Sanofi’s weak Q1 cancer drug sales spur Medivation buyout desire

Sanofi interior

A day after Sanofi ($SNY) went public with its $9.3 billion bid for California biotech Medivation ($MDVN), the French drugmaker has posted its quarterly results--and its cancer drug sales go a long way to explain why it’s seeking an oncology biotech buyout.

First up, the big picture: Sanofi’s group sales for Q1 reached €8.54 billion ($9.73 billion)--nudging up just 0.7% on the year-ago period at constant exchange rates. This was less than analysts’ consensus estimates of €8.66 billion.

Much of its overall growth was driven by its 2011 biologics purchase Genzyme, which saw its sales increase 20.5%--predominately off the back of its MS franchise which grew 77% thanks to Aubagio and Lemtrada.

Dragging Sanofi down is its weakening diabetes and heart drug portfolio, which saw sales slide by 5.8% for the quarter. Its aging blockbuster insulin Lantus was mainly responsible for this revenue slide, seeing an 11% dip in sales to notch just under €1.4 billion ($1.6 billion).

But then we come to its oncology sales. The Big Pharma looked to be turning away from the field last year when it axed many of its cancer R&D operations, but 2016 has seen the company attempt a comeback into the oncology fold.

Its current cancer portfolio won’t be keeping Roche ($RHHBY), Bristol-Myers Squibb ($BMY) or Merck ($MRK) up at night--but its quarterly figures may well do this to Sanofi’s CEO Olivier Brandicourt.

Total cancer drug sales were just €358 million ($407 million), up 1.4%, with its advanced prostate cancer drug Jevtana topping the list of its 6 oncology meds at just €90 million ($102.5 million). At the bottom of the list is colorectal cancer treatment Zaltrap, which saw sales drop by 15% to make only €17 million ($19.3 million) for the quarter.

Zaltrap was approved by the FDA four years ago, but the company had to almost immediately slash its price in half, and it’s struggled to make much headway in a market dominated by Roche’s Avastin (which has a host of other cancer licenses), German Merck’s Erbitux and Bayer’s Stivarga.

There are also few indigenous candidates in its cancer pipeline to excite analysts, which is why it has been signing multibillion-dollar oncology deals with long-term partner Regeneron ($REGN), as well as a host of biotechs earlier this year, to shore up its future in the field.

But it is much behind its rivals in the new class of immuno-oncology and is unlikely to be competing any time soon in the PD1/PD-L1 market dominated by BMS and Merck--which is set to be worth $35 billion in the next decade.

This is why its $9.3 billion approach for Medivation--confirmed by both companies yesterday--makes so much sense for the drugmaker. Not only would it be getting hold of an immediate return from the almost $2 billion prostate cancer drug Xtandi makes (which it also needs in the near-term as its whole pharmaceuticals unit was down 1.4%), but it can also mine Medivation’s early- to midstage cancer pipeline, which has a relatively strong set of candidates.

These include the late-stage breast cancer drug talazoparib, which is projected to make $200 million in peak sales, and the blood cancer drug pidilizumab, which is in a Phase II trial. A candidate for bladder cancer and a multiple myeloma therapy are also in its early-stage pipeline.

Brandicourt said very little in his official statement, adding only that Sanofi should “remain focused on the execution of our strategic priorities and confirm our financial outlook of broadly stable Business EPS at CER for the full year.”

The senior management team refused to answer questions from journalists on the bid in an 8:30am EDT conference call this morning. But during the call David Hung, CEO and founder of the Californian biotech, released a public statement, saying: “Sanofi's opportunistically-timed proposal, which comes during a period of significant market dislocation […] is designed to seize for Sanofi value that rightly belongs to our stockholders. We believe the continued successful execution of our well-defined strategic plan will deliver greater value to Medivation's stockholders than Sanofi's substantially inadequate proposal.”

Sanofi has since responded, saying it is a “disciplined acquirer” with a “strong acquisition track-record”--perhaps the thunderclap of a hostile storm brewing. 

- check out Sanofi’s numbers