United States unit Genzyme and diabetes platform drove sales growth.
IHS Global Insight Perspective | |
Significance | French firm Sanofi generated global sales up 6.2% year-on-year (y/y) to EUR8.9 billion (USD1.4 bilion) in the second quarter, but sales of pharmaceuticals were hurt as expected by generic competition and austerity measures. |
Implications | Sanofi's second quarter was marked by a decline in net income due to the loss of patent exclusivity for Plavix (clopidogrel) and Aprovel (irbesartan) in the United States. But overall, the firm achieved a positive sales performance thanks to its growth platforms and increased presence in emerging markets. |
Outlook | The firm is about to re-organise its research activities as new product launches will be needed to fuel future growth. |
French pharmaceutical giant Sanofi has achieved total second-quarter sales up 6.2% year-on-year (y/y/) to EUR8.9 billion thanks to the continued good performance of its diabetes platform and to Genzyme, its new subsidiary in the United States. Positively impacted by the recovery of Fabrazyme (agalsidase beta), "New Genzyme" recorded sales up 9.1% y/y to EUR434 million during the second quarter.
Meanwhile, Sanofi's lead diabetes drug Lantus (insulin glargine) garnered sales up 16.5% y/y to EUR1.2 billion. Overall, its growth platform—composed of emerging markets, diabetes, vaccines, consumer healthcare, animal health, and new products—grew 7.6% y/y to attain EUR5.8 billion.
Sanofi: Q2 and H1 2012 Financial Results | ||||
Q2 2012 | % Change Y/Y* | H1 2012 | % Change Y/Y* | |
Net Sales | 8,870 | 6.2% | 17,381 | 7.8% |
Other Revenues | 247 | -41.5% | 673 | -19.4% |
Cost of Sales | 2,730 | 5.5% | 5,343 | 7.9% |
R&D | 1,239 | 3.5% | 2,415 | 5.1% |
Selling and General Expenses | 2,289 | 0.9% | 4,410 | 5.0% |
Operating Income** | 2,612 | 13.8% | 5,213 | 11.4% |
Operating Margin | 29.4% | 1.9 pp higher | 30.0% | 1.0 pp higher |
R&D As % of Sales | 14.0% | 0.3 pp lower | 13.9% | 0.3 pp lower |
Net Income | 1,944 | -9.6% | 4,386 | 1.5% |
* Change calculated on a reported basis | ||||
Geographically, the emerging markets proved to be a strong growth driver with sales from the region growing 9.8% y/y to EUR2.8 billion in the second quarter, boosted by several of the group's growth platforms and most particularly by double-digit growth in its diabetes, vaccines, and consumer health units in the region. In the US, sales increased by 3% y/y to EUR2.8 billion, driven by the good performances of Lantus, Eloxatin (oxaliplatin), and authorised generics, which continued to more than offset pressure on the generic front for Taxotere (docetaxel) and Lovenox (enoxaparin). On the negative front, Sanofi faced a double-digit sales drop in Western Europe where revenue was affected by austerity measures and generic competition to Taxotere, Aprovel, and Plavix (clopidogrel). Sales were down 11% y/y to EUR2.1 billion in the region over the second quarter. Over the period, exchange-rate movements had a positive effect of 5.8 percentage points reflecting the appreciation of the US dollar, Japanese yen and Chinese yuan against the euro.
On the spending front, Sanofi allocated EUR1.2 billion to its research and development (R&D) department during the second quarter. Meanwhile, selling and general expenses amounted to EUR2.3 billion, up 0.9% y/y. The group's operating income—as calculated by IHS Global Insight—rose 13.8% y/y to EUR2.6 billion during the second quarter, and net income was down 9.6% y/y to EUR1.9 billion over the period.
Pharmaceutical sales were down 0.4% y/y to EUR7.5 billion due to austerity measures and losses linked to generic competition in Europe and the US. Over the period, generic competition had a EUR163 million impact on sales, mainly due to generic competition to Lovenox, Xatral (alfuzosin) and Taxotere in the US, and to Taxotere, Plavix and Aprovel in Europe. During the second quarter, Sanofi had to face another wave of patent expiry in the US where Plavix and Aprovel lost their patent protection in May and March, respectively. As a result, US sales of Plavix (consolidated by Bristol-Myers Squibb, US) declined by 59.9% y/y to EUR536 million. At a global level, Plavix's presence decreased 43.3% to EUR1.1 billion. Meanwhile, sales of Aprovel in the US declined 69.6% y/y as a result of the loss of exclusivity.
