Sanofi's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Sanofi (

SNY

)

Q4 2011 Earnings Call

February 8, 2012 8:00 am ET

Executives

Sébastien Martel - VP, IR

Chris Viehbacher - CEO

Jerome Contamine - CFO

Hanspeter Spek - President, Global Operations

Elias Zerhouni - President, Global Research & Development

Analysts

Luisa Hector - Credit Suisse

Jean Jacques Le Fur – Oddo Securities

Vincent Meunier - Exane BNP Paribas

Philippe Lanone - Natixis

Mark Beards - Goldman Sachs

Eric Le Berrigaud - Bryan, Garnier

Alexandra Hauber - JP Morgan

Béatrice Muzard - Natexis

Presentation

Sébastien Martel

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Good afternoon and welcome to Sanofi's 2011 Annual Results. Thanks a lot for [Technical Difficulty] who have managed to come to Paris despite the snow that we had this morning for a change. And welcome to those who are also following us via webcast. This year we are actually allowing participants to ask questions via webcast and so we will add these questions in the Q&A.

As always, I have to go through the forward-looking statements. So, you know that our presentation today contains forward-looking statements and statements involve known and unknown uncertainties and risks. Those are detailed on our annual report on Form 20-F and in the Document of Reference.

Today, with us, we've got Chris Viehbacher, our CEO, who will share with you the highlights for 2011 and provide with updates on the execution of our strategy. Then Jerome Contamine, our CFO, will share with you the financial performance for 2011. We will deep dive into the performance of our global platforms with Hanspeter Spek, President, Global Operations. And then we've decided to keep enough time to actually cover a number of late stage projects in the pipeline. And this will be done by Dr. Elias Zerhouni, President of Global Research & Development. Chris will then wrap the session and then open up for Q&A.

With that I will actually leave the call to Chris.

Chris Viehbacher

All right. Well, good afternoon everybody. Let me add my words of welcome. Now it was three years ago almost to the day when I had the first opportunity to present results of Sanofi. It were the 2008 results to which I had contributed all of one month but it was an opportunity really to layout our strategy. In 2008, we pointed out and I think this has been kind of the hallmark of what we've been doing, we did point that while results were great in 2008 we could already envisage a time three years, four years hence, when things would not be so great, and that we, as management, have decided to be (a) both transparent but (b) also to layout a strategy that would prepare us for the patent cliff and would actually build a strong and growing company coming out of the patent cliff.

We'll go through some of that in a minute but I would say, three years later I think we've struck to the strategy. I think if you look at 2011 results this should be really unremarkable to you even though they are remarkable to us because they should really just be inline with what we intended to do and where we intended to go.

Now, it was a busy year for us. Clearly, 2011 was particularly marked by the Genzyme acquisition. That was a big move for us in a lot of different ways. Anytime you spend $20 billion is a big deal, but doing a hostile acquisition of a biotech company especially one that had manufacturing difficulties was clearly an element of risk. But equally it gave us an opportunity to create significant value, and I think as we look at 2011 we can already see that we have down the track of creating the value that we felt we would.

2012, I said on numerous occasions is a year that I've had circled in red in my diary for three years. The fact that we lose Plavix and Aprovel this year plus let's not forget Eloxatin full year of Taxotere affecting generic for Lovenox, not to mention a few price reductions in Europe and Turkey and the like. It's not a secret to anybody. I think we've always been open that that was going to occur.

I think really if I look at our investor base, most people have begun to say, okay, but what happens afterwards? And you remember back in September we had an opportunity to really present where we thought the company was going in 2013 and beyond.

So 2012 is a transition year in some way because we lose those blockbuster products, and in some ways its not because just a few years ago our future is not those blockbusters and we stopped promotions on those; we've been essentially milking those and we've been reinvesting in other parts of the business. And so, for us, 2012 has certainly got plenty of challenges but we're going to continue to focus on those things that we have focused on for the last three years which is building a strong, sustainably growing business based on our growth platforms and on Genzyme.

The strategy is what it has been. There's always been three aspects to this one is increased innovation in research and development, and in that we initially tackled development in the first two years and we obviously dramatically reduced our portfolio of assets. I think with the benefit of time what have seen is that a lot of those assets are still with us, I mean, its one thing to chuck things out; its another to decide what are you going to keep, and you have the right criteria to make those decisions. I think the fact that most of what we decided to keep is still with us is an indication that that we have right criteria and so that’s how we've been able to file five [dove] cases here while we've got 18 potential launches coming up between now and 2015.

