) reported third quarter 2013 business earnings of 89 cents per
American Depository Share (ADS), below the Zacks Consensus
Estimate of $1.01. Earnings were down 9% at constant exchange
rates (CER) from the year-ago period.
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Third quarter net sales decreased 6.7% on a reported basis and
marginally increased 0.6% at CER. Foreign exchange movements
negatively impacted sales during the quarter as currencies
including the Japanese Yen and U.S. Dollar depreciated as
compared to the Euro. A strong performance from growth platforms
was offset by a slowdown in China and lower sales of Brazil
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 increased 2.7% to €6.7 billion.
Revenues were negatively impacted by generic competition (€191
million). However, we note that the loss of revenues due to
generic competition was much higher in the second quarter at €481
Sanofi is slowly recovering as the effect of the genericization
of a number of major drugs is gradually fading. Though the major
patent expiries are over, Sanofi still continues to witness
In the third quarter of 2013, Eloxatin sales nosedived 58.1% to
€50 million due to generic competition. The product went off
patent in the U.S. on Aug 9, 2012.
Generic competition also affected Lovenox revenues, which
declined 3.7% to €401 million and Aprovel/Avapro revenues, which
dropped 25.5% to €210 million. Ambien (down 10.3%) and Taxotere
(down 24%) sales were also impacted by generic erosion.
The diabetes franchise (up 20.1% to €1.7 billion) continued to
perform well with growth driven by Lantus (up 21.2% to €1.5
billion). Apidra sales went up 36.8% to €73 million in the third
quarter of 2013. Newly launched (in UK, Germany, Spain) Lyxumia
generated sales of €3 million in the third quarter of 2013.
Genzyme sales increased 21.1% to €529 million. Cerezyme sales
increased 8.6% to €165 million. Myozyme sales increased 14.7% to
€127 million. Both the products benefited from the addition of
new patients and growth in Emerging Markets.
Fabrazyme sales were €96 million, up 19.5%, benefiting from
patients switching to Fabrazyme from
) Replagal in the Western European market and new patient
Newly launched Aubagio generated sales of €44 million in the
third quarter of 2013 as compared to €33 million in the second
quarter of 2013. Revenues from Genzyme are expected to increase
with Lemtrada gaining EU approval for the treatment of adults
with relapsing remitting multiple sclerosis.
Zaltrap, another newly launched product, generated sales of €13
million in the third quarter of 2013 as compared to €14 million
in second quarter 2013. Sanofi has developed Zaltrap in
Regeneron Pharmaceuticals, Inc.
Sales in the consumer health care business climbed 9.8% to €742
million driven by Doliprane, Allegra, Essentiale, No Spa and
Enterogermina and the re-launch of Rolaids in September. In Jan
2013, Sanofi acquired worldwide rights to Rolaids from McNeil
Consumer Healthcare, a subsidiary of
Johnson and Johnson
). Sanofi's consumer health care portfolio was boosted when the
U.S. Food and Drug Administration (FDA) approved Nasacort 24HR
nasal spray. The drug was approved as an over-the-counter (OTC)
treatment for seasonal and other nasal allergies for use in
children above 2 years and adults. Nasacort 24HR nasal spray will
be available from the spring of 2014.
The Generics sub-group at Sanofi continued with its disappointing
performance in the third quarter of 2013 with sales declining
5.4% to €424 million. Lower sales in Brazil due to inventory
mismanagement hurt results during the quarter. Sales are however
expected to improve going forward.
Third quarter 2013 Human Vaccines revenues were €1.3 billion,
down 7.2%. Lower revenues were due to a manufacturing issue at
the Toronto site which led to shortage of Pentacel, Adacel and
Daptacel. The supply is expected to improve in the fourth quarter
of 2013. Sales of the Animal Health segment decreased 6.4%
to €458 million in the third quarter of 2013.
At the end of Oct 2013, Sanofi's pipeline consisted of 51 new
molecular entities and vaccines in clinical development, of which
12 were either undergoing phase III studies or were under
The company adjusted its 2013 business earnings guidance to take
into account the vaccine shortage in the third quarter. 2013
business earnings per share are now expected to decrease around
10% (at CER) from 2012 levels (previous guidance: decrease 7% to
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
Sanofi carries a Zacks Rank #3 (Hold). Companies that currently
look attractive include Johnson and Johnson, carrying a Zacks
Rank #2 (Buy).