Sanofi-Aventis (SNY) reported fourth quarter earnings of 94 cents per American Depository Share (ADS), a couple of cents below the Zacks Consensus Estimate. The company reported earnings of 88 cents in the year-ago period. For the full year, earnings came in at $4.47 per ADS, well above the Zacks Consensus Estimate of $4.35 and the year-ago earnings of $4.11. Full year revenues increased 6.3%.
Fourth Quarter Performance
Fourth quarter revenues increased 3.8% with performance being driven by Lovenox (up 8.1%), Lantus (up 16.7%), vaccines (up 64.6%) and Apidra (up 30%). Meanwhile, Eloxatin (down 80.5%) and Plavix continued to face generic erosion in the U.S. and some parts of Europe, respectively.
While Plavix revenues declined 30.8% in Europe due to increased generic competition, the product continued to grow at a robust rate both in the U.S. (up 11.3%) and Japan (up 49.7%). Sanofi has a co-promotion agreement with Bristol-Myers Squibb (BMY) for Plavix.
Revenues from emerging markets grew 26.2% during the quarter with strong growth registered in Latin America, Africa and the Middle East. The consumer health care business recorded year-over-year growth of 36.1% in the fourth quarter.
Following the acquisition of Chattem, Sanofi is now the fifth largest consumer healthcare player in the world on the basis of product revenues. This acquisition should help Sanofi establish a strong presence in the U.S. consumer health care market.
Sanofi’s Human Vaccines business delivered strong fourth quarter growth of 64.6%, thanks to the strong performance of the company’s influenza franchise. Influenza vaccine revenues increased 248% during the reported quarter, with H1N1 vaccines revenues of approximately $500 million. We believe the vaccines business will remain an important contributor to the top-line in the coming years.
Although research and development (R&D) expenses declined 7%, selling and general expenses increased 2.4% during the quarter. The decline in R&D expenses is mainly due to the company’s focus on the most promising development programs and the impact of cost savings in pharmaceuticals R&D.
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.
Our Expectations
We expect Sanofi to continue look to contain 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 look to grow revenue through additional partnering deals and acquisitions. The company signed 33 deals in 2009 and is on the look-out for similar deals in 2010.
Sanofi has guided towards earnings growth in the range of 2-5% in 2010. Sanofi reported that generic versions of Lovenox are yet to launch. Companies like Teva (TEVA) are seeking to launch generic versions of the product. The entry of generic versions of Lovenox would be a major blow for the company.
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