UPDATED: Sanofi 'opening' M&A strategy beyond cancer, CEO says, following solid Q3 results

By Eric Sagonowsky Oct 28, 2016 9:19am

After missing out on a much-desired Medivation buy, Sanofi CEO Olivier Brandicourt told analysts Friday that he's still shopping for M&A, and not just in oncology. Sanofi would deal in immunology, rare diseases and MS, too.

Losing Medivation to Pfizer "is not the end of our presence in oncology,” Brandicourt explained, adding that Sanofi is still seeking targets in areas where it has a presence but needs to bulk up.

The deal talk came after Sanofi posted third-quarter results that were pretty decent. It survived decreases in diabetes and elsewhere to eke out a slight sales win, in fact. At the same time, though, the pharma reported that manufacturing issues could trip up the approval timeline of a key blockbuster-in-waiting.

Sanofi’s pharmaceutical sales were essentially flat in the third quarter, increasing half a percentage point to €7.23 billion. Meds in rare diseases, multiple sclerosis and cardiovascular posted increases to offset struggling diabetes, consumer and established pharma products, which each fell.

All told, Sanofi turned in revenues that were up 3% to €9.65 billion, beating consensus estimates of $9.53 billion. EPS was up 11% to €1.79, beating analyst projections of €1.54. Third-quarter income was up 9.3% to €2.3 billion. On the heels of the results, the company now says EPS will grow 3% to 5% this year, higher than a previous guidance of flat EPS.

Brandicourt and Sanofi leadership have made the “definite decision” to sell off the company’s generics portfolio in Europe, he said, promising more info as the process progresses.

Additionally, the French drugmaker is kicking off a €3.5 billion share buyback it intends to complete by the end of next year.

In its announcement, Sanofi said regulatory action on sarilumab, an IL-6 antibody, could be delayed after an FDA “fill-finish” plant inspection. The agency had been set to decide by the end of this month on that anti-inflammatory drug, which bested AbbVie’s megablockbuster Humira in a Phase III trial in rheumatoid arthritis.

Sanofi's Q3 results are an improvement on a bruising second quarter for the French drugmaker, when it reported net income off 11% to €1.16 billion on sales that had declined by 4.3% to €8.14 billion.

Sanofi's current struggles, exemplified in those results, prompted an all-out push to buy oncology-focused California biotech Medivation earlier this year. But as industry watchers know, Sanofi didn’t get that deal done, with Medivation instead selling to Pfizer for $14 billion.

Lantus, the company’s behemoth insulin, fell 9.8% for the quarter to €1.39 billion on pricing pressures and patients switching to the follow-up, Toujeo, which reeled in €167 million. Both drugs face new obstacles next year, with Eli Lilly and Boehringer Ingelheim's Lantus biosimilar, Basaglar, making its debut in December.

As drugmakers know all too well, particularly in diabetes, those pricing pressures aren’t going anywhere. Basaglar has already landed formulary spots for next year, edging Lantus aside at CVS Health and UnitedHealth. CVS bounced Toujeo as well, limiting Sanofi's ability to recoup Lantus sales via its follow-up med.

Overall, third-quarter diabetes sales slipped 1.5% to €1.8 billion.

Sanofi Pasteur, the French drugmaker's vaccines business, and its rare-disease unit Genzyme each posted double-digit growth, at 14.4% and 16.9%, respectively. Sanofi said its vaccines sales benefited from early flu shipments to the U.S., a strategy that rival GlaxoSmithKline cited in its results released this week.

Dengvaxia, Sanofi’s first-of-a-kind dengue vaccine, brought in €30 million to bring its tally for the year to €50 million.

Sanofi shares were slightly up in early trading Friday.

Editor's note: An incorrect sales estimate for sarilumab was removed from this story.

Earnings Dengvaxia Genzyme Lantus Sanofi Sanofi Pasteur Deals