Sector News

Sanofi shares sink as diabetes sales slow, CEO pressured

October 28, 2014
Life sciences
(Reuters) – French drugmaker Sanofi said sales growth at its leading business of diabetes treatments would stall next year due to tough competition on prices in the United States, sending its shares down more than 8 percent on Tuesday.
 
The diabetes headache adds to uncertainty surrounding France’s biggest drugmaker, whose German-Canadian chief executive has been forced to defend his position following reports the board chairman was seeking to replace him.
 
The drop in Sanofi’s shares was the steepest in five years and wiped 9.2 billion euros ($11.7 billion) off the company’s market value. Shares of its main rival in the diabetes field, Denmark’s Novo Nordisk, fell close to 3 percent.
 
“This is a setback for the company’s most important growth driver of recent years,” said Berenberg analyst Alistair Campbell, who has a “hold” rating on Sanofi stock.
 
Sanofi stuck to its 2014 profit forecast despite weaker-than-expected third-quarter sales. But analysts said the warning on diabetes sales, which account for over a fifth of group revenue and were expected to keep growing, would entail significant downgrades in their 2015 earnings forecasts.
 
“I’m somewhat bemused … and I think most people will be and will just reach for the panic button until we get some greater explanation of what’s going on,” said Deutsche Bank’s Mark Clark, ahead of an analyst call later in the day.
 
Moreover, Viehbacher did not come out to reporters with a clear line of support from his board, which only said in a statement yesterday that his succession was not on the agenda.
 
Questioned about reports the board chairman was seeking to oust him, Viehbacher only said he was focused on his job and that the board had supported his transformation of Sanofi over the past six years.
 
“I’m the CEO of this company, I’m focused on delivering results,” Viehbacher told reporters on a call.
 
Sanofi has sought in recent years to offset the impact of patent losses on big-selling drugs such as blood thinners Plavix and Lovenox by betting on harder-to-copy biotechnologies, over-the-counter treatments and animal health products.
 
But one of its key growth areas, diabetes, slowed sharply in the third quarter as it was forced to offer rebates on sales in the United States under pressure from health insurers seeking to save money and stiff competition.
 
Sanofi warned the impact was set to last and that diabetes drug sales would be “broadly stable” next year, when most analysts expected them to keep growing in the double digits.
 
Sales at the diabetes franchise rose 8.3 percent at constant exchange rates, from 16.2 percent growth in the second quarter.
 
Sales of its Lantus insulin, which accounts for a third of operating profit but is set to lose patent protection early next year, posted growth of just 5.8 percent over the quarter to 1.04 billion euros. This compared with 16.3 percent growth in the second quarter.
 
Sanofi’s problems in the U.S. diabetes field highlight the growing challenges facing drugmakers in the world’s biggest drugs market, even when companies have a strong position there. British rival GlaxoSmithKline has also been struggling with price cuts in the United States in respiratory medicine, where it holds a leading position.
 
CHOOSY ON M&A
 
Sanofi has largely stood on the sidelines of a tide of mergers and acquisitions in the industry, where drugmakers worldwide are rationalising their business to shrinking healthcare spending and tough competition from generics.
 
Sanofi has however been looking at ways to reduce the drag on its growth from an $8 billion portfolio of mature drugs in Europe, the bulk of which are produced in France. The review took the board by surprise and could explain its sudden coldness with Viehbacher, a source familiar with the matter said.
 
But Viehbacher said teams weighing different options had not found a satisfactory solution for the portfolio, which generates precious cash flow despite being on the decline.
 
“There is no major plan to do anything in France or anywhere else on these products or anything else,” he said.
 
Viehbacher stressed that Sanofi believed in its diversified model and had considerably replenished its pipeline of new drugs, including a potential blockbuster cholesterol treatment, a follow-on to Lantus and the world’s first dengue vaccine.
 
“The confidence we have in the outlook of the company is such that we can afford to be choosy when looking at M&A,” he said.
 
Sanofi’s business net income, which excludes items such as amortisation and legal costs, rose 9.4 percent to 1.935 billion euros on sales of 8.781 billion, putting business earnings per share (EPS) at 1.47 euros per share.
 
This compared to average forecasts for EPS of 1.47 euros on sales of 8.86 billion in a company-provided poll of 14 analysts.
 
(1 US dollar = 0.7874 euro)
 
By Natalie Huet (Additional reporting by Noelle Mennella, Ben Hirschler and Blaise Robinson; Editing by David Clarke and Mark Potter)

comments closed

Related News

October 17, 2021

Colorcon acquires a majority share in Ideal Cures Pvt. Ltd., India

Life sciences

Ideal Cures will operate as a fully independent entity within Colorcon. Their business complements Colorcon’s position in the Indian pharmaceutical market with a strong presence in the domestic generic sector comprised of long-standing customer relationships sustained by innovative and customized solutions.

October 17, 2021

Barriers exist, but participation urgent in breast cancer clinical trials: report

Life sciences

Across four new breast cancer treatments approved by the FDA last year, 2% to 9% of patients in clinical trials for the drugs were Black Americans and 0% to 9% were Hispanic, according to a new report from Breastcancer.org.

October 17, 2021

Danish consortium acquires part of Jernbanebyen to create one of the world’s healthiest urban villages

Life sciences

The southern section of Jernbanebyen in central Copenhagen has a new owner. The Baneby Consortium, comprising NREP, Novo Holdings and Industriens Pension, has bought the land from Freja Ejendomme. The ambition is to create a green, partly car-free environment that will also be one of the healthiest in the world. 

Send this to a friend