Sanofi: Q2 Sales of Leading Products | ||
Drug | Q2 2012 Net Sales (EUR Mil.) | % Change Y/Y* |
Lantus | 1,228 | 16.5% |
Apidra | 56 | 0.0% |
Plavix | 553 | -1.0% |
Lovenox | 489 | -11.0% |
Eloxatin | 375 | 35.9% |
Aprovel | 334 | -5.8% |
Taxotere | 159 | -27.9% |
Multaq | 64 | -14.7% |
Jevtana | 65 | 27.1% |
Cerezyme | 150 | -13.9% |
Myozyme/Lumizyme | 113 | 9.1% |
Fabrazyme | 74 | 123.3% |
Renagel/Renvela | 165 | 10.9% |
Synvisc/Synvisc One | 106 | 9.0% |
* CER Source: Sanofi | ||
On the positive side, Sanofi's performance was positively impacted by its latest major acquisition Genzyme, which contributed EUR434 million to the group's sales. Genzyme's lead drug Cerezyme (imiglucerase) achieved sales down 13.9% y/y due to quarterly variability of order patterns and strong comparables in the second-quarter of 2011. Meanwhile, Myozyme (alglucosidase alpha) and Fabrazyme garnered respective sales up 9.1% y/y to EUR113 million and up 123.3% y/y to EUR74 million.
March was marked by a return to full dosing for patients treated with Fabrazyme in the US; this has contributed to support the subsidiary's business over the second quarter. Meanwhile, Sanofi's diabetes business achieved continued growth during the second quarter, fuelled by strong sales of Lantus. Overall, the diabetes franchise brought in sales of EUR1.4 billion, up 13.7% y/y. The group's oncology franchise achieved sales of EUR751 million, up 7% y/y at CER. Growth in sales of oncology products was boosted by another strong quarter for Eloxatin (oxaliplatin), with sales up 53.3% y/y. Generic competition affected sales of Taxotere in the US and Western Europe. Sales of the product were down 27.9% y/y to EUR159 million during the first quarter. Meanwhile, second quarter sales of Jevtana (cabazitaxel) were up 18.8% y/y to EUR119 million, supported by its roll out in Western Europe.
Outlook and Implications
Sanofi's performance remains in line with its expectations for 2012. The firm confirmed its 2012 business earnings per share guidance—expected to be 12% to 15% lower than in 2011—based on the expected sales decline that will result from the loss of Plavix and Avapro exclusivity in the US, the continued success of its growth platforms, and austerity measures as well as further generic competition.
After the positive impact that resulted from the recovery of its patent exclusivity on Eloxatin in September 2011, Sanofi prepares to face generic competition soon since the US market exclusivity of Eloxatin will expire on 9 August. Despite the patent cliff, Sanofi has managed to build up strong growth platforms that should continue to offset generic losses in the short-to-medium term. The acquisition of Genzyme and its integration into Sanofi's structure is a strong sign that the French firm intends to build its presence in the biotech sector, which is far from its traditional business model that was mainly based on the development and commercialisation of blockbusters.
Going forward, Sanofi banks on new product roll-outs to bring in fresh sources of revenue. The last quarter has been marked by the approval of Sanofi Pasteur's poliovirus vaccine Imovax Polio in Japan and by the granting of an extended use to Lantus for the treatment of type 1 diabetes in children aged two to five years in Europe. The next compound to carefully follow is Lemtrada (alemtuzumab), which has recently been submitted for approval for the treatment of relapsing multiple sclerosis in the EU and US (see United States: 12 June 2012: Genzyme Files Lemtrada for US, EU Approval in MS).
The firm is about to announce a re-organisation of its research activities, with about 1,200–2,500 jobs said to be at risk in France. More details should be provided in September.