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Profits Drop at Sanofi-Aventis

Quarterly sales also fall.

Sanofi-Aventis

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delivered disappointing third-quarter results as sales were hurt by generic competition, European government pricing policies and delays in shipping flu vaccines.

Shares of Sanofi-Aventis, the eighth-biggest seller of prescription drugs in the U.S., dropped 81 cents, or 1.9%, to $42.69 Tuesday. The stock fell as low as $41.65 in heavy trading.

For the three months ended Sept. 30, sales fell 4.2% from a year ago to $8.63 billion. Operating income fell 7.7% to $3.1 billion, and adjusted earnings per share, which excludes one-time items, dropped 12.5% to $1.58.

The company predicted that full-year earnings per share would grow "at least 2%," a slight change in terminology from the Sept. 1 guidance for a gain of "around 2%." Those figures, which exclude items, are down substantially from the company's forecast before the anticoagulant Plavix came under attack by generic competition in the U.S. for three weeks during August.

Those sales, by Canada's

Apotex

, have been temporarily halted by a judge.

However, the judge refused to order a recall of all generic Plavix, forcing Sanofi-Aventis and its U.S. marketing partner

Bristol-Myers Squibb

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to lower their full-year earnings predictions.

Last week, Bristol-Myers Squibb said U.S. sales of Plavix fell 43% to $474 million vs. the third quarter last year. Total Plavix sales for Bristol-Myers Squibb dropped 36% to $630 million.

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Plavix is the company's biggest drug.

Although the Plavix controversy hit the New York-based company harder, Sanofi-Aventis was affected, too. Worldwide sales of Plavix, the French company's second-biggest drug were $679 million, up 2.5% from the year-ago quarter but below recent trends. Sanofi-Aventis gets a royalty based on Bristol-Myers Squibb's U.S. sales, and that amount fell 39% to $51 million.

Sanofi-Aventis issued its financial report on the same day the two companies returned to court, asking that a preliminary injunction against Apotex remain in force. The drug giants want the injunction to continue until a U.S. court decides their patent-infringement suit against Apotex. The trial is expected to begin in January.

Both companies say they don't know how much generic Plavix is still being held by U.S. wholesalers. Bristol-Myers Squibb says the economic damage will continue through this year and into the first quarter of 2007. Sanofi-Aventis executives told analysts Tuesday that they couldn't add to their partner's estimate. They said many managed care firms in the U.S. are granting more favorable coverage to the generic drug, requiring patients to pay more out of pocket for the brand-name medication.

Sanofi-Aventis executives spent much of the post-earnings teleconference being pelted by questions from analysts about the weight-loss drug Acomplia. Executives offered multiple variations of "no comment."

For months, analysts have been seeking guidance about when Acomplia, which many forecast as an annual multibillion dollar product, might reach the U.S. market. The drug is already is available in seven European countries.

The Food and Drug Administration granted conditional approval in February, but Sanofi-Aventis hasn't discussed the conditions.

Previously, the company has predicted U.S. approval during the second half of this year, but this time around they wouldn't even go that far. The most analysts could extract from the conference call was the fact that the FDA hadn't asked for additional clinical tests and that the company had filed on Oct. 26 its response to all the questions raised by the agency.

"We have done our homework," said Hanspeter Spek, executive vice president for pharmaceutical operations. "We have answered the

FDA's questions."

Spek described the slump in vaccine sales as a "technical effect" caused by a delay in shipping U.S. flu vaccine during the third quarter. The company is still on track to supply some 50 million doses in the U.S., and Spek said the revenue will be recovered during the fourth quarter. Sales for all vaccines worldwide fell 7% to $808.5 million, and revenue from flu vaccines fell 35% to $215 million.

In addition to temporary generic competition for Plavix, Sanofi-Aventis' results showed the effects of permanent competition for its previous best-sellers, including the antihistamine Allegra, whose sales fell 55% to $195 million, and the diabetes medication Amaryl, whose sales fell 44% to $132.5 million.

Coming to the rescue during the third quarter was the

anticoagulant Lovenox, the company's top drug, which produced sales of $729 million, up 9% from the year-ago quarter. The Ambien family of insomnia drugs recorded a 34% gain to $672.5 million.

Among other big drugs, the multipurpose cancer medication Taxotere posted a 5% gain to $536 million, even though Spek said U.S. results have been "unsatisfactory." The colorectal cancer drug Eloxatin gained 2% to $521 million. The Lantus brand of insulin scored a 31% gain to $515 million.