Sanofi Shares Slump on Forecast for 5% Profit Drop This Year

Sanofi said profit may drop as much as 5 percent this year as generic competition to the Plavix blood thinner crimps sales and it spends to introduce new medicines. The stock fell the most in nine months.

Earnings per share excluding some costs will probably be unchanged at best or down 5 percent at worst from last year, at constant exchange rates, the Paris-based drugmaker said in a statement today. Analysts surveyed by Bloomberg expect earnings to slip 0.2 percent this year.

The guidance “is disappointing compared to consensus expectations,” Amit Roy, an analyst with Nomura in London, who has a neutral recommendation on the stock, said in a phone interview. “2012 was meant to be their trough year.”

Chief Executive Officer Chris Viehbacher has sought partnerships and acquisitions to replenish Sanofi’s drug pipeline and make up for the revenue losses caused by generic competition to the company’s top-selling products. He is introducing new products such as Aubagio, a pill for multiple sclerosis, and Lyxumia, a diabetes drug that won regulatory approval in Europe this week.

Sanofi fell 4 percent, the biggest intraday drop since May 10, to 66.60 euros in Paris. Partner Zealand Pharma A/S, which developed Lyxumia, slid 20 percent, the most since its initial public offering in 2010, after saying advanced clinical trials to test the medicine in combination with Sanofi’s bestseller Lantus wouldn’t start this year as planned.

Generic Pain

The combination tests will be pushed back because of a technical issue with the Fix-Flex pen, the device needed to inject the double medicine, the companies said. It’s unclear whether the trial can take place in 2014, Elias Zerhouni, who heads research and development, said at a press conference.

“Significant delays to the insulin combination do not bode well for this franchise” because Lyxumia isn’t competitive on its own, Alistair Campbell and Louise Hinds, analysts at Berenberg Bank, wrote in a note to clients.

Cheaper copies of Plavix and Avapro, a drug for hypertension, in the U.S. may wipe out about 800 million euros ($1.08 billion) from earnings in the first half, Sanofi said. The company said it expects growth to resume in the second half.

Sanofi reported a 24 percent decline in fourth-quarter profit because of generic competition to products including Plavix, Avapro and the Eloxatin cancer medicine in the U.S.

Business net income, meaning earnings excluding some costs, was 1.57 billion euros, or 1.19 euros a share, in the quarter, down from 2.08 billion euros, or 1.56 euros a share, a year earlier, the company said. That exceeded the 1.17 euro-a-share average estimate of 14 analysts compiled by Bloomberg.

Dividend Increase

Plavix lost market exclusivity in the U.S. on May 17. Sanofi also suffered from U.S. generic competition to Eloxatin and its Lovenox blood-thinner.

The fourth quarter “has taken the full brunt of the major patent expiries,” Mark Purcell, an analyst at Barclays Plc in London, wrote in a note before Sanofi published results.

Net sales advanced 0.2 percent to 8.53 billion euros in the quarter, exceeding analysts’ estimates.

Shareholders will receive a dividend of 2.77 euros a share, representing a pay-out ratio of 45 percent, the French drugmaker said. That’s up from 2.65 euros a year earlier.

Sanofi shares have returned 29 percent over the year through yesterday including reinvested dividends, beating the 21 percent increase of the Bloomberg Europe Pharmaceutical Index. The French drugmaker hasn’t bought back shares since September.

‘Robust Pipeline’

Sanofi reaffirmed its 2015 targets and said it’s “on track” to meet its 2 billion-euro cost savings goal by then.

“We have a robust pipeline that we are starting to roll out, that’s really starting a new chapter” for Sanofi, Viehbacher told reporters on a conference call.

The drugmaker is targeting “bolt-on” acquisitions in the price range of 1 billion euros to 2 billion euros this year, Viehbacher reiterated today. The company won’t rule out larger, “opportunistic” deals, “but so far we haven’t really seen anything that allows us to drive value creation,” he said.

Viehbacher declined to comment on a possible interest in the U.S. ophthalmology company Bausch & Lomb Inc.

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