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Sanofi (SNY) Q4 Earnings Lag on Weak Diabetes/Vaccines Sales
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Sanofi (SNY - Free Report) reported fourth-quarter 2017 earnings of 63 cents per American depositary share, which missed the Zacks Consensus Estimate of 69 cents. Earnings declined 15.2% on a reported basis. At constant currency rates (CER), earnings declined 8.8%.
Fourth-quarter net sales declined 2% on a reported basis to almost $10.26 billion (€8.69 billion). Sales also missed the Zacks Consensus Estimate of $10.38 billion. Unfavorable exchange rate movements hurt sales by 6.1%. At CER, sales rose 4.1% year over year.
In January 2017, the French drug maker swapped its Merial Animal Health businesses with Boehringer Ingelheim’s Consumer Healthcare (CHC) business. Reflecting this exchange and full consolidation of Sanofi’s European vaccines operations, sales declined 1.6% at constant structure (CS) and CER basis.
Sales declined 6.2% at CER in the United States. However, sales rose 6.3% in Emerging Markets, 15.8% in Europe and 8.3% in the Rest of the World (Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico).
All growth rates mentioned below are on a year-on-year basis and at CER.
Segmental Performance
Pharmaceuticals sales (including emerging markets) declined 2.8% to €7.3 billion. However, at CS and CER, Pharmaceuticals sales rose 4%.
Sanofi reports through five Global Business Units (GBUs) – Sanofi Genzyme (Specialty Care), Diabetes & Cardiovascular, General Medicines & Emerging Markets, Consumer Healthcare and Sanofi Pasteur (Vaccines).
Sanofi Genzyme/Specialty Care GBU sales (including emerging markets) increased 16.5% to €1.71 billion, driven by contribution from new immunology drugs – Dupixent and Kevzara - and higher sales of multiple sclerosis (MS) and rare disease drugs.
Sales of MS drugs Aubagio rose 13.6% to €389 million while sales of Lemtrada went up 0.9% to €112 million.
Meanwhile, sales of rare disease drugs like Myozyme/Lumizyme improved 11.5% to €205 million while Fabrazyme sales were €180 million, up 6%. Cerdelga sales came in at €33 million, up 20.7% while Cerezyme sales rose 7.1% to €183 million.
Oncology sales rose 3.5% to €361 million. Jevtana sales were up 14.1% to €99 million while Thymoglobulin recorded sales of €72, flat year over year. Taxotere sales were also flat at €40 million. Eloxatine sales were up 14.6% to €44 million.
Sanofi and Regeneron Pharmaceuticals, Inc.’s (REGN - Free Report) rheumatoid arthritis (RA) drug Kevzara (sarilumab) was launched in the United States in June 2017 and in United Kingdom, Netherlands and Germany in Europe in the second half. Kevzara recorded sales of €8 million in the quarter compared with €2 million in the previous quarter.
Meanwhile, Dupixent/dupilumab for treating atopic dermatitis was launched in the United States in March and approved in the EU in September 2017. In December, Sanofi launched Dupixent in Germany. Dupixent generated sales of €118 million in the fourth quarter compared with €75 million in the previous quarter. Kevzara and Dupixent generated total immunology sales of €126 million in the fourth quarter, much higher than €77 million in the previous quarter.
Diabetes and Cardiovascular GBU (including emerging markets) declined 14.2% to €1.66 billion. The Diabetes franchise (including emerging markets) declined 15.6% to €1.53 billion due to lower sales of key drug Lantus.
Sales of diabetes drugs in the United States declined 29.5% to €730 million due to a tough U.S. payer environment and difficult year-over-year comparisons. Sales of diabetes drugs in Emerging Markets were up 8.2% while in Europe it rose 1.3%.
Lantus sales declined 20.9% to €1.08 billion in the quarter. Lantus sales declined 31.4% in the United States due to lower average net price and exclusion from the CVS and United Health formulary plans while in Europe sales declined 7.5% due to biosimilar competition and patient switching to Toujeo.
Toujeo generated sales of €216 million in the reported quarter, which, though down 4.2% on a year-over-year basis due to difficult year-ago comparisons, rose 9% sequentially.
