The FINANCIAL — Sanofi Chief Executive Officer, Olivier Brandicourt, commented:
“Sanofi Genzyme, Sanofi Pasteur and Emerging Markets were once again major contributors to our performance in the quarter. The continued growth of these businesses, together with disciplined expense management, enabled us to more than offset the headwinds in our Diabetes franchise. Consequently, we feel confident in our full-year outlook and raise our 2017 business EPS guidance. We are also encouraged by the strong uptake of Dupixent® in the U.S. and the approval of Kevzara®. The initiation of Phase 3 studies in additional indications for dupilumab, the Phase 2/3 programs with the anti PD-1 in multiple cancer indications and fitusiran in hemophilia were significant R&D milestones in the second quarter.”
In the second quarter of 2017, Company sales were €8,663 million, up 6.4% on a reported basis. Exchange rate movements had a favorable effect of 0.9 percentage points mainly reflecting the positive evolution of the U.S. dollar, Brazilian Real and Russian Ruble which more than offset the negative impact from the Egyptian Pound, Turkish Lira, British Pound and Chinese Yuan. Company sales benefited from the acquisition of Boehringer Ingelheim’s CHC business and full consolidation of Sanofi’s European vaccines operations leading to an increase of 5.5% at CER. At CER and constant structure, Company sales were up 0.6%, according to Sanofi.
First-half Company sales reached €17,311 million, up 8.7% on a reported basis. Exchange rate movements had a favorable effect of 1.7 percentage points. At CER and constant structure, Company sales were up 2.0%.
Second-quarter Pharmaceuticals sales were up 3.2% to €7,647 million. At constant structure, Pharmaceuticals sales were down 1.5% primarily due to Diabetes and Established products. First-half sales for Pharmaceuticals increased 5.3% (+0.6% at constant structure) to €15,511 million.
In the second quarter, Rare Disease sales increased 5.9% to €752 million driven by the accrual of patients worldwide. Rare Disease sales grew 6.8% in the U.S., 10.2% in Emerging Markets and 3.4% in Europe. First-half Rare Disease sales increased 6.7% to €1,464 million.
Gaucher (Cerezyme and Cerdelga) sales were slightly up (0.4%) at €224 million in the second quarter. Cerezyme sales were down 2.0% to €193 million reflecting a strong base for comparison. Cerdelga sales increased 19.2% to €31 million of which €23 million were generated in the U.S. (up 15.0%). First half Gaucher sales were €431 million (down 0.2%).
Second-quarter Fabrazyme sales were up 12.0% to €190 million, reflecting a continued accrual of new patients. First-half Fabrazyme sales were up 13.6% to €367 million.
Myozyme/Lumizyme sales grew 10.4% to €203 million in the second quarter, mainly due to new patient accruals and increased worldwide diagnosis of Pompe disease. First-half Myozyme/Lumizyme sales increased 11.5% to €393 million.
Second-quarter Multiple Sclerosis (MS) sales grew 27.9% to €549 million, reflecting strong Aubagio growth. First-half MS sales increased 30.0% to €1,045 million.
Second-quarter Aubagio sales increased 32.7% to €425 million driven by the U.S. (up 28.7% to €285 million) and Europe (up 42.5% to €114 million). In the U.S., Aubagio achieved a market share of 9.3% (source IMS TRX-Q2 2017). First-half Aubagio sales increased 31.3% to €796 million.
In the second quarter Lemtrada sales increased 13.9% to €124 million, including €63 million in the U.S. (up 10.7%) and €47 million in Europe (up 22.5%). First-half Lemtrada sales increased 26.0% to €249 million.
Dupixent which was launched in the U.S. in March for the treatment of moderate to severe adult atopic dermatitis generated sales of €26 million in the second quarter. Since the launch, over 5,100 physicians in the U.S. have prescribed Dupixent (as of July 26, 2017) and cumulatively over 13,000 patients have been prescribed Dupixent since launch (as of July 26, 2017). In Europe, Dupixent received a positive recommendation from the CHMP on July 21st 2017.
Kevzara, an anti IL6 treatment for rheumatoid arthritis, was launched in June in the U.S. and approved in EU.
