China slowdown and vaccine glitch hit drugmaker Sanofi
PARIS (Reuters) - French drugmaker Sanofi (SASY.PA) lowered its 2013 profit guidance for a second time after a slowdown in China, weaker generic sales in Brazil and manufacturing problems at a Toronto vaccine plant dented third-quarter results.
Sanofi said it now expected full-year earnings per share around 10 percent lower than in 2012 at constant exchange rates, having previously signaled a 7-10 percent drop.
However, Chief Executive Chris Viehbacher told reporters that the problems encountered during the quarter were largely one-offs that the company had now put behind it.
"We're confident about being able to get back to growth in the fourth quarter," he said on a conference call.
After opening 2 percent lower, Sanofi shares were up 2.4 percent at 1040 GMT, outperforming the Euro Stoxx Healthcare Index .SXDP and giving Sanofi a market value of around 102 billion euros, the second-biggest on France's blue-chip index .FCHI behind oil major Total (TOTF.PA).
Analysts noted that while vaccines and emerging markets had weakened, Sanofi's diabetes and Genzyme rare diseases businesses continued to post double-digit growth. They said the company, with most of the impact of lost patents now behind it, was ready for a recovery in profit.
"Overall, a weak quarter, yet the company returns to a period where growth should be steady and comparatively strong versus many peer companies," Bernstein analyst Timothy Anderson wrote in a note.
PRESSURE IN CHINA
Anderson said Sanofi's performance in emerging markets, and particularly in China, was clearly on the weak side, mirroring problems faced by other drug companies in the quarter.
A crackdown on Big Pharma's sales practices 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 (GSK.L) said last week its sales in China had dropped 61 percent in the third quarter, hit by a bribery scandal that made doctors wary of seeing drug representatives.
Sanofi's sales in China - which last year accounted for less than 4 percent of group revenue but posted the strongest growth - rose 5 percent in the third quarter. In the three months to the end of June, before the scandal, growth was 15 percent year-on-year.
"There have been investigations ongoing and this creates some confusion in the market place. We are seeing a progressive return to normal circumstances," Viehbacher said, noting that sales were improving month on month.
Worldwide, Sanofi's sales fell 6.7 percent to 8.432 billion euros ($11.61 billion) in the third quarter, generating earnings per share (EPS) of 1.35 euros, down 19 percent.
Analysts polled by Thomson Reuters I/B/E/S on average had forecast sales of 8.55 billion euros and EPS of 1.43 euros.
Business net income, which excludes items such as amortization and legal costs, declined 18.7 percent to 1.789 billion euros.
Vaccine sales fell 7.2 percent following the manufacturing problem at Sanofi's Toronto plant that held back batches of pediatric vaccines destined for the U.S. market.
Viehbacher said the problem had been resolved, shipping had restarted and Sanofi did not expect any future impact. 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 percent due to the lingering impact 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, Viehbacher has sought to replenish its pipeline, acquiring U.S. biotech firm Genzyme in 2011 to develop treatments for rare diseases and partnering with Regeneron (REGN.O) on a new cholesterol drug.
The company said sales trends had gradually improved in Western Europe over the year. Excluding currency effects, which slashed 7.3 percentage points off revenue growth, global sales were up 0.6 percent, growing for the first time in five quarters.
($1 = 0.7262 euros)
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