Q2 2011 Earnings Call
July 28, 2011 8:30 am ET
Sébastien Martel - VP, IR
Chris Viehbacher - CEO
Hanspeter Spek - President, Global Operations
David Meeker - COO Genzyme
Olivier Charmeil - SVP, Vaccines
Elias Zerhouni - President, Global R&D
Jérôme Contamine - EVP and CFO
Timothy Anderson - Sanford Bernstein
Michael Leuchten - Barclays Capital
Luisa Hector - Credit Suisse
Gbola Amusa - UBS
Graham Parry - Merrill Lynch
Mark Dainty - Citi
Mark Clark - Deutsche Bank
Mark Beards - Goldman Sachs
Damien Conover - Morningstar
Previous Statements by SNY
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Ladies and gentlemen, welcome to Sanofi 2011 second quarter results conference call. (Operator Instructions) I'll now handover to Mr. Sébastien Martel.
Thank you. Hello everyone, and welcome to Sanofi's conference call on our Q2 2011 results. Before we start, I'd like to remind that our slides are available on the website. As always, I must advice you that our presentation today contains forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different. These factors are detailed in our Annual Report on Form 20-F and in the Document de Référence.
On Slide 3, you can see the agenda for the day. Basically the presentation will be slighted in four parts. First, Chris Viehbacher, our CEO, will share with you the key highlights for the quarter. Then Hanspeter Spek, President, Global Operations; David Meeker, Chief Operating Officer of Genzyme; Olivier Charmeil, Senior VP Vaccines will provide some color on the Q2 2011 business performance.
Dr. Elias Zerhouni, President, Global R&D, will review our upcoming key regulatory filings and will come back to the first Phase III results of Lemtrada. And in conclusion JérômeContamine, our CFO, will comment on the Q2 2011 financial performance. We will then host a Q&A session.
And without any further due, I will now hand the call over to Chris.
Thank you, Sebastien. Good morning, good afternoon, everybody. I'll first just give a very warm welcome to Dr. David Meeker, who is joining us for the first time. We thought it would be helpful for some of our investors who haven't been as familiar with the Genzyme portfolio of products to have David as COO of Genzyme to be able to provide some of that detail.
I am going to move straight to Slide 5, because I think it really best illustrates what's been going on in the company. As we have been predicting now for several years, obviously there is an impact of generics on the many blockbusters that have driven this company's success for many years.
I showed this slide for the first time at the first quarter. This is an update for what it looks like in the second quarter, to remind you the first part of the chart really shows the sales of those nine products that are subject to patent expiry.
In Q2 of 2009, the sales of those on the quarterly basis were €2.1 billion. And you can see when we fast forward for two years that those sales have melted to €773 million. And in fact the impact of generics in the second quarter was stronger even than in the first quarter, with an impact of about €800 million of sales lost to generics in Q2 versus $500 million in our first quarter.
But of course it also says that at least in terms of sales we're getting a major part of the cliff behind us. And that cliff gets more and more behind us with every quarter that passes. That's not really the story of the company though. The story of the company really has been the other side of the page, where you can see the growth platforms.
And as you know, we've made a massive effort two years ago to reallocate resources and shift management attention, and strategically align the whole company behind these growth platforms. And the growth platforms are not just there really to replace those lost sales. But to restructure the sales into areas of business that have natural barriers to entry. And which are substantially less exposed to patent expiries, to really avoid more of the same on the left side of that chart.
Now what you can see is, is that of course over time and again with each quarter that these growth platforms become an ever more important part of the company. And if we look at the sales of Genzyme plus the growth platforms, you can see that already two-thirds of the company are in this part of the business and those have performed well. So that's really where we're going. You're seeing increasingly the new Sanofi emerge with the green bars and really the bars on the left side are starting to disappear.
So if we move to the next chart, we can see what the impact is on earnings per share. Again, if we hadn't had the ability to consolidate Genzyme, sales of Sanofi would have been down 4%. As it is with the consolidation of Genzyme, those sales are up 6.9%. Sales on a constant exchange rate basis are affected obviously by those.
Then if we look at earnings per share, we have obviously a decrease of 12.1% without the benefit of the Genzyme consolidation. And with the Genzyme consolidation then we have 7.4% decline. Now so what's been going on with Genzyme, so we've made huge progress on integration. We basically began the integration just after we announced the deal in the middle of February.
We've had a global integration committee made up of executives from Genzyme and from Sanofi with basically that being chaired by Henri Termeer and myself. We had an executive committee in Cambridge last week. And basically came to the conclusion that the global integration effort was largely completed. So I think we've done a very good job of actually bringing these two companies together in a relatively short period of time, recognizing that Genzyme has 10,000 employees in 80 countries.
Now there are still some level of integration work going on, particularly in countries outside of the U.S. But largely we believe that from a global point of view we've made the key decisions on people and structures, how we want to organize our business. And I have to say on a people basis, we had a dinner together last week. And I think we've made a huge step in starting to move from the inevitable parts of integration, where we were we and you, and we all become more we.
Now what are we actually doing in terms of structure, we look at Genzyme's four businesses. And they were essentially the Personalized Genetic Health. There are the Biosurgery business, the Renal business, and the Oncology business. Then of course there's a new business, which comes from creating a new multiple sclerosis platform.
And we decided that, really the personalized intensely patient centric approach would really be best served with the Personalized Genetic Health business and the Multiple Sclerosis business. So the new perimeter of Genzyme, if you like, is the PGH, the rare diseases and the multiple sclerosis business.
Into that we have put the Sanofi MS product Aubagio. And this is actually quite an exciting opportunity to launch two major drugs in a category within a short time of each other. So we'll be able to become quite rapidly I think a leader in multiple sclerosis.