Sanofi SNY reported first-quarter 2015 business earnings of 74 cents per American Depositary Share (ADS), a penny below the Zacks Consensus Estimate. Earnings were up 12.8% on a reported basis and 2.6% at constant exchange rates (CER).
Sanofi’s shares were down 1.3% after announcing its first-quarter results. First quarter net sales increased 12.3% on a reported basis and 2.4% at CER.
Segmental Performance
Sanofi operates through the following segments: Pharmaceuticals, Human Vaccines and Animal Health. All growth rates mentioned below are on a year-on-year basis and at CER.
Pharmaceutical segment sales increased 2.2% to €7.5 billion, reflecting robust performance in emerging markets.
The Diabetes franchise was dragged down 3.2% to €1.8 billion, reflecting lower sales from its best-selling drug, Lantus, in the U.S. (down 13.1% to €1 billion). Lower sales were due to an increase in rebates offered by the company beginning 2015. Global sales too were down 5% to €1.6 billion. However, Apidra (up 10.7%) and Lyxumia (up 60%) performed well. Meanwhile, recently launched Toujeo and Afrezza generated sales of €7 million and €1 million, respectively, in the reported quarter. Sanofi has a licensing agreement with MannKind MNKD for Afrezza.
Genzyme sales increased 30.9% to €821 million. Cerezyme sales rose 4.8% to €189 million while Myozyme sales increased 19% to €156 million. Both the products benefited from strong growth in emerging markets.
Fabrazyme sales were €141 million, up 27.6%, benefiting from strong sales in global markets.
Sanofi’s multiple sclerosis business generated sales of €208 million, up 118.1% from the year-ago quarter. The increase was due to higher sales of Aubagio and inclusion of Lemtrada sales. Aubagio generated sales of €170 million in the reported quarter as compared to €78 million in the year-ago quarter and Lemtrada generated revenues of €38 million as compared to €16 million in the last quarter.
Sales in the Consumer Health Care business increased 5.3% to €979 million primarily driven by Allegra (up 16.3%) and Enterogermina (up 36.8%) sales. Revenues from the Generics sub-group at Sanofi were up 10.2% to €478 million in the first quarter of 2015, reflecting strong performance in emerging markets.
Generic competition for Allegra (down 5%), Plavix (down 9.4%) and Multaq (down 4.1%) continued to affect revenues.
First-quarter 2015 Human Vaccines revenues were €697 million, down 4.6% primarily due to lower influenza vaccines sales in the emerging markets (down 19.4% to €228 million). Sales of the Animal Health segment increased 13.5% to €658 million in the reported quarter.
Guidance Maintained
The company continues to expect 2015 business earnings at the same level as 2014 or grow slightly. Also, the company estimates a positive impact of about 12% from foreign exchange rate translations.
The company continues to expect Diabetes segment sales to remain flat or grow slightly between 2015 and 2018.
Our Take
Sanofi’s first-quarter business earnings were disappointing with the company posting lower year-over-year earnings. Moreover, we remain concerned about the performance of the company’s Diabetes business. We expect investor focus to remain on the sales ramp up of newly launched diabetes drugs.
Meanwhile, Sanofi continues to progress with its pipeline. The company has a key regulatory event coming up with the FDA expected to respond on Praluent (hypercholesterolemia) by Jul 24. Approval would be a huge boost for the company.
Sanofi currently carries a Zacks Rank #5 (Strong Sell). Actelion Ltd. ALIOF and BioMarin Pharmaceutical Inc. BMRN are better-ranked stocks in the health care sector. Both hold a Zacks Rank #1 (Strong Buy).
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