Sanofi blames China for profit warning
by Natalie Huet,
2013-10-30 14:16:14.0
PARIS — French drug maker Sanofi cut its 2013 profit forecast for a second time after a sharp slowdown in China, lower generic sales in Brazil and manufacturing problems at a Toronto vaccine plant hit third-quarter results.
Sanofi said it now expected full-year earnings per share about 10% lower than in 2012 at constant exchange rates, compared with previous guidance of a 7%-10% drop.
Its shares fell 2% in early trading to €74.20, the second-worst performer on the French blue-chip CAC 40 index.
The world’s fourth-largest pharmaceutical company by prescription drug sales is among the most exposed to emerging markets, where it makes nearly a third of its revenue.
A crackdown on the sales practices of large pharmaceutical companies in China, increased government pressure on drug prices from Asia to Latin America and weakness in emerging-market currencies are acting as a reminder that growth in those regions remains volatile.
Britain’s GlaxoSmithKline, at the centre of the furore in China, said last week its sales there had dropped more than 60% in the quarter, hit by a bribery scandal that made doctors wary of seeing drug representatives.
"Promotional activities and sales are progressively coming back to normal," Sanofi said.
Sanofi’s sales in China — which last year accounted for less than 4% of group revenue but posted the strongest growth — rose 5% in the third quarter. In the three months to end June, before the scandal, growth was 15% year on year.
Worldwide, Sanofi’s sales fell 6.7% to €8.432bn in the third quarter, generating earnings per share (EPS) of €1.35, down 19%. Analysts polled by Thomson Reuters IBES on average had forecast sales of €8.55bn and EPS of €1.43.
Business net income, which excludes items such as amortisation and legal costs, declined 18.7% to €1.789bn.
The company had already cut its 2013 profit forecast in August.
Plant hitch
Double-digit growth at its diabetes and Genzyme rare disease businesses contrasted with lower sales of generics, vaccines and animal-health products, Sanofi said.
Vaccine sales fell 7.2% following the manufacturing problem at Sanofi’s Toronto plant that held back batches of paediatric vaccines destined for the US market.
CE Chris Viehbacher said the problem had been resolved and shipping had restarted. The company added that it expected a record flu season in the northern hemisphere in the second half.
Generic drug sales were down 5.4% due to the lingering effect of inventory issues in Brazil in the previous quarter.
Sanofi’s earnings have suffered from the loss of patents on some of its best-selling drugs, including blood thinner Plavix.
Since taking the helm four years ago, Mr Viehbacher has sought to replenish its pipeline, acquiring US biotech firm Genzyme in 2011 to develop treatments for rare diseases and partnering Regeneron on a new cholesterol drug.
Excluding currency effects, which slashed 7.3 percentage points off revenue growth, global sales were up 0.6%, growing for the first time in five quarters.
The company said sales trends had gradually improved in Western Europe over the year and that most of the patent cliff was now behind it.
"We’re confident about being able to get back to growth in the fourth quarter," Mr Viehbacher said.
Reuters
Picture: THINKSTOCK
PARIS — French drug maker Sanofi cut its 2013 profit forecast for a second time after a sharp slowdown in China, lower generic sales in Brazil and manufacturing problems at a Toronto vaccine plant hit third-quarter results.
Sanofi said it now expected full-year earnings per share about 10% lower than in 2012 at constant exchange rates, compared with previous guidance of a 7%-10% drop.
Its shares fell 2% in early trading to €74.20, the second-worst performer on the French blue-chip CAC 40 index.
The world’s fourth-largest pharmaceutical company by prescription drug sales is among the most exposed to emerging markets, where it makes nearly a third of its revenue.
A crackdown on the sales practices of large pharmaceutical companies in China, increased government pressure on drug prices from Asia to Latin America and weakness in emerging-market currencies are acting as a reminder that growth in those regions remains volatile.
Britain’s GlaxoSmithKline, at the centre of the furore in China, said last week its sales there had dropped more than 60% in the quarter, hit by a bribery scandal that made doctors wary of seeing drug representatives.
"Promotional activities and sales are progressively coming back to normal," Sanofi said.
Sanofi’s sales in China — which last year accounted for less than 4% of group revenue but posted the strongest growth — rose 5% in the third quarter. In the three months to end June, before the scandal, growth was 15% year on year.
Worldwide, Sanofi’s sales fell 6.7% to €8.432bn in the third quarter, generating earnings per share (EPS) of €1.35, down 19%. Analysts polled by Thomson Reuters IBES on average had forecast sales of €8.55bn and EPS of €1.43.
Business net income, which excludes items such as amortisation and legal costs, declined 18.7% to €1.789bn.
The company had already cut its 2013 profit forecast in August.
Plant hitch
Double-digit growth at its diabetes and Genzyme rare disease businesses contrasted with lower sales of generics, vaccines and animal-health products, Sanofi said.
Vaccine sales fell 7.2% following the manufacturing problem at Sanofi’s Toronto plant that held back batches of paediatric vaccines destined for the US market.
CE Chris Viehbacher said the problem had been resolved and shipping had restarted. The company added that it expected a record flu season in the northern hemisphere in the second half.
Generic drug sales were down 5.4% due to the lingering effect of inventory issues in Brazil in the previous quarter.
Sanofi’s earnings have suffered from the loss of patents on some of its best-selling drugs, including blood thinner Plavix.
Since taking the helm four years ago, Mr Viehbacher has sought to replenish its pipeline, acquiring US biotech firm Genzyme in 2011 to develop treatments for rare diseases and partnering Regeneron on a new cholesterol drug.
Excluding currency effects, which slashed 7.3 percentage points off revenue growth, global sales were up 0.6%, growing for the first time in five quarters.
The company said sales trends had gradually improved in Western Europe over the year and that most of the patent cliff was now behind it.
"We’re confident about being able to get back to growth in the fourth quarter," Mr Viehbacher said.
Reuters
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