Sanofi SNY reported second-quarter 2019 earnings of 74 cents per American depositary share, which beat the Zacks Consensus Estimate of 67 cents. Earnings increased 4.8% on a reported basis. At constant currency rates (CER), earnings grew 4.8%, driven by strong top-line growth.
Second-quarter net sales of the French pharma giant rose 5.5% on a reported basis to almost $9.7 billion (€8.63 billion). Exchange rate movements benefited sales by 1.6%. At CER, sales increased 3.9% year over year. Sales however missed the Zacks Consensus Estimate of $9.88 billion.
In September 2018, Sanofi closed the agreement to sell its European generics business, Zentiva, to Advent International. Adjusting for the Zentiva divestiture and sales of Bioverativ products to Swedish Orphan Biovitrum AB (SOBI), sales rose 5.8% at constant structure and CER basis.
Sales increased 8.4% at CER in the United States. At CER, sales rose 10% in the Emerging Markets and 4.3% in the Rest of the World (Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico). However, sales declined 7.5% in Europe at CER.
All growth rates mentioned below are on a year-on-year basis and at CER.
Earlier, Sanofi reported through five Global Business Units (GBUs) — Sanofi Genzyme (Specialty Care), Diabetes & Cardiovascular, General Medicines & Emerging Markets, Consumer Healthcare and Sanofi Pasteur (Vaccines).
However, beginning the first quarter of 2019, Sanofi implemented a new structure wherein the General Medicines & Emerging Markets and Diabetes and Cardiovascular GBU were reorganized into two new GBUs, namely the Primary Care unit and the China and Emerging Markets unit. Importantly, Emerging Markets sales for Specialty Care and Primary Care are now included in China & Emerging Markets GBU.
Pharmaceuticals sales (including the emerging markets) rose 1.7% to €6.46 billion driven by key eczema drug, Dupixent, which was partially offset by lower Diabetes and Established Rx products sales and the Zentiva (European generics business) divesture.
Sanofi Genzyme/Specialty Care GBU sales (excluding the emerging markets) increased 21.8% to €2.29 billion, driven by Dupixent.
In the immunology franchise, Dupixent generated sales of €490 million in the quarter, up 166.3% year over year and 50% on a sequential basis. Sales were driven by continued growth in atopic dermatitis and rapid uptake in new asthma indication. In October last year, Dupixent was approved by the FDA for the asthma indication, which played a key role in driving sales of the drug higher in the quarters thereafter.
Meanwhile, Dupixent was launched for adolescent atopic dermatitis in mid-March 2019, which contributed to the drug’s sales in the second quarter. Dupixent was launched for the asthma indication in Japan in April and was approved for the asthma indication in EU in May and for chronic rhinosinusitis with nasal polyposis in the United States in June. All these label expansions should drive sales of this key drug higher in the future quarters. Sales of the drug in the United States were €403 million while the same in Europe were €46 million.
New rheumatoid arthritis drug, Kevzara recorded sales of €51 million in the quarter compared with €30 million in the previous quarter.
Sales of rare disease drugs increased 3% to €640 million driven by Gaucher and Pompe therapies. Important drugs like Myozyme/Lumizyme rose 6.7% to €195 million, Fabrazyme sales were €182 million, up 4.2%. Cerezyme sales declined 7.5% to €115 million.
Oncology sales increased 10.2% to €302 million. Key cancer drug Jevtana’s sales were up 18.6% to €118 million supported by higher sales in United States.
Sales of multiple sclerosis drugs rose 2.9% to €522 million. Aubagio sales increased 11.5% to €456 million while sales of Lemtrada fell 32.6% to €66 million.
Rare blood disorders franchise, added to Sanofi’s portfolio with the acquisition of Bioverativ in 2018, fetched sales of €287 million. New drug Cablivi (caplacizumab), approved for the treatment of a rare blood disorder called acquired thrombotic thrombocytopenic purpura, generated sales of €15 million in the quarter compared with €5 million in the previous quarter. Cablivi was launched in the United States in April and generated sales of €1 million in the region. The remaining €4 million in sales came from Germany, Denmark and Austria where the product is now commercially available.
