Sanofi Raises Profit Forecast on Diabetes, Orphan Drugs
Sanofi (SAN) raised its profit forecast for the year after reporting higher second-quarter earnings as it benefits from increased prices in the U.S. for its top-selling product, the diabetes medicine Lantus.
Earnings per share excluding some costs and currency swings will rise by 6 percent to 8 percent this year, Paris-based Sanofi said in a statement today, compared with a previous forecast for growth of 4 percent to 7 percent. Second-quarter profit climbed 3.9 percent.
Sanofi, France’s biggest drugmaker, is also getting a boost from expanding sales of its rare-disease treatments. The company’s earnings growth shows that Sanofi has overcome the loss of patent protection to several of its key products, Chief Executive Officer Chris Viehbacher said today on a conference call with reporters.
“There is enough here to be positive on,” analysts led by Michael Leuchten at Barclays Plc wrote in a note today. “Sanofi has been trying to shift the focus to its pipeline for quite some time. This was a futile exercise as long as concerns about the base business caused uncertainty. With that out of the way we suspect the debate will now move onto pipeline assets that can drive revenues.”
Sanofi climbed 2.4 percent to 78.73 euros in Paris, the biggest gain in almost five months. The stock has lost 1.8 percent in the past year, making it the second-worst performer in the Bloomberg Europe Pharmaceutical Index, after GlaxoSmithKline Plc.
“Here’s a company that has derated massively, that is one of the cheapest versus its peers, widely perceived to have no pipeline and be over-reliant on one product, which is Lantus,” said Peter Verdult, an analyst at Citigroup Inc. in London. “If you were to take a blank piece of paper, and think in the next three months, which stocks have got price momentum, which stocks could work as a trade, Sanofi has that mixture: good valuation, catalysts and currently low expectations.”
Second-quarter profit excluding some costs and currency swings climbed to 1.54 billion euros ($2.06 billion), or 1.17 euros a share, from 1.48 billion euros, or 1.12 euros a share, a year earlier, when earnings were battered by inventory mismanagement in Brazil. Analysts predicted 1.14 euros a share, the average of 15 estimates compiled by Bloomberg.
Sales in the quarter increased 0.9 percent to 8.08 billion euros, compared with analysts’ estimates for 8.06 billion euros. The strengthening of the euro against the dollar and other currency moves wiped 5.5 percentage points from sales, Sanofi said.
About 60 percent of Lantus’s growth came from price increases, though competitive pressure in the U.S. is making it more difficult to raise prices, Viehbacher said.
“The U.S. is becoming a little bit more unsettled in terms of pricing,” he said. “There’s certainly a much greater competitive situation going on at payor level. That bears watching and that would be my only point of caution for the future.”
Revenue from the company’s so-called growth platforms, which excludes off-patent products such as the blood thinners Plavix and Lovenox, expanded 15 percent.
Sanofi has held talks with Mylan Inc., Abbott Laboratories and private equity-firms including Warburg Pincus LLC about a possible sale of its mature-products portfolio, according to an internal document obtained by Bloomberg News this month.
“It would be nice to find a solution for the products but they generate an awful lot of cashflow,” Viehbacher said on the call today. “Trying to find a solution for them that actually maintains the cashflow is not always easy.”
Viehbacher is looking for future growth from promising new products such as the cholesterol-lowering drug alirocumab, a new insulin called Toujeo and the world’s first dengue vaccine.
Sanofi said yesterday that alirocumab met the main goal of nine trials, and reduced the risk of death, heart attack and stroke in one of them. Sanofi tentatively plans to sell the drug under the brand name Praluent, Viehbacher said today.
“In my lengthy career in this industry, this is the most exciting medicine I’ve had the opportunity to see launched,” he said on the call.
The company, which developed Praluent with Regeneron Pharmaceuticals Inc., said it bought a voucher from BioMarin Pharmaceutical Inc. that may allow it to get a six-month review at the U.S. Food and Drug Administration instead of the usual 10 months. Viehbacher said he expects to start sales of the drug “slightly ahead or about the same time” as Amgen Inc., which is developing a similar therapy.
Sanofi said this month its experimental dengue vaccine protected some children against three out of four strains in a trial. The company is waiting for results from a larger study in Latin America and plans to seek approval next year in the countries most affected by the disease.
Sanofi said today it scrapped plans to develop SAR100842 for systemic sclerosis, and opted out of SAR153192, a cancer drug it co-developed with Regeneron. Sanofi said this week it decided to end an agreement with KaloBios Pharmaceuticals Inc. over the development of an experimental drug against a bacterial infection.
Net debt increased to 10.2 billion euros at the end of June from 6 billion euros at the end of last year.
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