UPDATE 5-Sanofi stops 14 candidate drugs, profit up 15.7 pct

* Stops development of 14 drugs, including 4 in Phase III

* To decide on another 4 drugs in coming months

* Sees 3 potential blockbusters in leaner pipeline

* Q1 net profit 2.18 bln euros, beating consensus

* Shares rise as much as 4.4 pct, beats DJ health index

(Adds comments from conference call, updates shares)

By Caroline Jacobs

PARIS, April 29 (Reuters) - Sanofi-Aventis (SASY.PA) took a knife to its pipeline, slashing 14 drugs from development, including four in final trials, and beat forecasts with a 15.7 percent rise in quarterly net income, lifting its shares.

Under Chief Executive Chris Viehbacher, the French drugmaker's research team has sped up its assessment of which drugs can successfully reach the market to help offset sales lost to cheap generics when patents expire.

Cost cutting helped the world's fourth-biggest drugmaker post first-quarter earnings ahead of expectations on Wednesday and it kept its 2009 forecast for earnings per share growth of at least 7 percent at constant currency exchange rates.

"We're certainly off to a very good start of the year," Viehbacher said. He said the forecast was for minimum growth, leaving the door open for a review at second-quarter earnings in July. "We put a floor, not a ceiling," he said.

Sanofi shares rose 3.9 percent to 43.22 euros by 1451 GMT, while the DJ health index .SXDP was little changed. The stock is trading at 6.9-times its expected 2009 EPS, cheaper than the 8.9-times GlaxoSmithKline (GSK.L) -- Viehbacher's previous employer -- is trading at.

Viehbacher is aiming for small- to mid-sized takeovers of up to 15 billion euros and R&D partnerships to improve Sanofi's pipeline. He said he remained open for all deal sizes, adding his team looked at more than 70 projects in the quarter.

"We are looking ... at all sizes of acquisitions," he said. "I don't think I'm changing my strategy," he added. "We don't start by saying what's the price tag but what businesses are most attractive, the most interesting."

Sanofi could also be branching out in animal healthcare, possibly buying the 50 percent share Merck (MRK.N) has in their Merial joint venture. The U.S. drugmaker is merging with Schering Plough SGP.N and is still weighing its options.

Analysts welcomed Sanofi's strong earnings, ongoing measures to contain costs, refocused pipeline and the swift transition of the company since Viehbacher arrived in December.

"We think the market has failed to adjust for upside from corporate change as well as strong recent newsflow," Collins Stewart analyst James Knight said in a research note.

Adjusted net profit rose to 2.18 billion euros ($2.84 billion), up 8.7 percent at constant exchange rates compared with the 1.95 billion euro average forecast from a Reuters poll of 12 analysts.

Sales grew 2.5 percent to 7.11 billion euros while they were flat at constant exchange rates. At constant rates, growth was driven by 27 percent higher sales of diabetes drug Lantus, an 8.3 percent rise in cancer drug Taxotere and 9 percent growth in vaccines.

In its "first critical phase" of R&D transformation, Sanofi ditched products from clinical trials and said it would decide in the next months on the fate of four others. Speeding up its search for R&D alliances could help boost the share of biotech-based drugs to as much as 50 percent in the next years.

FLU VACCINES

Sanofi, which is the world's biggest maker of vaccines, said it was doing whatever was necessary to help fight a pandemic of swine flu, should it occur. Vaccine companies are gearing up to make a pandemic vaccine if one is needed. [ID:nLS423019]

It has also donated stock of seasonal flu vaccine to Mexico, where as many as 159 people have died from the disease. [nFLU]

Sanofi has suffered several high-profile setbacks in its pipeline, culminating in the flop of obesity pill Acomplia, once seen as a blockbuster. About a fifth of its sales are exposed to drugs losing their patent protection by 2012 and its portfolio does not contain enough drugs to be able to offset that loss.

It now has 51 drugs in its portfolio, of which 21 are in Phase III or are awaiting regulatory approval, including heart drug Multaq. Morgan Stanley analysts expect Multaq peak sales of 3 billion euros against consensus of around 1 billion euros.

The leaner pipeline contained three possible candidates with sales potential of at least 1 billion euros Viehbacher said, naming a vaccine to prevent the spreading tropical disease dengue, and cancer candidates BSI-201 and aflibercept.

Sanofi stopped developing in final Phase III clinical trials anti-depressant saredutant, AVE5530 in hypercholesterolemia, and returned the rights of cancer drug TroVax to Oxford BioMedica (OXB.L). In its fast-growing vaccines business, it dropped combination shot UnifiveTM to focus resources on Hexaxim.

In mid-stage Phase II, four studies were halted -- AVE0657 for sleep apnea, SSR180575 for diabetics, oncology candidate AVE1642 and a melanoma vaccine. It stopped six Phase I projects.

In the next few months, Sanofi plans to decide on four drugs -- heart drug idrabiotaparinux, neurotherapy drug xaliprodene, AVE1625 and West Nile virus vaccine -- on which clinical data are pending.

($1=.7683 Euro)

(Reporting by Caroline Jacobs; Editing by John Stonestreet and Andrew Macdonald)