Second-quarter Oncology sales increased 4.4% to €383 million driven mainly by Jevtana and Thymoglobulin. First-half Oncology sales were up 8.6% to €795 million.
Jevtana sales were up 12.5% to €100 million in the second quarter supported by the performance in the U.S. and Japan. First-half Jevtana sales increased 9.0% to €197 million.
In the second quarter, Thymoglobulin sales increased 8.7% to €76 million driven by the U.S. (up 7.7% to €44 million) and Emerging Markets (up 30.8% to €17 million). First-half Thymoglobulin sales increased 8.2% to €148 million.
Eloxatin sales were stable at €45 million in the second quarter. Second-quarter Taxotere sales decreased 6.5% (to €44 million) due to continued generic competition in Japan. First-half sales of Taxotere and Eloxatin were down 2.2% (€91 million) and up 3.5% (€90 million), respectively.
In the second quarter, Diabetes sales decreased 12.2% to €1,647 million, reflecting lower Lantus sales in the U.S. Second-quarter U.S. Diabetes sales were down 23.0% to €814 million. First-half U.S. Diabetes sales decreased 19.1% to €1,653 million. In the second half of 2017, Sanofi expects an accelerated decline of U.S. diabetes sales relative to the first half of 2017. This reflects the phased impact of exclusions in commercial formularies at CVS and United Health as well as a high basis of comparison in last year’s fourth quarter. Second-quarter sales in Emerging Markets increased 8.4% to €383 million. Sales in Europe were €325 million, a decrease of 3.0% in the second quarter. First-half Diabetes sales decreased 9.2% to €3,310 million.
In the second quarter, Sanofi glargine (Lantus and Toujeo) sales decreased 13.5% to €1,407 million. In the U.S., Sanofi glargine sales of €782 million were down 23.9% and reflected the impact of the exclusion from various CVS commercial formularies from January 1, 2017 as well as from the United Health commercial formulary which became effective on April 1, 2017. In Europe, Sanofi glargine sales decreased 2.0% to €248 million due to biosimilar competition in several European markets. First-half Sanofi glargine sales decreased 10.7% to €2,825 million.
Over the quarter, Lantus sales were €1,197 million down 19.2%. In the U.S., Lantus sales decreased 28.1% to €660 million mainly reflecting lower average net price and the aforementioned impact of formulary exclusions. In Europe, second-quarter Lantus sales were €194 million (down 14.0%) due to biosimilar competition and patients switching to Toujeo. In Emerging Markets, sales were up 5.6% to €262 million. First-half Lantus sales decreased 16.7% to €2,423 million.
Second-quarter Toujeo sales were €210 million (up 46.1%) of which €122 million (up 12.3%) were recorded in the U.S., €54 million in Europe (versus €27 million in the second quarter of 2016) and €19 million in Emerging Markets (versus €1 million in the second quarter of 2016). First-half Toujeo® sales increased 59.8% to €402 million.
Amaryl sales were €85 million, down 5.4% in the second quarter, of which €69 million were generated in Emerging Markets (down 2.7%). First-half Amaryl® sales were stable at €174 million.
Second-quarter Apidra sales decreased 2.2% to €93 million. Lower sales in the U.S. (down 13.3% to €27 million) were partially offset by double-digit growth in Emerging Markets (up 15.0% to €23 million). First-half Apidra sales increased 5.6% to €191 million.
Soliqua® 100/33 / Suliqua (insulin glargine 100 Units/mL & lixisenatide 33 mcg/mL injection) was launched in the U.S. in January 2017 and Suliqua recently in the first European country, the Netherlands. Soliqua 100/33 / Suliqua sales were €5 million in the second quarter and €9 million in the first half.
Second-quarter Praluent sales (collaboration with Regeneron) were €42 million of which €29 million was in the U.S. and €11 million in Europe. This reflected significant payer utilization management restrictions in the U.S. and limited market access in Europe. First-half Praluent sales were €76 million versus €33 million in the first half of 2016. In January 2017, the U.S. District Court for the District of Delaware issued an injunction that required Sanofi and Regeneron to stop marketing, selling and manufacturing Praluent in the U.S. starting from February 21, 2017. However, on February 8, 2017, the Court of Appeals for the Federal Circuit stayed (suspended) the permanent injunction for Praluent during the companies’ appeal. As a result, Sanofi and Regeneron will continue marketing, selling and manufacturing Praluent in the U.S. during the appeal process. The Court of Appeals oral arguments were heard on June 6, 2017. The companies now await a decision from the Court of Appeals on the appeal issues. It is at the Court’s discretion when to issue a decision.
