) reported fourth quarter 2012 business earnings of 77 cents per
American Depository Share (ADS), in line with the Zacks Consensus
Estimate but below the year-ago earnings of $1.05 per ADS. Full
year earnings came in at $3.98 per ADS, below the Zacks Consensus
Estimate of $4.07 and the year-ago earnings of $4.63.
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Fourth quarter net sales increased 0.2% on a reported basis but
fell 1.7% at constant exchange rates (CER). The strong
performance of growth platforms was mitigated by generic
competition, European austerity measures, divestment of the
Dermik assets and the return of Copaxone assets. Full year net
sales increased 4.7% on a reported basis (up 0.5% at CER).
Sanofi operates through the following segments: Pharmaceuticals,
Human Vaccines and Animal Health. All growth rates mentioned
below are on a year-on-year basis and at CER.
Pharmaceutical segment sales decreased 4.8% to €7.0 billion.
Weaker revenues were primarily due to generic competition (€499
million), European pricing pressure, return of Copaxone assets
(€86 million) and Dermik divestment (€35 million). The diabetes
franchise (up 20.9% to €1.5 billion) continued performing well
with growth driven by Lantus (up 22.6% to €1.3 billion). Apidra
sales went up 82.9% to €65 million in the fourth quarter of 2012.
We note several of Sanofi's key products are facing generic
competition. In the fourth quarter of 2012, Eloxatin sales
nosedived 80.0% to €68 million due to generic competition. The
product went off patent in the US on Aug 9, 2012.
Generic competition also affected Plavix revenues, down 6.2% to
€503 million and Aprovel/Avapro/Karvea/Avalide revenues, down
34.1% to €212 million. We remind investors that Plavix and Avapro
went off patent in the US in May 2012 and Mar 2012, respectively.
Following the genericization of Plavix and Avapro in major
markets across the globe, Sanofi and its partner
Bristol-Myers Squibb Company
) revamped their long-standing alliance regarding the drugs. As
per the new agreement, effective from Jan 1, 2013, Sanofi sells
Avapro/Avalide globally and Plavix in all markets, except the US
and Puerto Rico.
Lovenox (down 13.1% to €441 million) also performed
disappointingly due to generic competition in the US.
Newly launched multiple sclerosis drug, Aubagio, generated US
sales of €7 million in the fourth quarter of 2012. In the EU, the
Committee for Medicinal Products for Human Use (CHMP) is expected
to give an opinion on the approval of Aubagio in the first
quarter of 2013.
New Genzyme sales increased 22.2% to €481 million. Cerezyme sales
increased 26.1% to €171 million. Myozyme/Lumizyme sales increased
11.1% to €121 million.
Fabrazyme sales were €84 million, up 74.5%. Higher revenues
reflected patients switching to Fabrazyme from
) Replagal and better product supply.
Sales in the consumer health care business climbed 11.2% to €732
million, driven by strong performance in the emerging markets in
the fourth quarter of 2012.
The Generics sub-group at Sanofi performed disappointingly in the
final quarter of 2012 with sales declining 7.2% to €458 million.
Reduced sales of the authorized generic versions of Lovenox hurt
results during the quarter.
Fourth quarter 2012 Human Vaccines revenues were €1.0 billion, up
20.5%. Sales of the Animal Health segment increased 6.6% to €506
million in the fourth quarter of 2012, supported by Emerging
Markets (up 14.0%).
The company expects 2013 business earnings per share to remain
flat to down 5% from 2012 levels (at CER). The Zacks Consensus
Estimate for 2013 is currently pegged at $4.13 per share.
Business net income will be impacted by around €800 million in
the first half of 2013 due to Plavix and Avapro genericization.
In 2013, US healthcare reform is expected to impact revenues by
almost €500 million, while European pricing pressure is expected
to have an impact of €300 million.
Sanofi is looking to combat the generic threat confronting most
of its key drugs by signing deals and making acquisitions. We are
pleased with Sanofi's efforts to develop its pipeline and believe
that newly approved products in Sanofi's portfolio hold huge
Since the start of 2013, several of Sanofi's pipeline candidates
gained approval including approval of diabetes candidate, Lyxumia
(lixisenatide) and oncology drug, Zaltrap (aflibercept) in Europe
and Kynamro for homozygous familial hypercholesterolemia (HoFH)
in the US.
At the beginning of Feb 2013, Sanofi's pipeline consisted of 64
new molecular entities and vaccines in clinical development, of
which 17 were either undergoing phase III studies or are under
Sanofi carries a Zacks Rank #1 (Strong Buy) in the short run.
) is an example of another equally attractive large-cap pharma
stock. It also carries a Zacks Rank of #1.