It’s been just over 16 months since Sanofi closed its $11.6 billion buyout of hemophilia specialist Bioverativ. But the company is already revising its sales projections for one of Bioverativ’s key products—big-time.
Monday, the French drugmaker recorded a €1.84 billion ($2 billion) write-down “mainly related to Eloctate,” a long-acting treatment that starred as one of the deal’s centerpieces. The move followed another quarter in which the drug’s sales provided “the real disappointment” in Sanofi’s earnings picture, ODDO BHF analyst Martial Descoutures wrote in a note to clients.
Second-quarter sales of the drug sank 8% in constant exchange rates, hitting €171 million ($190 million) for the quarter. That performance offset 23.5% growth at constant exchange rates for Eloctate’s portfolio-mate Alprolix, a long-acting treatment for hemophilia B.
It’s no surprise Sanofi doesn’t expect things to get any better when it comes to Eloctate sales. It has Roche sensation Hemlibra to thank for the decline; the closely watched therapy has made a splash since winning a label expansion last October that opened up use to all hemophilia A patients, with or without factor VIII inhibitors.
In its first quarter after the FDA’s green light set up a head-to-head showdown, Eloctate sales of €174 missed Wall Street’s €204 million estimate by 14.7%, with Sanofi attributing the slide to U.S. competition. In the second quarter, it sang a similar tune, pointing out that sales outside the U.S. actually increased.
Sanofi "admits to underestimating Hemlibra and expects the competitive pressure to continue," Wolfe Research analyst Tim Anderson wrote in a note to clients Monday following Sanofi's earnings call.
It’s not a great look for Sanofi, which coughed up a sum for Bioverativ that Jefferies analysts at the time called “relatively expensive” at 8.4 times 2018 revenue. While they agreed the deal seemed “logical” from a portfolio perspective, they flagged competition concerns in the hemophilia arena, which is approaching the advent of gene therapy.
"There was investor aversion to this deal because SAN was perceived as spending its money earmarked for M&A to plunge headlong into a category where competitive dynamics are changing rapidly and fundamental disruption seems likely," Wolfe's Anderson wrote Monday.
Luckily for the drugmaker, though, anti-inflammatory standout Dupixent and the vaccines unit provided bright spots during the period. All things considered, Sanofi upped its full-year EPS guidance to growth of about 5% in constant currencies from growth of between 3% and 5%.