Sanofi Overcomes Diabetes Crunch, Surges After Boosting Forecast

  • Drugmaker to divest EU generics business within 12-24 months
  • Lantus successor won’t fully replace old best-seller’s sales

Sanofi raised its earnings forecast after soaring sales for flu vaccines and a multiple-sclerosis pill helped offset price pressures at the French drugmaker’s diabetes business in the U.S. The shares rose the most in more than seven years.

Earnings per share, excluding some items, will probably increase between 3 percent and 5 percent at constant exchange rates, the Paris-based company said in a statement on Friday. Sanofi had previously said earnings by that measure would be broadly stable. It’s starting a 3.5 billion-euro ($3.8 billion) share buyback program.

Sanofi is benefiting from a diverse portfolio compared with diabetes market competitor Novo Nordisk A/S, which slashed its forecast and saw its shares sink the most in more than 14 years. Chief Executive Officer Olivier Brandicourt is counting on new therapy areas to replace declining revenue from best-selling insulin Lantus, which lost patent protection last year. Sanofi on Friday confirmed a plan to divest its European generic-drug business, which garners about 800 million euros in annual sales, within the next year or two.

Lantus went off-patent just as a multiplicity of therapies spurred unprecedented price competition for diabetes medicines in the U.S. The drug’s successor, Toujeo, generated sales of 167 million euros last quarter. It probably won’t fully compensate for the drop in the older product’s sales, analyst estimates compiled by Bloomberg show.

Profit excluding some items at Sanofi rose to 2.3 billion euros in the third quarter from 2.1 billion euros a year earlier, the company said. That beat the 2 billion-euro average of 10 analyst estimates compiled by Bloomberg. Sales rose 2.1 percent to 9.65 billion euros, in line with analysts’ estimates.

The shares rose as much as 6.7 percent to 73.45 euros in Paris, their biggest intraday jump since 2009. Sanofi returned a 10 percent loss this year prior to Friday, compared with a 13 percent decline in the Bloomberg Europe 500 Pharmaceuticals Index.

Sanofi expects 1.5 billion euros of cost savings by 2018 under Brandicourt’s plan to reshape the company. The better-than-expected earnings were mostly due to cost controls in research, development and administrative expenses, Louise Pearson, an analyst at Berenberg Bank in London, wrote in a note to investors.

The drugmaker also got a boost from early shipment of flu vaccines to the U.S., and its vaccine sales climbed 14 percent to 1.8 billion euros. Revenue from MS pill Aubagio spiked 50 percent to 334 million euros, also driven by U.S. demand. Sales for Fabrazyme, an enzyme-replacement therapy for a rare genetic disease, climbed 20 percent to 176 million euros. The diabetes franchise dropped, with revenue from Lantus sinking 9.8 percent to 1.39 billion euros.

In August, CVS Health Corp. replaced Lantus on next year’s list of covered drugs with Eli Lilly & Co.’s Basaglar, a cheaper version of the insulin that is scheduled to be sold in the U.S. starting in December.

Sanofi also said regulatory approval of the experimental medicine sarilumab, expected in the fourth quarter, may be affected by a U.S. Food and Drug Administration plant inspection in Normandy, France, that found manufacturing issues.

Brandicourt said he was “disappointed” not to succeed in buying Medivation Inc., which Pfizer is acquiring for about $14 billion, but the company isn’t giving up its hope to revive its cancer business.

“We believe now that we can rebuild a meaningful market position in oncology thanks to our internal pipeline” as well as external collaborations, he said on a conference call with reporters. “We acknowledge that it will take time.”

Should attractive acquisition targets arise, the company is ready to “act rather swiftly,” he said.

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