Sanofi enjoys solid Q1, despite continuing erosion of Lantus sales in U.S.

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Sanofi beat analyst expectations with growth in about every market category other than diabetes, where Sanofi and other drugmakers have been beaten up badly by payers pitting one drugmaker against another to get discounts.

Sanofi CEO Olivier Brandicourt has been criticized for failing to pull off a couple of big acquisitions, but his more mundane deal to get Boehringer Ingelheim’s consumer health business has paid off. It helped the French drugmaker overcome continuing hits to its diabetes franchise and turn in a surprisingly strong first quarter.

The drugmaker today reported revenues were up 8.6% in constant currencies to €8.6 billion ($9.4 billion). Earnings per share were €1.42, up 3%, beating analyst forecasts.

“We have started the year with robust growth driven by specialty care and vaccines as well as good performance in emerging markets. Our top line in the first quarter also benefited from the integration of the Boehringer Ingelheim CHC and European vaccine businesses,” Brandicourt said in the earnings release. “At the same time, the simplified organization continues to contribute to Sanofi’s financial performance.”

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Total pharma sales were up 2.6% to €7.9 billion, after overcoming a 7.7% decline in its diabetes business, including a 14.7% hit in the U.S. where sales in that franchise came in at €839 million. That decline is expected to accelerate through the year because of formulary exclusions in the U.S. where payers are playing hardball, pitting drugmakers against each other to get deep discounts for meds.

But Sanofi reported growth in specialty drugs, up 15.6%; vaccines, up 13%; and of course, consumer health, which grew 42.7% to €1.3 billion with the BI operations folded in and up 4.7% if excluded. Sales of Sanofi’s multiple sclerosis meds were particularly strong, up 32.4% to €496 million, as sales of Aubagio grew 30% to €371 million in the U.S. and Europe and sales of Lemtrada shot up 40% to €125 million.

Then, for icing on the the cake, the drugmaker announced that the FDA had accepted the re-submission and promised a 2-month turnaround for sarilumab, the  IL-6 inhibitor for arthritis developed with Regeneron. The drug candidate, which will be sold as Kevzara, was sidelined last fall when the partners received a complete response letter tied to FDA concerns over a Sanofi fill/finish site in France.

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Sanofi's partnership with Regeneron has been a mixed bag so far. While it has yet to contribute revenue, the partners got approval at the end of the quarter for their new drug Dupixent, an injected treatment for atopic dermatitis (AD) that is expected to hit peak sales of $3 billion.

Genzyme head David Meeker said the drug shipped in the U.S. within 24 hours of its March 28 FDA approval. He said they are targeting the 300,000 patients with AD and the 7,000 docs who have experience treating the condition with injected drugs. More than 2,500 prescriptions have already been written and the product has been recommended for approval in Europe, so the partners are moving that way.

On the other hand, Praluent, the specialized cholesterol-lowering drug from Sanofi and Regeneron, continues to face a “challenging market,” Brandicourt said, because of the patent challenge from Amgen. A court order that would have forced the partners to remove Praluent from the market has been held at bay for now, and so Praluent “remains on the market,” he said.

Sanofi’s M&A strategy, which was the big topic of discussion last year, received scant attention during Sanofi’s analyst call today. Brandicourt said that there was nothing new to report. He said Sanofi continues to look for deals in areas where it has or wants more strength, but that it will only buy if it can find the right value and those that can bring immediate growth in sales. He said the company is also looking at M&A to further build its pipeline.  

All eyes were on Sanofi's M&A efforts last year when the French drugmaker first ran hard after cancer-focused biotech Medivation before Pfizer snapped it up for $14 billion, then reportedly jumped at the chance to bid for Actelion, a Swiss-based drugmaker that Johnson & Johnson got for $30 billion. Last month, a source said that Sanofi was talking about a $1 billion cash deal for Boston-area biotech Flexion Therapeutics, whose knee injection for osteoarthritis, Zilretta, is awaiting approval. Nothing more has been leaked since and the topic did not come up today.

Despite the good news that Brandicourt had to report around the Q1 earnings, he said the company was sticking with its previous guidance for the year, which was not so upbeat. It has forecast that earnings per share will be flat to down -3% in constant currencies.