It wasn't Sanofi's fourth-quarter profits, which grew by 13%. Nor was it the 8.8% increase in sales for the period, or the 5.3% increase in 2011 sales, to €33.39 billion ($44.3 billion). The headline number for the French drugmaker's financial report was 15%--the projected drop in earnings for 2012. And the sound-bite statement from CEO Christopher Viehbacher (photo) was this: "2012 has been marked red in my diary for years."
Since he took the helm at Sanofi ($SNY) in 2008, no doubt. Generic competition for its top-selling drug, Plavix, has been Viehbacher's Sword of Damocles, and the blood thinner loses patent protection in May in the U.S., where it's marketed via a partnership with Bristol-Myers Squibb ($BMY). The blockbuster hypertension drug Avapro also falls off patent this year. The patent losses together will cut about $1.86 billion off Sanofi's profits, the company said.
Still, the projected EPS decline of 12% to 15% isn't as severe as Eli Lilly's ($LLY) forecast, which puts this year's EPS at around 18% less than last year's. Nor does it match AstraZeneca's ($AZN) expected decline--to $6 to $6.30 per share, from $7.28 in 2011--or about 13% to almost 18%. Sounding a bit like his former colleague at GlaxoSmithKline ($GSK), Andrew Witty (photo), Viehbacher noted Sanofi is keeping its sales growth forecast for 2012-2015, of 5% per year on average. Better times are just ahead, he said: "Beyond the remaining patent cliff in 2012, the robust performance of our diversified growth platforms, the reduced exposure to future patent expiries and progress on R&D, position Sanofi for a period of sustainable growth."
Hopeful signs? Chiefly, the company's diabetes drug Lantus, which broke €1 billion in quarterly revenues for the first time, on an increase of more than 17%. (Fourth-quarter Eloxatin sales of €325 million pushed the cancer drug past €1 billion for the year, but that drug goes off patent in the U.S. in August.) And then there's Genzyme, the U.S. rare-diseases unit that Sanofi bought last year, which posted sales increases; its brand-new plant outside Boston won key regulatory approvals, clearing the way for steadier supplies of the Fabry disease drug Fabrazyme, and the steady sales that would come with that. Indeed, without Genzyme, 2011 sales would have dropped.
Plus, Viehbacher's diversification strategy is paying off. Sanofi has been buying up companies and striking deals in emerging markets over the past several years, and sales in those regions grew by 10.4% to €10.1 billion, or almost one-third of total sales. Consumer healthcare sales grew by 22.8%, fueled by the new Chattem unit's launch of over-the-counter Allegra in the U.S. Generics grew by 16.2%. "Overall, a solid, quiet quarter which will help build investor credibility in the name," Bernstein analyst Tim Anderson wrote in a note to clients. So far, investors aren't so sure; Sanofi shares were down at press time.