Where would Sanofi be without Lantus? The diabetes drug just keeps on churning up sales growth, quarter after quarter. In the fourth quarter, Lantus products grew by more than 22% to €1.33 billion. For the full year, the drug racked up almost €5 billion.
The French drugmaker ($SNY) really needed it. Sales grew by a bare 0.5% on the year, thanks to generic competition for its former flagship products, including the clot-fighters Plavix and Lovenox, and the cancer drug Eloxatin. Profits fell--by 7% to €6.20 per share for the year and 24% during the fourth quarter--as those high-margin drugs bit the dust.
All to be expected, one analyst pointed out. "2012 was meant to be their trough year," Nomura's Amit Roy told Bloomberg. The problem is that Sanofi now predicts disappointing earnings for 2013--flat at best, down 5% at worst. The stock dropped 5% on that news.
But even the forecast should have been expected, Leerink Swann's Seamus Fernandez said in an investor note. "Weakness in Sanofi shares today looks to be more a reflection of flawed consensus expectations, given the impact of another half year of sustained generic losses (Plavix, Avapro, and Eloxatin) and the recent swift rally in the euro versus most major currencies," Fernandez noted.
CEO Christopher Viehbacher pointed forward to the second half of the year. Growth will return then, he said. And the expected erosion in profits partly includes an investment in that future: the costs associated with launching new medicines, including its latest addition to the diabetes stable, Lyxumia, recently approved in Europe.
It's true that Viehbacher's "growth platforms" delivered solid results in 2012--including its diabetes business, which grew by 16.7% to €5.78 billion, fueled by Lantus. Emerging markets, another of Sanofi's growth bets, swelled by 8.3% to €11.14 billion during the year, accounting for almost 32% of net sales.
Consumer health, still another, ginned up a 10% gain to more than €3 billion, and Genzyme--the biotech unit Sanofi bought in 2011--grew by 16.9% to €1.78 billion. In all, those growth areas brought in €23.55 billion, or about two-thirds of the company's 2012 sales. Viehbacher quoted 10% growth for those businesses last year, and pointed out that, by the fourth quarter, they represented 70% of Sanofi's revenues.
Thing is, Lantus accounted for the lion's share of the diabetes business' growth, and its surge in emerging markets helped those results, too. Can the drug withstand forthcoming competition from Novo Nordisk's ($NVO) Tresiba (degludec)? That drug was recently approved in the E.U. and Japan, and recommended for U.S. approval by the FDA's advisors. It's one of Novo's "growth platforms," so you can be sure that the Danish company will be pushing hard for market share.
Sanofi has new drugs to tout and more, it hopes, on the way to market soon. If it can hold off Novo and chalk up some successful launches, then Viehbacher may be saying "I told you so" when 2013 earnings roll around. If not, he'll have a lot more explaining to do.