With solid Q2, Sanofi CEO says M&A could be part of growth strategy

Sanofi CEO Olivier Brandicourt

Sanofi's new CEO, Olivier Brandicourt, has a new company structure he is trotting out, a new potentially hot cholesterol-lowering drug to launch and now is able to take credit for a full quarter's worth of financial results that outperformed the street's best guesses. He even said today that Sanofi may be ready to do some wheeling and dealing, having so far stayed out of the M&A melee that has been going on all year.

The French drugmaker today reported revenues of €9.38 billion ($10.24 billion), up 4.9%, and earnings, excluding some costs, of €1.84 billion ($2.02 billion), or €1.41 a share, up from €1.17 a share. According to Bloomberg, that bested the €1.32-a-share average it said analysts forecast.

Citigroup analyst Peter Verdult told Bloomberg that to his way of thinking, it was "one of their best quarters in a long time."

It was solid enough that Brandicourt said that, while exercising fiscal restraint, Sanofi ($SNY) might very well look at some "mid-size M&A and bolt-ons." As Bernstein analyst Timothy Anderson told investors in a note, the CEO sees M&A as a "tool of interest."

It isn't all great for the drugmaker, however. The company's diabetes med sales, which leans on its blockbuster Lantus, fell 3.8% as discounting in the U.S. and the launch in Europe of Eli Lilly's ($LLY) biosimilar of Lantus chipped away. Brandicourt told analysts the biosimilar is being sold at a 15% discount to the Sanofi drug.

But Sanofi is counting on its high-cholesterol fighter Praluent, approved by the FDA last week, to help offset the declines in diabetes. Brandicourt told analysts it is ready to launch, "if not tomorrow, then next week," Bloomberg reports. There are big expectations for the drug, with sales of more than $1 billion projected by 2018. But there is also a price fight by payers brewing. Sanofi announced it will price the PCSK9 cholesterol-fighter at $14,600, which is nearly 50% higher than what analysts expected.

Tim Wentworth, president of PBM Express Scripts ($ESRX), was already complaining today that the price of PCSK9 drugs could "wreak havoc" among its clients. Those sounded like fighting words from a company that orchestrated a price war over the prices of Gilead Sciences' ($GILD) hep C drugs that forced discounting. But by pushing the price of Praluent higher than expected, analysts have said, Sanofi may be positioning itself to offer big discounts and still reap big rewards.

Brandicourt, who took over in April after his predecessor was ousted by the Sanofi board, is working on a 5-year fighting plan of his own. Two weeks ago he laid out a structure in which the company will have 5 units, three of them new. Specialty drugs, including cancer, go to its Genzyme unit, diabetes and cardiovascular gets the diabetes drugs as well as Praluent, while established products, generics, consumer health and emerging markets go under a third. The CEO reiterated to analysts, and nervous employees, today that the reorg is about getting into the best position to compete and is not about job cuts.

- here's the release
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