Sanofi posts drop in third-quarter net income, lifts annual outlook

Sanofi's third-quarter net income slipped 23 percent versus the year-ago period to 1.6 billion euros ($2.1 billion), although the company issued a slightly more optimistic outlook for the full-year. The drugmaker indicated that it now expects a 12-percent drop in adjusted earnings per share for 2012, while it previously projected the decrease at as much as 15 percent.

CEO Christopher A. Viehbacher remarked that "the loss of exclusivity for Eloxatin in August in the US marks the final step in the genericisation of our legacy blockbusters," with quarterly sales lost to generic competition reaching 448 million euros ($580 million). "The long-expected impact of generic competition is having its way but we are really seeing a light at the end of the tunnel," Viehbacher noted, adding that "the solid performance of our growth platforms...coupled with tight cost control, allowed us to limit the impact of the patent cliff."

Overall sales in the three-month period rose 3.3 percent to 9 billion euros ($11.7 billion), while revenue from prescription drugs increased 1.4 percent to 7 billion euros ($9.1 billion). In the quarter, Sanofi said that sales of its growth platforms, which include diabetes drugs, vaccines, Genzyme products and emerging markets, rose 6.4 percent on a constant exchange rate basis to 6.4 billion euros ($8.3 billion). Viehbacher noted that these businesses now account for over 70 percent of sales, up from less than half of revenue four years ago.

Third-quarter sales in the US fell 8.5 percent on a constant exchange rate basis to just under 3 billion euros ($3.9 billion), as generic competition negatively affected Eloxatin and Lovenox. Revenue in Western Europe dropped 11.6 percent to 2 billion euros ($3 billion), affected not only by patent expiries, but also by the transfer of the Copaxone business to Teva. Sales from emerging markets were up 6.8 percent on a constant exchange rate basis compared to the year-ago period to 2.8 billion euros ($3.6 billion), including double-digit growth from diabetes products. Third-quarter sales in China reached 341 million euros ($442 million), up 11.9 percent, with revenue from Russia jumping 20.6 percent to 204 million euros ($264 million).

For specific products, sales of Lantus surged 32.1 percent to 1.3 billion euros ($1.7 billion), which Sanofi noted was "driven" by the US, Japan and emerging markets. In the quarter, sales of Plavix attributable to Sanofi slipped 2.3 percent year-over-year to 505 million euros ($654 million), while revenue from Avapro, which is sold by the drugmaker as Aprovel, declined 5 percent to 298 million euros ($386 million). Earlier this month, Sanofi and partner Bristol-Myers Squibb restructured their agreement following the loss of exclusivity of Plavix and Avapro/Avalide in many major markets. In the US, sales of Plavix consolidated by Bristol-Myers Squibb plummeted 97.5 percent to 33 million euros ($43 million), while the product's revenue in Europe declined 29.6 percent to 102 million euros ($132 million).

Further, sales of Lovenox in the three-month period fell 11.5 percent versus the same quarter of 2011 to 437 million euros ($566 million), "due to generic pressure in the US," where revenue declined 63.2 percent to 55 million euros ($71 million). Sales of Eloxatin were down 58.4 percent at 129 million euros ($167 million), while revenue from Sanofi's vaccine unit jumped 10.3 percent to 1.5 billion euros ($1.9 billion).

The company's Genzyme business posted revenue of 470 million euros ($608 million), up 30.6 percent on the prior-year period, as sales of Fabrazyme recovered following approval of a new manufacturing plant in January and the return of all existing patients in all markets to full doses. The product's revenue surged 171.9 percent to 87 million euros ($113 million).

Societe Generale analyst Stephen McGarry noted that the third quarter was "the first full quarter with all three major patent expiries," adding that 2012 "represents the trough year for Sanofi’s earnings." Meanwhile, Sanford C. Bernstein & Co. analyst Tim Anderson said the three-month period was "good" for Sanofi, "with raised 2012 guidance." He suggested that the company "should be capable of returning to very consistent revenue and EPS growth over the long-term, which makes it unique among its peers."

To read more Top Story articles, click here.