Sanofi Poised for Swift Medivation Move as Earnings Drop

  • Second-quarter profit drops 8.7% as Plavix, Lantus decline
  • Drugmaker maintains forecast for stable earnings in 2016

Sanofi said it’s ready to act swiftly to reach a deal with U.S. biotechnology company Medivation Inc. as profit and sales declined, highlighting the need for new medicines to propel growth.

“We have entered this new phase of our discussion with Medivation, which of course we expect will be much more productive,’’ Chief Executive Officer Olivier Brandicourt said on a conference call. “There is no certainty in terms of timing but we are ready clearly to move quickly.’’

Sanofi’s profit fell 8.7 percent last quarter as cheaper copies dented sales of the best-selling insulin Lantus and two new products had slower-than-expected starts. Medivation would bring the tumor-fighting drug Xtandi as well as two innovative experimental products with the potential to rouse Sanofi’s cancer business, which has languished since the former blockbusters Taxotere and Eloxatin faced generic competition.

Sanofi will remain financially disciplined in the latest round of talks with Medivation, Brandicourt said. The San Francisco-based company this month entered into confidentiality agreements with Sanofi and other parties that have expressed interest in a deal.

Mid-Size Deals

The French drugmaker will use acquisitions to strengthen its business in key areas including oncology, concentrating on “bolt-on” or mid-sized deals, Brandicourt told analysts in a separate conference call.

“Large M&A today is not part of our agenda,” he said.

Sanofi first offered $9.3 billion, or $52.50 a share, for Medivation. It upped its offer to $58 in cash and $3 in the form of a contingent value right relating to the sales performance of the experimental cancer medicine talazoparib after entering into confidentiality agreements, but Medivation spurned the raised bid as well.

The stock fell as much as 3 percent to 74 euros, the most in five weeks, and traded at 74.97 euros at 3:52 p.m. Paris time. That takes its loss to about 24 percent over the past 12 months.

“The quarter was somewhat challenging” because of the currency crisis in Venezuela and the loss of patent protection on the blood thinner Plavix in Japan, according to Brandicourt, who also reiterated the company’s full-year forecast.

Sales of the cholesterol medicine Praluent, developed with Regeneron Pharmaceuticals Inc., rose to 21 million euros ($23 million), almost doubling from the prior quarter. That’s still below an expectation of 25 million euros as Praluent continues to suffer from payer restrictions in the U.S., Alistair Campbell, a London-based analyst at Berenberg Bank, wrote in a note.

Praluent Reassures

Brandicourt said he’s “reassured by the latest U.S. prescription trends,” which indicate the medicine is gaining ground, although he expects those restrictions to continue to hamper growth until the end of the year.

Earnings excluding some items declined to 1.68 billion euros in the second quarter from 1.84 billion euros a year earlier, the Paris-based company said in a statement Friday. That compares with the 1.69 billion-euro average of 10 estimates compiled by Bloomberg. Sales fell short of forecasts, sliding to 8.87 billion euros.

Sales of Lantus dropped 16 percent to 1.2 billion euros in the quarter. The company tallies sales in two different ways in its report. By total franchise, Lantus sales were 1.47 billion euros, beating estimates. Dengvaxia, the company’s dengue vaccine, only garnered 1 million euros in sales and is unlikely to meet the targets set by the company for the year due to political volatility in Latin America, Sanofi said.

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