Sanofi Easily Beats Zacks Estimate – Analyst Blog

Sanofi-Aventis (SNY) reported first quarter earnings of $1.29 per American Depository Share (ADS), which was well above the Zacks Consensus Estimate of $1.18. The company reported earnings of $1.10 in the year-ago period. 

First quarter revenues increased 3.9%, with performance being driven by the diabetes franchise (up 11%) and vaccines (up 56%). Performance of the diabetes franchise was driven by double-digit growth of Lantus (up 10.4%), Apidra (up 29%) and Amaryl (up 13%). 

Meanwhile, Eloxatin (down 80.8%) and Plavix continued to face generic erosion in the US and in some parts of Europe. Eloxatin sales should revive later this year, given Sanofi’s settlement agreements with generic companies, under which the generic players will stop marketing their versions after June 30.

 

While Plavix revenues declined 43.5% in Europe due to increased generic competition, the product continued to grow at a robust rate both in the US (up 18.2%) and Japan (up 44.2%). Sanofi has a co-promotion agreement with Bristol-Myers Squibb (BMY) for Plavix. 

Revenues from emerging markets grew 40.9% during the quarter with A/H1N1 vaccines contributing to growth. Strong growth was registered in Asia, Latin America and the Middle East. 

The consumer health care business recorded year-over-year growth of 42.5% in the first quarter. Following the acquisition of Chattem, Sanofi is now the fifth largest consumer health care player in the world on the basis of product revenues. This acquisition should help Sanofi establish a strong presence in the US consumer health care market. 

Sanofi’s Human Vaccines business delivered strong first quarter growth of 56%, thanks to the strong performance of the company’s influenza franchise. Influenza vaccine revenues increased significantly during the reported quarter, including contributions from H1N1 vaccines. We believe the vaccines business will remain an important contributor to the top line in the coming years. 

Both research and development (R&D) expenses and selling and general expenses declined during the quarter mainly due to cost saving efforts. 

Sanofi has been working on generating cost savings through its Transformation program, which is expected to generate cost savings of €2 billion in 2013. About €480 million of cost savings were generated in 2009 with both R&D and SG&A expenses declining as a percentage of sales. We expect the company to generate additional cost savings in 2010.

 

We expect Sanofi to continue its efforts for containing operating costs in order to grow earnings in the face of weakening sales of some of its biggest products. We also expect the company to pursue growing revenue through additional partnering deals and acquisitions. The company signed 33 deals in 2009 and is on the lookout for similar deals in 2010.

 

Despite including the impact of US Healthcare reform, Sanofi maintained its guidance for 2010. The company expects earnings growth in the range of 2−5% in 2010.