Soliqua, a once-daily titratable fixed-ratio combination of Lantus and Lyxumia, was launched in the United States in January 2017 and in some European countries (trade name – Suliqua) in 2017. Soliqua/Suliqua generated sales of €9 million in the quarter compared with €8 million in the previous quarter.
In the cardiovascular franchise, Sanofi’s anti PCSK9 therapy, Praluent garnered worldwide sales of €53 million in the reported quarter, compared with €42 million in the previous quarter.
General Medicines & Emerging Markets GBU sales came in at €3.35 billion, down 2.3%. Sales of Established products were €2.3 billion, down 5.5% as strong performance in emerging markets was offset by lower sales in Europe and generic competition for Plavix in Japan and Renvela/Renagel in the United States.
Sales of Generics declined 2.1% to €435 million due to lower sales in Europe and Emerging Markets.
Consumer Healthcare GBU sales were €1.2 billion, up 51.8%. Sales were up 2.5%, excluding acquisition of Boehringer Ingelheim’s Consumer Healthcare business, driven by higher sales in Europe and United States, which offset slight decline in Emerging Markets.
Fourth-quarter consolidated Sanofi Pasteur (Vaccines) sales increased 8.7% to €1.39 billion. Vaccines sales reflect the termination of the Sanofi Pasteur MSD joint venture with Merck (MRK - Free Report) in Europe from December 2016.
In the Vaccines segment, lower sales in Emerging Markets and United States offset sales growth in Europe. In Emerging Markets, vaccines sales declined due to the phasing effect of Hexaxim pediatric vaccine sales and the buyback of unused doses of Sanofi’s dengue vaccine, Dengvaxia following the unfavorable label update announced in November.
Sanofi is facing issues with Dengvaxia due to safety concerns. In November, Sanofi had revealed that in people who had never been infected by the dengue virus, vaccination with Dengvaxia, upon a subsequent dengue infection, might increase the risk of severe disease.
In response, in December 2017, the Philippines FDA asked the company to suspend the sale/distribution/marketing of Dengvaxia and withdraw it from the market pending compliance with the directives of the agency.
In the United States, lower sales of pediatric and booster vaccines resulted in a decline.
Costs Rise
Selling general and administrative expenses (SG&A) increased 9.6% at CER in the quarter, reflecting launch costs of Dupixent and Kevzara and additional costs in China. R&D expenses were up 6.3% at CER, reflecting higher pipeline development costs in oncology (isatixumab, PD-1) and sotagliflozin.
Full Year 2017 Results
Full-year 2017 earnings of $3.13 per American depositary share also missed the Zacks Consensus Estimate of $3.34 per share. Earnings declined 2.5% on a reported basis. At CER, earnings declined 0.2%, which was almost in line with Sanofi’s expectation of it remaining more or less flat on a CER basis
Net sales rose 3.6% on a reported basis and 5.6% at CER to almost $39.6 billion (€35.06 billion). Sales, however, missed the Zacks Consensus Estimate of $42.3 billion.
2018 Outlook
Sanofi expects 2018 business earnings to grow between 2% and 5% at CER. It anticipates a negative currency impact in the range of 3%-4% on business earnings in 2018. However, the guidance includes the impact of the recently announced pending acquisitions of Belgian nanobodies maker, Ablynx and a small biotech focused on making therapies for hemophilia, Bioverativ Inc. . The acquisitions should strengthen Sanofi’s position in the rare blood disorders market.
Our Take
Sanofi’s fourth-quarter 2017 results were below expectations as it missed estimates for both earnings and sales.
Higher sales of multiple sclerosis and rare disease drugs, significant contribution from Dupixent and a strong performance in Europe was offset by continued weakness in the Diabetes franchise and lower vaccine sales in Emerging Markets and United States. Shares of Sanofi were down more than 2% in pre-market trading.
In the past year, Sanofi’s shares have returned 2.2%, underperforming the 14.4% increase for the industry.
However, Sanofi’s 2018 outlook looks upbeat as it expects to return to growth this year on the back of the Bioverativ and Ablynx deals, a strong pipeline and lower tax rates under the new tax laws.