Second-quarter and first-half Multaq sales were €83 million (down 3.6%) and €181 million (up 3.5%), respectively.
In the second quarter, Established Rx Products sales decreased 2.3% to €2,559 million. This reflected a decline in sales in Europe (down 6.3% to €881 million) and the impact of generic competition to Plavix in Japan, which more than offset a solid Emerging Markets performance (up 3.5% to €967 million). First-half Established Rx Products sales decreased 0.9% to €5,199 million.
Lovenox sales decreased 2.4% to €402 million in the second quarter, reflecting increased competition in Europe (down 7.3% to €243 million) following the availability of a biosimilar, which offset the strong performance in Emerging Markets (up 9.7% to €123 million). First-half Lovenox sales were stable at €817 million.
In the second quarter, Plavix sales were down 0.3% to €385 million due to generic competition in Japan that started in June 2015 (sales in Japan were down 31.2% to €64 million). In Emerging Markets, Plavix sales increased 12.8% to €266 million sustained by the performance in China. First-half Plavix® sales decreased 1.0% to €765 million.
Second-quarter Renvela/Renagel sales increased 16.8% to €248 million driven by the U.S. performance (up 20% to €209 million). In the U.S. the first generics of Renvela/Renagel powder and tablet formulations were approved in June and July, respectively. In Europe, Renvela/Renagel sales were down 14.3% to €19 million due to generic competition. First-half Renvela/Renagel sales increased 9.0% to €494 million.
Aprovel/Avapro sales were up 9.1% (to €190 million) driven by product sales to Sanofi’s partner in Japan and sales in China. First-half Aprovel/Avapro sales increased 11.0% to €383 million.
In the second quarter, Consumer Healthcare (CHC) sales increased 42.5% to €1,163 million reflecting the closing of the acquisition of Boehringer Ingelheim CHC business on January 1st, 2017. At constant structure, Sanofi CHC sales were stable in the second quarter and were impacted by an early start of the Cough and Cold season in Europe in the first quarter of the year. At constant structure, first-half CHC sales increased 2.4% to €2,504 million.
In Europe, second-quarter CHC sales were up 44.6% to €308 million. At constant structure, sales decreased 7.8%, following an early Cough and Cold season in the first quarter of 2017. Sales of the Allergy Cough and Cold and Pain products were down 14.5% and 10.3%, respectively. At constant structure, first-half CHC sales in Europe increased 1.6% to €714 million.
In the U.S., second-quarter CHC sales increased 24.0% to €293 million. At constant structure, CHC sales were up 2.5% driven by the Pain and Allergy portfolios. In the allergy segment, Sanofi gained market share thanks to the good performance of Allegra and the launch of Xyzal Allergy 24HR (approved in February as an over-the-counter treatment for the relief of symptoms associated with seasonal and year-round allergies) in a competitive environment. Second-quarter sales of the Digestive category were down 9.3% reflecting lower Zantac sales mostly due to retailer delistings of DUO fusionTM. In the U.S., at constant structure, first-half CHC sales increased 2.5% to €641 million.
In Emerging Markets, second-quarter CHC sales increased 33.9% to €401 million. At constant structure, CHC sales were up 4.6% reflecting the start of recovery in Russia. In the first half, Emerging Markets CHC sales increased 3.0% to €805 million at constant structure.
In the Rest of the World, CHC sales were up 133.3% to €161 million. At constant structure, CHC sales were up 0.6% negatively impacted by lower sales of the Allergy Cough and Cold products in Japan and the Nutritional portfolio in Australia. In the Rest of the World, at constant structure, first-half CHC sales increased 2.8% to €344 million.
In the second quarter, Generics sales decreased 8.0% to €442 million reflecting lower sales in Europe (down 7.3% to €190 million), the U.S. (down 28.9% to €32 million) and Emerging Markets (down 9.4% to €189 million). In Emerging Markets, sales were impacted primarily by the divestment of a third party distribution business in China and unfavorable phasing in Latin America. First-half Generics sales decreased 5.0% to €910 million.
