Thanks to Genzyme—and no thanks to vaccines or diabetes—Sanofi is treading water

As much as Sanofi has struggled with diabetes and generic drugs the past few years, it could typically count on vaccines and Genzyme to come to the rescue. This quarter, Genzyme played its usual lifeguard role, but vaccines fell down on the job.

Genzyme, Sanofi's rare disease unit, got a boost from its atopic dermatitis launch Dupixent—which posted sales 12% ahead of analyst expectations at €176 million—to gin up revenue growth of 33% to €1.8 billion. Luckily for the French drugmaker, that offset 15%-plus drops for its diabetes and cardiovascular business and vaccines unit.

The diabetes freefall wasn't much of a surprise, but vaccines has reliably chipped in growth over the past several years. All told, the company turned in sales that were flat at €8.18 billion.

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Sanofi's second-quarter vaccine sales of €811 million were hurt by a supply issue for Pentaxim in China; timing of government orders for Sanofi's polio, pertussis and Hib franchise; and a tough year-over-year comparison for Menactra, which turned in outsize sales for the same period in 2017, the drugmaker reported. Overall, vaccine sales fell short of analyst expectations by 10%. The good news? Sanofi expects the business to return to mid-single-digit growth in the second half, Sanofi Pasteur head David Loew said on a Tuesday conference call.

Sanofi believes it has fixed the Pentaxim supply problem in China after changing a gel in the manufacturing process, Loew said. So far, one lot of vaccine produced with the new process has won regulatory approval, he said, and a second lot is awaiting a green light.

In diabetes, Sanofi's well-documented problems haven't subsided. Global sales fell 12% and U.S. sales plummeted 30%. Pricing pressure continued to take a bite out of sales, and changes in Medicare Part D cut 5 million covered lives out of its reimbursement universe.

One bright spot, however; the company posted 12% diabetes growth in emerging markets, and those countries should help shore up the rest of the business in the future, execs said on the Tuesday earnings call. Growth there will "result in a reduction in the rate of decline," execs said the call Tuesday.

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The performance in diabetes likely won't come as a surprise for pharma watchers; Sanofi's struggles in the field have forced it to look elsewhere for growth. Already this year, the company has picked up Bioverativ for $11.6 billion and Ablynx for $4.8 billion in bids to move into blood disorders and to build its pipeline. Vaccines in recent years have been a reliable growth contributor, but the company hit some setbacks last year with the Dengvaxia safety scandal in the Philippines and the phase 3 trial failure for a C. diff vaccine.