Sanofi lifts annual earnings guidance after Q3 sales, profit rise

Sanofi announced Friday alongside its third-quarter financial results that it now expects business earnings per share to grow this year between 3 percent and 5 percent, having previously predicted that the figure would be "broadly stable." Shares in the company rose nearly as much as 7 percent on the news.

CEO Olivier Brandicourt commented "we have generated solid sales momentum in the third quarter and seen a strong contribution to our financial performance from savings and efficiencies arising from our more focused organisation." In the quarter, sales climbed 2 percent year-over-year to 9 billion euros ($9.8 billion), with revenue from influenza vaccines and multiple sclerosis drugs offsetting pricing pressures on diabetes products in the US.

Further, profit in the three-month period rose 2.8 percent to 1.7 billion euros ($1.9 billion), while Sanofi noted that business net income increased 9.7 percent to 2.3 billion euros ($2.5 billion), above analysts' expectations of around 2 billion euros ($2.2 billion). Berenberg Bank analyst Louise Pearson indicated that the better-than-expected earnings were mostly due to cost controls in research, development and administrative expenses.

In the quarter, sales of vaccines jumped 14.4 percent on a constant exchange rate basis to 1.8 billion euros ($2 billion), boosted by an early shipment of influenza vaccines to the US. Revenue from multiple sclerosis therapy Aubagio surged nearly 50 percent to 334 million euros ($364 million), also driven by demand in the US, while sales of Fabrazyme lifted 20.4 percent to 176 million euros ($192 million). Revenue at the company's Genzyme unit increased 16.9 percent to 1.3 billion euros ($1.4 billion).

Meanwhile, sales in Sanofi's diabetes franchise slipped 1.5 percent to 1.8 billion euros ($2 billion), with revenue from Lantus, which lost patent protection last year, falling 9.8 percent to 1.4 billion euros ($1.5 billion). In August, CVS Health replaced Lantus on its preferred formulary list for 2017 with Eli Lilly's Basaglar, which is set to be launched in the US in December. The company indicated that sales of Toujeo reached 167 million euros ($182 million).

Sanofi confirmed Friday that it plans to divest its European generic-drug business, which garners about 800 million euros ($873 million) in annual sales, within the next year or two. Chief financial officer Jérôme Contamine suggested that the profitability of the unit, which excludes generic drugs in Russia, CIS and Turkey, is "not very far" from the group average. However, Contamine noted that the business requires investment in areas, such as complex generics, that Sanofi is not ready to make.

Brandicourt said that while he was "disappointed" not to succeed in buying Medivation, which Pfizer is acquiring for about $14 billion, the company isn't giving up on reviving 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, Brandicourt remarked, adding "we acknowledge that it will take time." The executive noted that should an attractive acquisition targets arise, Sanofi is ready to "act rather swiftly."

The drugmaker also indicated that it is starting a 3.5 billion-euro ($3.8 billion) share buyback programme, which is expected to be complete by the end of 2017.

Regarding its pipeline, Sanofi suggested that a filing for the rheumatoid arthritis therapy sarilumab, which was accepted by the FDA in January and assigned a target review date of October 30, may be affected by a plant inspection in Normandy, France, that found "manufacturing deficiencies." Brandicourt said "we are working with the...FDA to resolve these issues as quickly as possible." Analysts predict that the drug, which is being developed with Regeneron Pharmaceuticals, could generate more than 500 million euros ($546 million) in annual sales.

To read more Top Story articles, click here.