Second-quarter Vaccines sales were up 26.2% to €1,016 million and reflected the termination of the Sanofi Pasteur MSD joint-venture in Europe from December 31, 2016. At constant structure, sales were up 19.2% mainly driven by the Polio/Pertussis/Hib franchise and Menactra. In the U.S., sales were up 12.7% to €378 million. In Emerging Markets, sales grew 22.2% to €414 million. In Europe, sales were up 140.4% to €135 million reflecting the termination of SPMSD JV. At constant structure, European sales which are now fully managed by Sanofi Pasteur, were up 31.7%. First-half Vaccines sales grew 16.5% at constant structure to €1,800 million.
In the second quarter, Polio/Pertussis/Hib (PPH) vaccines sales increased 37.2% to €469 million. At constant structure, PPH sales grew 31.4% reflecting increased release of Pentaxim batches in China and strong performance of Hexaxim in Europe as well as in some Emerging markets. At constant structure, first-half Polio/Pertussis/Hib vaccines sales increased 34.4% to €901 million.
Second-quarter Menactra sales increased 41.3% to €181 million reflecting the CDC ordering pattern in the U.S., an outbreak in Australia and phasing in the Middle East. First-half Menactra sales increased 11.8% to €271 million.
Influenza vaccines sales were stable (€98 million) in the second quarter and up 14.7% (€136 million) in the first half driven by the South Hemisphere campaign. For the North Hemisphere, first shipment for U.S. Flu season was completed on July 17th and Sanofi Pasteur expects to deliver a similar number of Flu vaccine doses in the U.S. as in 2016.
Second-quarter Adult Booster vaccines sales were €115 million, up 11.5% and down 6.5% at constant structure due to the continuing impact of Repevax® supply disruption in Europe. At constant structure, first-half Adult Booster vaccines sales decreased 13.9% to €194 million.
Second-quarter Travel and other endemic vaccines sales were €113 million up 10.9% and stable at constant structure. At constant structure, first-half Travel and other endemic vaccines sales were up 3.8% to €219 million.
Second-quarter and first-half Dengvaxia sales were €1 million and €18 million, respectively.
In July, Sanofi announced it will acquire Protein Sciences, a U.S. privately held vaccines biotechnology company. This acquisition will allow Sanofi Pasteur to broaden its flu portfolio with the addition of a non-egg based vaccine. The acquisition, which has been unanimously approved by the board of directors of Protein Sciences and a majority of Protein Sciences shareholders, is expected to close in the third quarter of 2017, subject to customary regulatory approvals.
Second-quarter sales in the U.S. were €2,798 million, a decrease of 1.0% or 2.7% at constant structure impacted by the decline of Diabetes sales (down 23.0%) which was not fully offset by the strong performance of the Multiple Sclerosis franchise (up 25.0%), Vaccines (up 12.7%) as well as the launch of Dupixent®. In the U.S., at constant structure, first-half sales decreased 0.8% to €5,562 million.
Second-quarter sales in Emerging Markets were €2,629 million, up 10.2% or 6.6% at constant structure driven by Vaccines (up 22.2%), Established Rx products (up 3.5%) and Diabetes (up 8.4%). In Asia, second quarter sales were up 11.7% (up 10.0% at constant structure) to €934 million reflecting strong performance in China (up 17.1% at constant structure to €550 million), driven by the recovery in Vaccines and growth of Established products. In Latin America, second quarter sales increased 10.1% (up 3.9% at constant structure) to €729 million. Second-quarter sales in Brazil decreased 3.0% at constant structure to €284 million. Second-quarter sales in the Eurasia region increased 17.9% (15.2% at constant structure) to €312 million supported by strong growth in Russia and Turkey. Over the quarter, sales in Russia were €163 million up 33.7% and 25.2% at constant structure driven by CHC sales growth. In Africa and the Middle East, sales were €626 million up 4.7% and 1.4% at constant structure. In Emerging Markets, at constant structure, first-half sales increased 7.5% to €5,172 million.
