Sanofi CEO Olivier Brandicourt forecast a 9% drop in sales of diabetes medicines in 2018 after the disease area suffered a near-20% fall in the fourth quarter of 2017 due to continued pressure on pricing in the crucial U.S. market.
After announcing two multibillion-euro acquisitions in January, the CEO conceded that the Paris-based drugmaker still has the financial firepower for more deals, although he refused to be drawn on the current bidding process for Pfizer Inc.'s consumer health business.
"When it comes to M&A we said $20 billion target, you're right," he told reporters on a conference call following the 2017 full year and fourth quarter results. "CHC [consumer] remains an important part of our business. … I wouldn't make any specific comment on the Pfizer CHC business." Sanofi's consumer health business is estimated to be the third largest globally, with 4.3% market share, just behind Bayer AG and GlaxoSmithKline plc.
Since the start of the year, the CEO has been on an acquisition spree to deepen Sanofi's focus on rare diseases and restructured an existing deal with Alnylam Pharmaceuticals Inc. on fitusiran, as he attempts to address issues in the vaccines business, where Dengvaxia has suffered from safety concerns notably in the Philippines and after dropping development of an experimental Colostridium difficile vaccine.
On Jan. 22, Sanofi snapped up Bioverativ Inc. for $11.6 billion to bulk up the rare disease portfolio and expand further into hemophilia; a week later the Paris-based group snatched Ablynx NV from Novo Nordisk A/S by offering more than twice the price, scaling up the rare diseases offering and expanding into nanobody technology.
Sanofi has faced headwinds in its diabetes business due to increased competition and a tightening of prices in the U.S. and suffered from supply issues in its emerging markets vaccines business, as well as the fall out from Dengvaxia.
The rare disease portfolio is attractive on a number of levels — not least the acceleration of development times and high operating margins, as a smaller sales force is required to cater to a smaller group of doctors and treatment centers, Cowen & Co. analysts led by Steve Scala said in a note. These diseases also benefit from seven to 10 years of market exclusivity, and this can only be broken in certain circumstances, allowing for a revenue stream unchallenged by cheaper generics, for longer.
Brandicourt was speaking after the French pharmaceuticals group unveiled fourth quarter results in which diabetes and cardiovascular sales slumped by 19.1% and vaccines posted anemic growth of 1.2% due to costs associated with the Dengvaxia vaccine, stocking issues and a higher comparative period in the previous year — even though flu vaccines rose by 21%. Added to currency headwinds, earnings per share fell by 8.8% in the quarter.
Sanofi produces around 45% of the flu vaccine produced globally and supplied 70% of the flu vaccine to the Southern Hemisphere, according to
For the full year, Sanofi reported EPS of €5.54 and revenue of €35.05 billion, slightly lower than forecasts by Cowen, who were looking for 2017 EPS of €5.60 and a 4% fall in revenues to €35.11 billion. Cowen had penciled in a 12% drop in the diabetes market for the year to €6.4 billion and predicted the diabetes market will decline by 10%, more than Sanofi's estimate, in 2018 to €5.8 billion euros.
Looking ahead, Sanofi forecast EPS growth of 2% to 5% and said that the tax rate is likely to be around 22% following U.S. tax reform, which has not impacted the 2017 numbers. Still, a number of headwinds are likely to impact the first half of 2018 despite a strong expected performance of Dupixent for atopic dermatitis and eczema, Brandicourt said. "In other words, we expect a second half bias to our growth during 2018."
The CEO said China now represents 20% of total emerging market sales, due to continued strong sales of blood thinners Plavix and Lovenox, as well as diabetes medicine Lantus and vaccines. "China was once again the biggest growth driver in emerging markets for us," he said.
"On a full year basis we delivered 2017 results pretty much in-line with guidance," Brandicourt said on the call. "In other words, it played out pretty much as we expected it to and this was in spite of a challenging fourth quarter."
