We issued an updated research report on Sanofi (SNY - Free Report) on Mar 16, 2017.
Paris, France, based pharma giant, Sanofi possesses a diversified product portfolio with a presence in several therapeutic areas including cardiovascular diseases, diabetes, oncology, and CNS disorders, among others.
Sanofi has several new products in its portfolio and candidates in its pipeline that can contribute to growth in 2017 and beyond. Products like Toujeo(diabetes), Aubagio and Lemtrada (multiple sclerosis) have been doing well andthe trend is likely to continue. Promising pipeline candidates include Dupixent/dupilumab (atopic dermatitis - under priority review in the U.S. and EU; asthma – phase III, U.S. filing expected in fourth quarter of 2017; nasal polyposis – phase III) and Kevzara (sarilumab). Kevzara was approved in Canada in Feb 2017 while in the U.S., the regulatory application is expected to be re-submitted to the FDA in the first quarter of 2017. The regulatory application in the EU was submitted in Jul 2016. Soliqua, a once-daily titratable fixed-ratio combination of Lantus and Lyxumia, was launched in the U.S. in Jan 2017 and is expected to be launched in Europe later this year.
Meanwhile, Sanofi’s focus on streamlining its business and pursuing business development deals is encouraging. Sanofi has collaboration agreements with companies like Regeneron Pharmaceuticals, Inc. (REGN - Free Report) among others.
Also, Sanofi reviewed its cost base and conducted an extensive review of its research and development operations in order to reallocate resources to the highest growth and most promising development programs. Sanofi expects to deliver cost savings of at least €1.5 billion by 2018. Moreover, Sanofi’s new operating model is expected to streamline the company’s business and drive long-term growth. In 2016, the company generated €650 million of savings and is targeting around double that amount in 2017.
Sanofi’s shares are up 10.2% so far this year, comparing favorably with the Zacks classified Large-Cap Pharma industry’s return of 7.6%.
However, Sanofi’s Diabetes franchise is under significant pressure with key product, Lantus, facing increasing competitive pressure at the payer level and the presence of biosimilar competition in several European markets and Japan. Moreover, a biosimilar version of Lantus- Eli Lilly & Company’s (LLY - Free Report) Basalgar hit the U.S. markets in Dec 2016. Lantus has been a major contributor to the company’s top line having accounted for 14.1% of total sales in 2016.
Considering recent market trends, Sanofi expects global Diabetes sales to decline 4–8% annually over the 2015–2018 time frame. In fact, in 2017, the Diabetes franchise is expected to come below this range.
Other headwinds include generic competition and slower-than-expected uptake of new products like Praluent.
While key drug, Plavix is already facing declining sales due to generic pressures, drugs like Lantus, Lovenox, Aprovel/Avapro. Renagel and Taxotere, among others, are expected to face further generic competition in 2017, which will continue to have a negative impact on revenues in the coming quarters.
Although the approval of Praluent is a major boost for the company, sales are yet to pick up. Administrative hurdles imposed by payers for both physicians and patients remain a headwind. Moreover, prescription volumes remain subdued in key markets with treatment being reserved only for very severe patients. Praluent’s uptake could remain limited until guidelines supporting broader use of the treatment are issued and phase III cardiovascular outcome study data are out.
Moreover, Sanofi and Regeneron suffered a setback this year with the United States District Court in Delaware granting Amgen, Inc.'s (AMGN - Free Report) request for a permanent injunction prohibiting the sale of Praluent. The injunction relates to a patent infringement lawsuit filed by Amgen and follows a favorable jury verdict received by Amgen. In Mar 2016, a Delaware jury declared that the two patents owned by Amgen, which describe and claim monoclonal antibodies to PCSK9, were valid and that Sanofi and Regeneron had failed to prove them (U.S. Patent Nos. 8,829,165, and 8,859,741) invalid due to the lack of written description and enablement. Though Sanofi and Regeneron have succeeded in getting a stay on the injunction during the appeal process, it is only a temporary relief.
Sanofi carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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