Second-quarter sales in Europe were €2,350 million, up 6.8% or down 1.0% at constant structure impacted by lower Established products (down 6.9% at constant structure) and CHC sales (down 7.8% at constant structure) which were not fully offset by the strong performance of the Multiple Sclerosis franchise (up 35.8%) and Vaccines (up 31.7%). In Europe, at constant structure, first-half sales increased 0.4% to €4,761 million.
Sales in Japan increased 10.0% to €472 million in the second quarter. At constant structure, sales in Japan were down 7.5% impacted by generic Plavix® competition which was partially offset by strong growth of Vaccines sales. In Japan, at constant structure, first-half sales decreased 4.0% to €1,001 million.
Regulatory updates since the publication of first-quarter results on April 28, 2017 include the following:
The European Commission granted marketing authorization for Insulin lispro Sanofi (100 Units/mL) in July for the treatment of diabetes in adults and children. This followed the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) positive opinion in May.
In July, the European Medicines Agency’s CHMP adopted a positive opinion recommending the granting of the marketing authorization of Dupixent (dupilumab) for use in adults with moderate-to-severe atopic dermatitis who are candidates for systemic therapy.
In June, the European Commission granted marketing authorization for Kevzara (sarilumab) in combination with methotrexate for the treatment of moderately to severely active rheumatoid arthritis (RA) in adult patients. In May, the U.S. Food and Drug Administration (FDA) also approved Kevzara® for the treatment of adult patients with moderately to severely active RA.
At the end of July 2017, the R&D pipeline contained 47 pharmaceutical new molecular entities (excluding Life Cycle Management) and vaccine candidates in clinical development of which 13 are in Phase 3 or have been submitted to the regulatory authorities for approval.
In June, positive results from two Phase 3b/4 ODYSSEY-DM trials in patients with diabetes were announced. In the studies, Praluent (alirocumab), when administered on top of maximally tolerated doses of statins, significantly reduced low-density lipoprotein cholesterol (LDL-C), the primary endpoint of the ODYSSEY DM-INSULIN study, and was superior to usual care in reducing non-high-density lipoprotein cholesterol (non-HDL-C), the primary endpoint of the ODYSSEY DM-DYSLIPIDEMIA study.
In June, a Phase 3 study evaluating dupilumab in persistent asthma despite the use of medium to high dose of Inhaled Corticosteroid and a LABA (Long-Acting Beta Agonist) was initiated in 6-11 years population. Another Phase 3 evaluating dupilumab in moderate-to-severe atopic dermatitis in 12-17 years population was initiated in April.
In May, a Phase 3 study evaluating SAR439684, a PD-1 inhibitor, in 1st line Non-Small Cell Lung Cancer started.
In July, Sanofi and Alnylam announced new positive results from the ongoing Phase 2 open-label extension (OLE) study with fitusiran in patients with hemophilia A and B, with or without inhibitors. These results were presented at the International Society on Thrombosis and Haemostasis (ISTH) 2017 Congress. The updated clinical results of this study showed that the safety and tolerability profile of fitusiran remains encouraging, with no thromboembolic events. Based on these results, the companies initiated the Phase 3 ATLAS program for fitusiran in patients with hemophilia A and B with or without inhibitors.
In July, a Phase 2 study evaluating SAR439684, a PD-1 inhibitor, in advanced Basal Cell Carcinoma started.
SAR439459 (anti-TGF-β) entered into Phase 1 in monotherapy and combination with SAR439684 (PD-1 inhibitor) in patients with advanced solid tumors.
2017 Second-quarter and first-half financial results(8)
Business Net Income(8)
In the second quarter of 2017, Sanofi generated sales of €8,663 million, an increase of 6.4% (up 5.5% at CER). First-half sales were €17,311 million, up 8.7% on a reported basis (up 7.0% at CER).
Second-quarter other revenues increased 63.6% (up 61.2% at CER) to €270 million including VaxServe sales of non-Sanofi products of €195 million (versus €89 million in the second quarter of 2016). First-half other revenues increased 67.4% to €519 million of which €368 million were generated by VaxServe (up 108.1% at CER).
