba.

The outcome of the FDA panel meeting will be “more important” than today’s results for Sanofi, Richard Vosser and other analysts at JPMorgan wrote in an Oct. 23 note to clients. The FDA committee’s ruling “could increase confidence in Lantus sales going forward, should Tresiba face a delay.”

Sales of Fabrazyme, a treatment for a rare illness known as Fabry’s disease that Sanofi gained through last year’s purchase of Cambridge, Massachusetts-based Genzyme, showed a “strong recovery” in the third quarter, surging 172 percent to 87 million euros. Revenue from the newly-reorganized Genzyme rose 31 percent to 470 million euros.

Sales from vaccines and animal health products both advanced 10 percent in the period, Sanofi said.

“Our growth platforms continue to build steam,” Viehbacher told reporters today. “This is what we believe will put Sanofi back in the growth trajectory.”


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