Bloomberg News

Sanofi Sees 2012 Profit Dropping as Much as 15% on Generics

February 09, 2012

(Updates with investor comment in sixth paragraph; CEO comment in eighth.)

Feb. 8 (Bloomberg) -- Sanofi, France’s biggest drugmaker, said profit may drop as much as 15 percent this year, hurt by generic competition to its Plavix blood thinner and Avapro hypertension drug in the U.S.

Earnings per share excluding some costs will probably decline by 12 percent to 15 percent at constant exchange rates, Paris-based Sanofi said in an e-mailed statement today. Analysts surveyed by Bloomberg expect earnings to drop 12 percent this year. Sanofi shares fell as much as 3 percent.

Chief Executive Officer Chris Viehbacher has expanded in areas such as emerging markets and bought Genzyme Corp. in April to gain treatments for rare diseases, seeking to shield Sanofi from another wave of patent expirations. Cheaper copies of Plavix and Avapro will wipe out about 1.4 billion euros ($1.86 billion) in profit this year, when the impact of the so-called patent cliff is the greatest.

“2012 has been marked red in my diary for years,” Viehbacher said in an interview on Bloomberg Television today. “We cannot compensate for that in one year but we can compensate over time. As we come out of the cliff, Sanofi is extremely well positioned for growth.”

Cautious by Tradition

Sanofi fell 1.7 percent to 55.59 euros at 12:30 p.m. in Paris. The stock has returned 14 percent over the past year including reinvested dividends, compared with 17 percent for the Bloomberg Europe Pharmaceutical Index.

“The drop in earnings Sanofi forecast for 2012 is a bit greater than some analysts had expected,” Jerome Forneris, who helps manage $9.9 billion, including Sanofi shares, at Banque Martin Maurel in Marseille, said in a phone interview. “This is hurting the shares today.”

The French drugmaker reported a 13 percent increase in fourth-quarter profit, boosted by the Genzyme acquisition and higher demand for its Lantus diabetes medicine. Profit excluding some costs climbed to 2.08 billion euros, or 1.56 euros a share, matching the average estimate in a Bloomberg survey of 11 analysts.

The 2012 profit estimate is in line with Sanofi’s 2012-2015 plan announced in September, Viehbacher said in an interview.

“I think 12 to 15 percent is where we saw the market expectations,” Viehbacher said. Sanofi must abide by a “tradition of being a little on the cautious side,” particularly in the current economic environment, the 51-year- old executive said.

‘Solid, Quiet’

Sales rose 8.8 percent to 8.51 billion last quarter, in line with the average estimate of 18 analysts. Genzyme sales reached 831 million euros. Revenue from Lantus, the company’s best-selling product, surged 18 percent to 1.05 billion euros, exceeding 1 billion euros in quarterly sales for the first time, Sanofi said.

The company reported a “solid, quiet quarter which will help build investor credibility,” Tim Anderson, an analyst at Sanford C. Bernstein, wrote in a note to clients.

Stockholders will receive a dividend of 2.65 euros a share, a pay-out ratio of 40 percent. That’s up from 2.50 euros a year earlier. Sanofi reiterated today it plans to increase the percentage of earnings it pays out in dividends to 50 percent by 2014 from 35 percent in 2011.

Plant Trouble

Sanofi said last month that the U.S. Food and Drug Administration approved a new plant in Framingham, Massachusetts, that will help Genzyme eliminate shortages of its rare-disease medicines Fabrazyme and Cerezyme. Production recovery is “well under way,” the company said today.

“The approval of the Framingham plant was a key milestone to reassure investors on Sanofi’s ability to fix the Genzyme issues and the credibility of the management,” Vincent Meunier, an analyst at Exane BNP Paribas in Paris, wrote in a Feb. 6 note to clients. He has an “outperform” recommendation on Sanofi.

The company plans to increase earnings by more than 5 percent annually and trim costs by 2 billion euros through 2015, Sanofi said in September. It reiterated today that sales should rise by at least 5 percent a year in the period. It’s counting on growth in emerging markets, diabetes products, vaccines, consumer health care, veterinary medicines and new patented drugs to more than replace sales lost to generics.

Sanofi said today Genzyme is still gathering documents to submit its experimental drug Lemtrada as a treatment for relapsing multiple sclerosis to U.S. and European Union regulators in the second quarter. The company said Nov. 3 it was expecting to file for Lemtrada’s approval this quarter.

Sanofi also said a new formulation of Lantus started being tested in a late-stage clinical trial program.

--With assistance from Caroline Connan in Paris. Editors: Marthe Fourcade, Phil Serafino, Tom Lavell.

To contact the reporter on this story: Albertina Torsoli in Paris at atorsoli@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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