Last year, we tackled the R and we've embarked upon an ambitious program not only of restructuring but when you look at things like the Warp Drive deal that we did in January although a small deal in itself is very much emblematic of where we see research and development going and I won't say more on that because Elias will come back and talk about that.

Second part was to simply take the cash flow that we knew was going to go away one day and reinvest in those areas where there were growth opportunities. And the third was really to make sure we are adopting our structure. And essentially that meant we're going to disinvest where there is no more growth and we’re going to invest where there is growth.

Strategy is all about making those choices, and it is often very easy to say I want to go here but in making new strategies and choice you have to stop doing things. And that’s what sometimes been very difficult with large organizations. And I think Jerome will show you that we’ve had some extremely impressive shifts in resources from those areas, which no longer provide growth to those that do.

So let’s take these a little bit one at a time. Elias is going to go through each of these products in a little bit more detail, because I think there is an awful lot of value here that is not being recognized. What I’m particularly happy about is is not only Aubagio but also Lemtrada, which we plan to file in the second quarter of this year. By the way, there is no real big difference. There is nothing going on. It was first quarter, it’s just slipped into the second quarter; it’s at the end of the year and with the work flow that’s going to slip a bit, but we’re still very confident in that.

Lemtrada, I think is yet misunderstood. I read an article yesterday in the paper. I mean, I think, people clearly don’t really understand that Lemtrada is in a complete class by itself in multiple sclerosis. The only product that has even demonstrated significant superiority over the gold standard, which is Rebif. One of the things that I didn’t know really realized until even yesterday, which I don’t think most people realized, the market is not dominated by Gilenya or [Tutavre]. 80% of the market is in something called AVCR, which Avenox, Vita-Feron, Copaxone, and Rebif. So the market is still to be had by those who come along within the innovative products and I think Aubagio and Lemtrada will do that.

Now the GLP-1 with Lyxumia reinforced by diabetes franchise Kynamro put this down a path, but will ultimately the PCSK-9 and Zaltrap will add to our as well as Visamerin both of those products will add to our oncology franchise.

I will just say on those five, I can tell you that actually getting five regulatory (inaudible) together in nine months is an incredible task. And I search back; I couldn’t find another company that had ever submitted so many regulatory files in such a concentrated period of time. So for company that, most people don’t think as a pipeline, I think it’s a pretty strong achievement.

Genzyme is clearly, was clearly the focus of 2011. This time, last year, we were addressing and finalizing really the acquisition we announced on 15th of February. On the 16th of February, we already began the pre-integration. And there were number of aspects to this. Obviously bringing a successful biotech company with a Big Pharma is not an easy thing to do. Especially because this was not just any biotech, it was a very iconic biotech company and a big one with 10,000 employees. So, as I stand here today, I am actually amazed that the progress that we have made on a number of fronts.

Clearly, the value proposition of Genzyme we have been able to bring production back on Cerezyme and Fabrazyme to those patients who need it. Central to this was being able to get training and the new facility approved, and so we achieved a major milestone this year when we had within three or four days of each other approval by both the European as well as the US Regulatory Authorities and on the basis of really the first validation batch.

Now, I think that’s a very strong sign of the confidence that the Agency has in the work program that we have put in place since Sanofi and Genzyme have started to working together on this.

Just this week, we have also received formal approval from the FDA of the work plan to get ourselves out of the consent decree. You think about a year ago in Allston, which was the site affected by the consent decree, we were still producing bulk of our products, we were still doing purification and we are still doing fill and finish. By April, we have moved the fill and finish out, by the end of the year we were only producing two products and by the end of this year, we will only be producing one product in Allston and so we have dramatically simplified operations taken the pressure off of Allston and I think that is what’s really given me the confidence that we are getting back well into production.

Now, if you start up a biological facility you don’t go from zero to a hundred in five days. That’s why it is going to take a little bit of time to the middle of the year to really fully get supplied, but on Fabrazyme, for example, we will be able to get all patients in the US back to full dose by the beginning of March. We will then start working on the waiting list. We will be able to also already immediately begin to treat a number of patients in Europe, who are in (inaudible) but who obviously not getting the full dose of the enzyme that they need and so we will be able to start bringing Fabrazyme back. Cerezyme will obviously benefit from the fact that Allston is simplified.

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