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Business News/ Companies / Sanofi ups earnings growth goal, plans cost cuts
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Sanofi ups earnings growth goal, plans cost cuts

Sanofi ups earnings growth goal, plans cost cuts

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Paris: French drugmaker Sanofi-Aventis raised its earnings growth goal for the year and outlined new cost savings to help it cope with the effect on profit of patent expiries on a number of its top drugs.

Sanofi beat the average of analysts’ forecasts for its second-quarter earnings on Wednesday when it raised its growth forecast for adjusted earnings per share (EPS) to around 10% at constant exchange rates from at least 7%.

The group, world leader in flu vaccines, will get a boost from increased demand due to the spread of H1N1 swine flu, though the sales impact in 2009 may be limited.

Cost savings of €2 billion by 2013 as well as support from key growth drivers such as vaccines, diabetes products like Lantus and emerging markets should help Sanofi achieve a net profit and sales level similar to that in 2008. Net profit excluding selected items was €7.2 billion in 2008, on sales of 27.6 billion.

Sanofi is anticipating a bleak few years when several of its key drugs will lose patent protection, allowing rivals to produce cheaper copies that the company has said could take out about a fifth of its sales.

“It’s been a very good quarter short term, but we have also moved to position ourselves for long-term growth," chief executive Chris Viehbacher said at a news conference. “We hit on all the objectives we wanted to achieve."

Sanofi shares rose as much as 2.5% but were flat again by 0855 GMT, but still ahead of the DJ Stoxx healthcare index, which was down 0.3%.

“It is good to see they’re serious about restructuring and cleaning out the pipeline; that is coming down to the new leadership team," Helvea analyst Karl Heinz Koch said.

Since Viehbacher’s appointment in December, the world’s fourth-largest drugmaker by sales has closed a number of partnerships to discover new drugs, embarked on takeovers in generics and overhauled its research and development.

Viehbacher stuck to his strategy of focusing on takeovers of up to €15 billion while not entirely ruling out a bigger deal. Some analysts believe Sanofi needs to make a major move to balance out sales lost to generic competition.

“I don’t think the cost savings are enough to counterbalance a possible loss in generics, and I still think they need a bigger deal to deal with all the potential generic losses," Koch said.

DITCHES TWO MORE PRODUCTS

On top of the 14 products it had already dropped from its pipeline, Sanofi said it had ditched two more -- Phase II schizophrenia treatment AVE1625 and Phase III cancer side-effects drug xaliproden. On the other hand, four new drug candidates entered clinical development.

Sanofi said there had been no significant changes in the prescription of flagship drug Lantus following studies that linked the insulin with cancer. US and European Union health regulators did not support the studies and independent experts invited by Sanofi concluded the studies were flawed.

Sanofi’s second-quarter net profit rose 29.4% to €2.3 billion, bolstered by 11.2% higher sales at 7.48 billion, as well as by contributions from acquisitions. Along with Lantus, group sales benefited from forecast-beating growth for four other key products, including blood thinner Plavix and cancer drug Eloxatin.

Those drugs, however, could face early generic arrivals.

A US court in June cleared the path for cheaper copies to Eloxatin to appear, and in May the European Medicines Agency gave the green light to six generic versions of Plavix, which is marketed by Bristol-Myers Squibb in the United States.

Viehbacher said Sanofi had received major orders from the US and France for H1N1 flu vaccines and was in discussion with more than 30 countries about supplies.

But he cautioned 2009 sales might not be that large, since supply depended on variable vaccine yields and it would take time to process orders. “At the moment, we don’t think the H1N1 sales will necessarily be that significant this year," he said.

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Published: 29 Jul 2009, 03:21 PM IST
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