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Sanofi (SNY) Q4 Earnings Lag on Weak Diabetes/Vaccines Sales
Sanofi (SNY - Free Report) reported fourth-quarter 2017 earnings of 63 cents per American depositary share, which missed the Zacks Consensus Estimate of 69 cents. Earnings declined 15.2% on a reported basis. At constant currency rates (CER), earnings declined 8.8%.
Fourth-quarter net sales declined 2% on a reported basis to almost $10.26 billion (€8.69 billion). Sales also missed the Zacks Consensus Estimate of $10.38 billion. Unfavorable exchange rate movements hurt sales by 6.1%. At CER, sales rose 4.1% year over year.
In January 2017, the French drug maker swapped its Merial Animal Health businesses with Boehringer Ingelheim’s Consumer Healthcare (CHC) business. Reflecting this exchange and full consolidation of Sanofi’s European vaccines operations, sales declined 1.6% at constant structure (CS) and CER basis.
Sales declined 6.2% at CER in the United States. However, sales rose 6.3% in Emerging Markets, 15.8% in Europe and 8.3% in the Rest of the World (Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico).
All growth rates mentioned below are on a year-on-year basis and at CER.
Segmental Performance
Pharmaceuticals sales (including emerging markets) declined 2.8% to €7.3 billion. However, at CS and CER, Pharmaceuticals sales rose 4%.
Sanofi reports through five Global Business Units (GBUs) – Sanofi Genzyme (Specialty Care), Diabetes & Cardiovascular, General Medicines & Emerging Markets, Consumer Healthcare and Sanofi Pasteur (Vaccines).
Sanofi Genzyme/Specialty Care GBU sales (including emerging markets) increased 16.5% to €1.71 billion, driven by contribution from new immunology drugs – Dupixent and Kevzara - and higher sales of multiple sclerosis (MS) and rare disease drugs.
Sales of MS drugs Aubagio rose 13.6% to €389 million while sales of Lemtrada went up 0.9% to €112 million.
Meanwhile, sales of rare disease drugs like Myozyme/Lumizyme improved 11.5% to €205 million while Fabrazyme sales were €180 million, up 6%. Cerdelga sales came in at €33 million, up 20.7% while Cerezyme sales rose 7.1% to €183 million.
Oncology sales rose 3.5% to €361 million. Jevtana sales were up 14.1% to €99 million while Thymoglobulin recorded sales of €72, flat year over year. Taxotere sales were also flat at €40 million. Eloxatine sales were up 14.6% to €44 million.
Sanofi and Regeneron Pharmaceuticals, Inc.’s (REGN - Free Report) rheumatoid arthritis (RA) drug Kevzara (sarilumab) was launched in the United States in June 2017 and in United Kingdom, Netherlands and Germany in Europe in the second half. Kevzara recorded sales of €8 million in the quarter compared with €2 million in the previous quarter.
Meanwhile, Dupixent/dupilumab for treating atopic dermatitis was launched in the United States in March and approved in the EU in September 2017. In December, Sanofi launched Dupixent in Germany. Dupixent generated sales of €118 million in the fourth quarter compared with €75 million in the previous quarter. Kevzara and Dupixent generated total immunology sales of €126 million in the fourth quarter, much higher than €77 million in the previous quarter.
Diabetes and Cardiovascular GBU (including emerging markets) declined 14.2% to €1.66 billion. The Diabetes franchise (including emerging markets) declined 15.6% to €1.53 billion due to lower sales of key drug Lantus.
Sales of diabetes drugs in the United States declined 29.5% to €730 million due to a tough U.S. payer environment and difficult year-over-year comparisons. Sales of diabetes drugs in Emerging Markets were up 8.2% while in Europe it rose 1.3%.
Lantus sales declined 20.9% to €1.08 billion in the quarter. Lantus sales declined 31.4% in the United States due to lower average net price and exclusion from the CVS and United Health formulary plans while in Europe sales declined 7.5% due to biosimilar competition and patient switching to Toujeo.
Toujeo generated sales of €216 million in the reported quarter, which, though down 4.2% on a year-over-year basis due to difficult year-ago comparisons, rose 9% sequentially.
