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Sanofi cuts forecasts but says worst effects of patent cliff have passed

Sales continue to fall on generic competition and mismanagement in Brazil affects emerging markets

Sanofi reception

Generics continued to take a bite out of Sanofi's revenues in the second quarter, forcing the company to trim its year-end forecasts, although CEO Chris Viehbacher said the worst of the patent cliff is now behind the company.

Sales fell almost 10 per cent in the quarter to €8bn ($10.6bn), with around €480m lost to generic competition compared to the same period of 2012 and inventory mismanagement in its Brazilian generics unit causing revenues in emerging markets to drop 2 per cent.

Earnings per share (EPS) were down 19 per cent to €1.11, and Sanofi is now predicting 2013 EPS will be 7 to 10 per cent lower than 2012, having said earlier it expected a 5 per cent fall.

Viehbacher said it had been a "difficult quarter" but the company expects to return to growth in the second half of the year as the impact of generic competition to older drugs such as blood thinners Lovenox (enoxaparin) and Plavix (clopidogrel) recedes and growth platforms - including diabetes, vaccines and speciality medicine subsidiary Genzyme - gain the ascendancy.

Diabetes products delivered growth of 16 per cent, driven by long-acting insulin Lantus (insulin glargine), which rose nearly 18 per cent to €1.41bn, and while vaccine sales were flat at €760m the unit suffered from comparison with the same period in 2012 caused by a delay in flu vaccine shipments from the first quarter.

Genzyme went from strength to strength, with its portfolio of drugs for rare diseases bringing in €492m, up 17 per cent, and new oral multiple sclerosis treatment Aubagio (teriflunomide) adding another €33m to the pot.

The emerging markets performance was a disappointment - with overall generics sales at Sanofi down more than a third to €300m - with the problems pinned squarely at the door of Sanofi's Brazil unit, where overstocking of inventory forced the company to recall swathes of product at or near expiry dates.

New management has been appointed both in Brazil and Latin America, according to Viehbacher, who noted that - excluding Brazil - generic sales increased 10 per cent.

Arguably more worrying for Sanofi are the recent setbacks in its R&D pipeline, with recent casualties including lung cancer treatment iniparib and blood thinner otamixaban, although it still has 14 projects in the phase III or pre-registration stages.

Viehbacher said the company is still open to making acquisitions but at the moment is focusing on area such as emerging markets, branded generics and consumer healthcare, continuing the company's diversification to reduce its reliance on branded medicines.

1st August 2013

From: Sales

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