Second-quarter Gross Profit increased 6.1% to €6,136 million (up 4.9% at CER). At CER and CS*, Gross Profit increased 0.3%. The gross margin ratio decreased 0.2 percentage points to 70.8% versus the second quarter of 2016. The positive impact of the growing Multiple Sclerosis business, Vaccines and China was offset by the negative U.S. Diabetes net price evolution. In the second quarter, the gross margin ratio of Pharmaceuticals was 72.6%, a decrease of 0.5 percentage points and the gross margin ratio of Vaccines improved 5.2 percentage points to 57.5%. First-half Gross Profit increased 9.5% to €12,336 million (up 7.7% at CER and up 2.8% at CER and CS*). In the first half of 2017, the gross margin ratio improved by 0.6 percentage points to 71.3% versus the first half of 2016. Sanofi expects its gross margin ratio to be between 70% and 71% at CER in 2017.
Research and Development (R&D) expenses increased 6.2% to €1,358 million (up 5.1% at CER) in the second quarter. At CER and CS, R&D expenses were up 3.1% reflecting mainly the increased spending on our development programs in immuno-oncology (isatixumab, PD-1) and sotagliflozin. First-half R&D expenses increased 6.1% to €2,667 million (up 4.6% at CER and up 2.6 % at CER and constant structure).
Second-quarter selling general and administrative expenses (SG&A) were up 7.1% to €2,568 million (up 6.1% at CER). At CER and CS, SG&A expenses were down 0.9% mainly reflecting disciplined cost management. General expenses decreased 5.1% at CER and CS, and Marketing expenses benefited from the reduction of the Diabetes sales and marketing spending in the U.S. These savings offset launch costs for Dupixent, Kevzara and Xyzal as well as commercial and marketing investments behind key Emerging countries and Vaccines. In the second-quarter, the ratio of SG&A to sales increased 0.2 percentage points to 29.6% compared to the second quarter of 2016. First-half SG&A expenses increased 9.5% to €5,046 million (up 7.7% at CER and up 0.4% at CER and CS). In the first half of 2017, the ratio of SG&A to sales was 0.2 percentage points higher at 29.1% compared to the same period of 2016.
Second-quarter other current operating income net of expenses was €68 million versus -€23 million for the same period of 2016 and included a minor capital gain. First-half other current operating income net of expenses was €102 million versus €70 million in the first half of 2016.
The share of profits from associates was €51 million in the second quarter versus €30 million for the same period of 2016. The share of profits from associates included Sanofi’s share in Regeneron profit. In the first half, the share of profits from associates was €81 million versus €53 million for the same period of 2016.
In the second quarter, non-controlling interests were -€30 million versus -€23 million in the second quarter of 2016. First-half non-controlling interests were -€65 million versus -€50 million for the same period of 2016.
Second-quarter business operating income increased 9.8% to €2,299 million. At CER, business operating income increased 8.5%. At CER and CS*, business operating income increased 4.1%. The ratio of business operating income to net sales increased 0.8 percentage points to 26.5% versus the same period of 2016. In the second quarter, the business operating income ratio of Pharmaceuticals was 27.3%, 0.2 percentage points lower and the business operating income ratio of Vaccines increased 8.1 percentage points to 20.0%. First-half business operating income was €4,741 million, up 12.5% (or up 10.1% at CER). At CER and CS, business operating income increased 5.8%. In the first half of 2017, the ratio of business operating income to net sales increased 0.9 percentage point to 27.4%.
Net financial expenses were €60 million in the second quarter versus €74 million in the second quarter of 2016. First-half net financial expenses were €123 million versus €191 million in the first half of 2016.
Second-quarter (and first-half) effective tax rate was 24.5% compared to 23.2% in the second quarter of 2016.
Second-quarter business net income(9) increased 1.0% to €1,696 million (down 0.5% at CER). The ratio of business net income to net sales increased 0.5 percentage points to 19.6% versus the same period of 2016 (excluding Animal Health business).
Sanofi raises full-year 2017 business EPS(8) guidance to broadly stable at CER, barring unforeseen major adverse events. The currency impact on 2017 business EPS is estimated to be approximately +1% at the average June 2017 exchange rates. As announced in the first quarter 2017 financial results, Sanofi previously expected full-year 2017 business EPS to be stable to -3% at CER, barring unforeseen major adverse events.