Soliqua, a once-daily titratable fixed-ratio combination of Lantus and Lyxumia, was launched in the United States in January 2017 and in some European countries (trade name – Suliqua) in 2017. Soliqua/Suliqua generated sales of €9 million in the quarter compared with €8 million in the previous quarter.
In the cardiovascular franchise, Sanofi’s anti PCSK9 therapy, Praluent garnered worldwide sales of €53 million in the reported quarter, compared with €42 million in the previous quarter.
General Medicines & Emerging Markets GBU sales came in at €3.35 billion, down 2.3%. Sales of Established products were €2.3 billion, down 5.5% as strong performance in emerging markets was offset by lower sales in Europe and generic competition for Plavix in Japan and Renvela/Renagel in the United States.
Sales of Generics declined 2.1% to €435 million due to lower sales in Europe and Emerging Markets.
Consumer Healthcare GBU sales were €1.2 billion, up 51.8%. Sales were up 2.5%, excluding acquisition of Boehringer Ingelheim’s Consumer Healthcare business, driven by higher sales in Europe and United States, which offset slight decline in Emerging Markets.
Fourth-quarter consolidated Sanofi Pasteur (Vaccines) sales increased 8.7% to €1.39 billion. Vaccines sales reflect the termination of the Sanofi Pasteur MSD joint venture with Merck (MRK - Free Report) in Europe from December 2016.
In the Vaccines segment, lower sales in Emerging Markets and United States offset sales growth in Europe. In Emerging Markets, vaccines sales declined due to the phasing effect of Hexaxim pediatric vaccine sales and the buyback of unused doses of Sanofi’s dengue vaccine, Dengvaxia following the unfavorable label update announced in November.
Sanofi is facing issues with Dengvaxia due to safety concerns. In November, Sanofi had revealed that in people who had never been infected by the dengue virus, vaccination with Dengvaxia, upon a subsequent dengue infection, might increase the risk of severe disease.
In response, in December 2017, the Philippines FDA asked the company to suspend the sale/distribution/marketing of Dengvaxia and withdraw it from the market pending compliance with the directives of the agency.
In the United States, lower sales of pediatric and booster vaccines resulted in a decline.
Costs Rise
Selling general and administrative expenses (SG&A) increased 9.6% at CER in the quarter, reflecting launch costs of Dupixent and Kevzara and additional costs in China. R&D expenses were up 6.3% at CER, reflecting higher pipeline development costs in oncology (isatixumab, PD-1) and sotagliflozin.
Full Year 2017 Results
Full-year 2017 earnings of $3.13 per American depositary share also missed the Zacks Consensus Estimate of $3.34 per share. Earnings declined 2.5% on a reported basis. At CER, earnings declined 0.2%, which was almost in line with Sanofi’s expectation of it remaining more or less flat on a CER basis
Net sales rose 3.6% on a reported basis and 5.6% at CER to almost $39.6 billion (€35.06 billion). Sales, however, missed the Zacks Consensus Estimate of $42.3 billion.
2018 Outlook
Sanofi expects 2018 business earnings to grow between 2% and 5% at CER. It anticipates a negative currency impact in the range of 3%-4% on business earnings in 2018. However, the guidance includes the impact of the recently announced pending acquisitions of Belgian nanobodies maker, Ablynx and a small biotech focused on making therapies for hemophilia, Bioverativ Inc. . The acquisitions should strengthen Sanofi’s position in the rare blood disorders market.
Our Take
Sanofi’s fourth-quarter 2017 results were below expectations as it missed estimates for both earnings and sales.
Higher sales of multiple sclerosis and rare disease drugs, significant contribution from Dupixent and a strong performance in Europe was offset by continued weakness in the Diabetes franchise and lower vaccine sales in Emerging Markets and United States. Shares of Sanofi were down more than 2% in pre-market trading.
In the past year, Sanofi’s shares have returned 2.2%, underperforming the 14.4% increase for the industry.
However, Sanofi’s 2018 outlook looks upbeat as it expects to return to growth this year on the back of the Bioverativ and Ablynx deals, a strong pipeline and lower tax rates under the new tax laws.
Sanofi 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 and EPS Surprise | Sanofi Quote
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