Paris: Sanofi-Aventis said Wednesday that hefty new restructuring costs caused its net profit to slump 64% in the fourth quarter, amid continued uncertainty over the fate of its nearly $20 billion bid for US biotechnology firm Genzyme Corp.
The French pharmaceutical giant said in a statement that its net profit shrank to €437 million ($596 million) in the fourth quarter, far less than the €1.2 billion profit it posted a year earlier.
The world’s fourth largest prescription drug maker by sales took €1.4 billion in restructuring charges last year, with €880 million in the fourth quarter alone. That was even more than the €1.1 billion it took in 2009 and continued the pricey restructuring the company has undergone since the arrival of chief executive Chris Viehbacher in 2008.
Paris-based Sanofi-Aventis was silent on the state of negotiations with the management of Cambridge, Massachusetts-based Genzyme, the target of an eight-month-long takeover campaign by the French drug maker. Its current $69 per share offer expires 15 February, and last week the companies agreed to share non-public information, a step that signaled the two sides were closing in on a deal.
Speaking on a conference call with reporters, Viehbacher dodged questions on the deal, saying only that discussions were “progressing.”
Sanofi-Aventis, maker of the world’s second-biggest selling medicine, the blood-thinner Plavix, also warned that a core measure of its earnings would fall this year under the combined wallop of US health care reform, EU austerity measures and increased competition from less expensive generic drugs. The lack of H1N1 vaccine sales, which boosted sales last year, will also weigh on earnings in 2011, Sanofi-Aventis said.
The company forecasts a 5 to 10% drop this year in its “business EPS,” a gauge of earnings per share that excludes restructuring and other exceptional items.
In 2010, earnings by this measure grew 6.8% to €7.06.
Under Viehbacher, Sanofi-Aventis has increasingly been making deals to acquire small companies or rights to promising experimental drugs. The moves are aimed at offsetting inadequate progress from internal research programs and looming revenue declines as blockbuster drugs face generic competition.
Sanofi-Aventis turned its sights on Genzyme last summer. If it succeeds, the deal would rank among the larger takeovers in the pharmaceutical industry in recent years.
Genzyme, which develops drugs for rare diseases, had to restructure its manufacturing after viral contamination shut down its suburban Boston factory for a few months in 2009. Genzyme got hit with both a $175 million government fine and a big drop in profit. In November 2009, the US Food and Drug Administration found tiny particles of steel, rubber and fiber in some of its drugs.
Genzyme has argued Sanofi’s offer does not take into account the company’s recovery and its pipeline of potential medicines.
The companies have disagreed about both Genzyme’s overall value and the value of Genzyme’s alemtuzumab, a biologic drug approved for treating leukemia under the brand name Campath. It’s now in late-stage testing for treating multiple sclerosis, and if approved would have the brand name Lemtrada.
The two companies are discussing potential terms, including possibly tying payments to milestones such as alemtuzumab’s future sales, as a way to reach a resolution.