Sanofi-Aventis' 2010 Guidance Remains Unchanged; Q1 Sales Up 3.9 %

The onset of Lovenox generics could be a near-term reality in the U.S., though timing remains uncertain.

Sanofi-Aventis managed to keep its revenues afloat in the first quarter of 2010 despite debt incurred from recent deals and the onset of generic competition for its mega drug Plavix (clopidogrel) in Europe, execs told investors April 29.

Plavix' presence in Europe declined 47 percent to €227 million; globally the drug brought in €535 million for the quarter. At the same time, Sanofi saw sales of Eloxatin decline 80.8 percent to €66 million due to the onset of generic competition in the U.S. last year.

Unlike some other big pharmas, U.S. health care reform did not cause Sanofi to change its 2010 predictions, with earnings per share growth in line with initial expectations of two percent to five percent. But this does not mean Sanofi remains unaffected by the new law.

For the quarter, Sanofi took a reserve against sales of $35 million to cover health care reform implications, mainly increased Medicaid rebates. The reserve does not get evenly distributed across products because some bear a larger Medicaid burden then others, execs said. For the year, Sanofi expects a hit of approximately $220 million from health care reform.

Overall, the pharma's sales increased 3.9 percent to €7.38 billion for the quarter, helped by H1N1 flu vaccine sales in the southern hemisphere; that's similar to the boost reported by Novartis during its Q1 call. Sanofi's sales of H1N1 vaccines were €413 million for the quarter.

But Sanofi's vaccines business fell short of investor's expectations, specifically in the U.S. where sales dropped 18.8 percent to €265 million. Execs said this decline is largely because of the Center for Disease Control and Prevention's decision to reduce inventories of pediatric vaccines, which they believe is a "temporary issue."

"Total revenues were €130M above our forecast, driven by global pharmaceutical sales... Total vaccines was a weak point coming in €46M below our forecast, although U.S. CDC destocking was a factor in the Q," Leerink Swann analyst Seamus Fernandez said in a same day note.

"Everything will really depend upon what happens with H1N1," execs said. "We've had some order cancellations particularly in Europe. But I think we are up to really wait and see how this evolves in the second half of the year."

Meanwhile, Sanofi remains confident that its deal with AgaMatrix to gain blood glucose monitors earlier this year will further bolster its diabetes business, which saw sales grow to €971 million, up 11 percent in the quarter. In inking the deal, execs explained that they avoided spending R&D funds on developing their own devices to be used with the insulins Lantus (€790 million, up 10.4 percent) and Apidra (€39 million, up 29 percent) in line with cost cutting strategies (Also see "Sanofi-Aventis Enters Diabetes Pact With AgaMatrix For Blood Glucose Monitors" - Pink Sheet, 31 Mar, 2010.).

Possible Lovenox Generics Still Loom In U.S....

Investors were optimistic about Sanofi's prospects following its first quarter results even though they acknowledged that generic competition for Lovenox (enoxaparin) is - as Deutsche Bank analysts said in a same-day note - "a plausible scenario."

Lovenox is Sanofi's second-largest product - it brought in sales of $4.1 billion last year, up 8.8 percent. For the first quarter, the drug's sales were €769 million. If unleashed, generics would severely cripple the pharma's sales.

But Sanofi won't forecast a possible impact from Lovenox generics in its 2010 guidance, though sales competition could soon be a reality in the U.S. market (Also see "Unknown Timing of Lovenox Generics Complicates Sanofi-Aventis' Outlook" - Pink Sheet, 15 Feb, 2010.).

-Carlene Olsen ([email protected])