Sanofi-Aventis's H1 Results Boosted by Acquisitions, Strong Sales of Lantus

Leading French drug maker Sanofi-Aventis has posted a 6.7% year-on-year (y/y) rise to 14.5 billion euro (US$20.5 billion) in sales for the first half (H1) of 2009. Pharmaceutical sales accounted for the bulk of this, at 13.2 billion euro, and rose by a reported 6.3% y/y. Human vaccines produced by the Sanofi Pasteur subsidiary, meanwhile, saw an 11.1% y/y sales jump to 1.3 billion euro. Operating costs were kept well in check, with the highest growth in spending coming from the 2.3 billion euro invested in research and development, up 3.7% y/y. Sanofi-Aventis's operating profit gained a healthy 18.3% y/y to stand at just over 5 billion euro, when calculated by IHS Global Insight as net sales minus cost of sales, R&D and S&G (selling and general) expenses. Net profit also saw double-digit growth, at 12.3% y/y, and closed the first half at 2.9 billion euro.

The first half of 2009 was characterised by a spate of acquisitions around the world. The merger with Czech generics producer Zentiva was finalised in March, to be followed a few weeks later by the acquisitions of Laboratorios Kendrick (Mexico) and Medley (Brazil); both generic drug makers. In April, the takeover of U.S. biotech BiPar Sciences was completed, giving Sanofi-Aventis access to poly ADP-ribose polymerase (PARP) inhibitor BSI-201, an experimental treatment for metastatic triple-negative breast cancer. More recently, but falling just outside the first-half reporting period, subsidiary Sanofi Pasteur also acquired Indian firm Shantha Biotech for 550 million euro (see France: 27 July 2009: Sanofi Pasteur Acquires Shantha Biotechnics in India). While these expensive purchases are set to boost revenues but drain income in the short-term, Sanofi-Aventis' CEO Chris Viehbacher has nevertheless set an ambitious target for the company's 2013 revenue and net income to match the levels achieved in 2008 prior to major acquisitions. Streamlining operations will play a major role in achieving this goal, including cutbacks to R&D (see France: 29 April 2009: Sanofi-Aventis Posts 2.5% Y/Y Sales Growth in Q1, Drops 14 R&D Projects).

Sanofi-Aventis's top-selling drug, thrombosis treatment Lovenox (enoxaparin sodium), fared better in terms of first-half sales than it did in the first quarter, with reported sales growth of 13.9% y/y. Diabetes treatment Lantus (insulin glargine) remains the company’s fastest-growing drug by some distance, however, with first-half turnover soaring 35.8% y/y to 1.5 billion euro. Sales of cancer drug Taxotere (docetaxel) also remained strong, while diabetes drug Apidra (insulin glulisine) continued to rapidly expand its market share. Following the consolidation of results from various acquisition targets, sales of generic drugs more than doubled to 377 million euro.

Generic competition plagued other treatments within Sanofi-Aventis's portfolio, most notably multiple sclerosis drug Copaxone (glatiramer acetate), which the French firm stopped selling in the United States and Canada after licensing its rights in those markets to Teva (Israel). Sales of ACE inhibitor Tritace (ramipril), and osteoporosis treatment Actonel (risedronate sodium) fell by 16% y/y and 15.4% y/y, respectively.

Sales of influenza vaccines suffered a major 40% y/y slump to 120 million euro during the reporting period. However, Sanofi-Aventis has pointed out that the loss is mostly due to H5N1 (avian influenza) vaccines; if their effect is taken away, sales growth of flu vaccines stood at 27.4% y/y on a comparable basis, as opposed to a loss of 41% y/y. The downturn in this segment should be quickly replaced by demand for Sanofi Pasteur's A/H1N1 (swine flu) vaccine, which is currently in development and has already been ordered by several governments including that of the United States and France.

Outlook and Implications