Sanofi second quarter shrugs off generics, Europe austerity

PARIS Thu Jul 26, 2012 2:30am EDT

Chris Viehbacher, CEO of Sanofi, attends a news conference to present Sanofi 2011 annual results in Paris, February 8, 2012. REUTERS/Benoit Tessier

Chris Viehbacher, CEO of Sanofi, attends a news conference to present Sanofi 2011 annual results in Paris, February 8, 2012.

Credit: Reuters/Benoit Tessier

PARIS (Reuters) - French drugmaker Sanofi (SASY.PA) posted a slower-than-expected decline in second-quarter profit as growth in emerging markets and diabetes sales offset competition from cheap drug copies and austerity measures in Europe.

Sanofi also confirmed on Thursday that 2012 earnings could drop between 12 and 15 percent due to the loss of top-selling drugs previously protected by patents.

In the three months to June 30, business net income, which excludes items such as amortization and legal costs, dropped 9.6 percent to 1.94 billion euros ($2.35 billion), beating an average of 1.86 billion in a Reuters poll of 10 analysts.

Sales in the quarter rose 6.2 percent to 8.87 billion euros, driven by emerging markets and double-digit growth in diabetes treatment Lantus, as well as the effect of the weaker euro. At constant exchange rates, sales increased 0.4 percent.

However, they dropped 11 percent in Western Europe, hit by generic competition and European governments' curbs on healthcare spending, which has hit several rivals.

GlaxoSmithKline (GSK.L) warned on Wednesday that its sales in 2012 would be flat as pressure on drug prices intensifies in Europe, while Novartis (NOVN.VX) pharmaceuticals head David Epstein told analysts last week that the region had now become the toughest market for drug pricing anywhere in the world.

Sanofi, which has been reducing its exposure to Europe, expects austerity measures in the region to have an impact of 300 million euros on full-year sales in 2012.

Western Europe represents 24 percent of the company's total sales, compared with 30 percent three years ago, Chief Financial Officer Jerome Contamine told reporters.

The Paris-based company confirmed that earnings could decline between 12 and 15 percent this year as top-selling drugs previously protected by patents, including blood thinner Plavix, are hit by competition from cheap copies.

But it expects to return to growth from next year thanks to emerging markets, diabetes, vaccines, animal health, biotech drugs and new products such as experimental multiple sclerosis drug Lemtrada.

"Over 90 percent of the patent cliff is behind us," Chief Executive Chris Viehbacher told reporters.

The company is making strides with new products that it hopes will replace the lost revenue from its off-patent blockbusters.

Sanofi is waiting for regulators' feedback on two multiple sclerosis drugs, and hopes to get approval for a novel cholesterol fighter, REGN727, by late 2015.

It is also developing the world's first vaccine against dengue, which this week showed it can protect against disease caused by three of four virus strains in a keenly awaited clinical trial in Thailand.

But this month it pulled all applications with regulators to sell semuloparin, an experimental drug to prevent blood clots in chemotherapy patients, after it failed to receive backing from the U.S. Food and Drug Administration.

Viehbacher said Sanofi had no plans to refile or continue developing the drug.

Shares in Sanofi, which have risen around 9 percent since the start of the year, closed at 61.66 euros on Wednesday.

($1 = 0.8248 euros)

(Editing by James Regan)