Primary Care GBU comprises the Diabetes and Cardiovascular and the Established Rx Products segments. Sales in the Primary Care GBU declined 15.7% to €2.28 billion hurt by lower diabetes sales and Zentiva divestiture.
The Diabetes franchise (excluding the emerging markets) declined 13.3% to €865 million due to lower sales of key drugs — Lantus and Toujeo.
Sales of diabetes drugs in the United States declined 17.5% to €461 million due to pricing pressure and loss of Part D business. In Europe, it dropped 6.8% and in rest of the world it declined 12.2%.
Lantus sales decreased 27.7% to €486 million in the second quarter. Lantus sales plunged 33.7% in the United States due to lower average net price and change in coverage with respect to Sanofi’s Part D business. In Europe, sales decreased 16.1% due to biosimilar competition and patient switching to Toujeo.
Toujeo generated sales of €175 million in the reported quarter, down 6.1%. Sales rose 10.7% in Europe while it declined 23.3% in the United States.
Admelog, a rapid-acting insulin, similar to Lilly’s LLY Humalog, which was launched in the United Sales in April last year, achieved sales worth €77 versus €66 million in the previous quarter.
Inthe cardiovascular franchise, Sanofi’s anti PCSK9 therapy, Praluent, garnered worldwide sales of €61 million in the reported quarter, down 1.7% as growth in Europe was offset by decline in the United States. Sales in the United States declined due to significantly higher rebates offered by Sanofi and partner Regeneron Pharmaceuticals, Inc. REGN to payers to improve access to the drug. Amgen's AMGN PCSK9 therapy, Repatha, also faces similar issues. Sales of the other drug, Multaq, in this franchise declined 6.1% to €80 million.
Sales of Established Rx Products came in at €1.28 billion, down 18.2% due to generic competition for Renvela/Renagel in the United States, lower sales of Lovenox in Europe and the divestment of the European generics business, Zentiva.
Sales of China and Emerging Markets GBU rose 7 % to €1.89 billion.
Consumer Healthcare GBU (including the emerging markets) sales were €1.14 billion, up 1.1% as higher sales in United States was offset by lower sales in Europe and softer performance in Emerging markets. Non-core brand divestments and weak cold and cough season hurt sales in Europe.
Sanofi Pasteur (Vaccines) sales (including the emerging markets) rose 24.7% to €1.02 billion driven by a strong performance of the Polio/Pertussis/Hib vaccines in Emerging Markets and timing of CDC purchases in the United States.
Selling, general and administrative expenses declined 3.1% at CER in the quarter, reflecting cost control measures. Research and development expenses were up 5.4% at CER due to increased spending on late-stage pipeline and investment in vaccines and emerging markets.
Sanofi expects earnings to grow approximately 5% at CER in 2019, which is at the higher end of its previous guidance range of growth between 3% and 5% at CER. It now anticipates a positive currency impact between 1% and 2% on earnings compared with the earlier expectation of around 2%.
Sanofi’s second-quarter 2019 results were mixed as it beat estimates for earnings but missed the same for sales. However, sales rose year over year as double-digit growth in the Specialty Care and Vaccines units offset persistent sluggishness in Diabetes and Cardiovascular franchises. Importantly, the company raised its earnings growth expectations for the year, which pushed shares up around 2.8% in pre-market trading on Monday.
Sanofi’s Specialty Care segment is on a strong footing with recent FDA approvals of new drugs Libtayo and Cablivi, and regular label expansion of Dupixent. Particularly, we believe Dupixent could prove to be an important growth driver. The performance of the Vaccines and Consumer Healthcare franchises has also improved lately. However, weak performance of the Diabetes unit, generic competition for many drugs and slower-than-expected uptake of core products like Praluent are headwinds.
Sanofi’s shares have underperformed the industry in the past year. It has risen 2.5% in the said time frame while there has been no movement for the industry.
Sanofi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sanofi Price, Consensus and EPS Surprise
Sanofi price-consensus-eps-surprise-chart | Sanofi Quote
Radical New Technology Creates $12.3 Trillion Opportunity
Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.
Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.
See the 7 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Sanofi (SNY) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Amgen Inc. (AMGN) : Free Stock Analysis Report
Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research