Call it what you will: chutzpah, optimism, wishful thinking, spin-doctoring, or just plain confidence. In any case, the headline on Sanofi's earnings release--"Last Quarter with Significant Negative Impact from Patent Cliff"--was one of the few positive statements on the page.
|Sanofi CEO Chris Viehbacher|
Just below that title, Sanofi reported a 9.8% decline in net sales (€8 billion, or about $10.58 billion) and a 23.4% drop in net income (€1.475 billion, or about $1.95 billion). A bit farther down, a 2.3% drop in emerging markets sales--thanks to an inventory snafu in Brazil--and a 5.7% drop in animal health. A 7% drop in overall pharma sales. And then, a new, lower earnings forecast.
CEO Christopher Viehbacher didn't mince words, though. "We have hit a few speed bumps," he said on the quarterly earnings call. "There's probably no point sugar-coating this."
Analysts didn't either. Leerink Swann's Seamus Fernandez called the results "disappointing" and said his firm was reviewing its own expectations for the company's performance this year. Barclays analyst Michael Leuchten was more direct in an interview with Bloomberg. "It's a pretty shocking set of results," he said.
In a statement, Viehbacher cited the "tough comparison" to last year because of the patent cliff. "Sales were also affected by our business in Brazil and commercial underperformance in certain business areas," he added.
The company's Medley unit, bought in 2009 as part of Viehbacher's plans to expand in emerging markets, had delivered so much product to customers that some drug stocks were expiring on the shelves. Sanofi had to recall that stock and take charges totaling €201 million. Needless to say, Sanofi also brought in new local management.
Viehbacher did move on quickly to more upbeat talk. The company's "growth platforms"--diabetes, consumer health, vaccines, animal health, Genzyme and other newer products--altogether amounted to €5.72 billion in sales, or $7.56 billion. That's a small increase, just 2.5%, because the animal health and emerging markets declines partly offset impressive increases in sales of diabetes products (16%) and at Genzyme (23.6%).
There were other bright spots. For instance, nice growth in a new delivery device for the megablockbuster diabetes drug Lantus, which could help Sanofi keep brand sales coming even after Lantus goes off patent. The company could tick off a series of newly approved drugs, including the diabetes treatment Lyxumia and the multiple sclerosis drug Aubagio.
Once again, Viehbacher reiterated his promise that the company would return to growth during the second half of the year. Investors appeared less than convinced; Sanofi shares dropped by 6% on the results, the biggest decline, according to Bloomberg, in three years.
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