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Sanofi's Worldwide Serial Dramas

The drug giant's recent dealings with regulators and litigators keeps investors on the edge.


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is becoming king of the pharmaceutical cliffhangers, as it seems each enterprise is fraught with suspense and uncertainty.

For older investors, the French drug giant's recent dealings with regulators and litigators might remind them of the silent film serial

The Perils of Pauline

. For younger investors, it's weekly installments of





The drama starts again Oct. 31, the same day Sanofi-Aventis issues third-quarter earnings. That's also the day the company and its U.S. marketing partner

Bristol-Myers Squibb

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are due in court to resume their fight to protect the patent for the anticoagulant Plavix.

The two companies want an injunction against Canada's


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, trying to block generic copies from the U.S. market until a judge rules on their patent-infringement suit vs. Apotex. The formal patent case is expected to be argued in January.

Plavix is Bristol-Myers's biggest drug, with first-half sales of $2.13 billion. It is Sanofi-Aventis's second-biggest drug, with first-half sales of $1.47 billion.

An ill-fated attempt to make a Plavix-protecting deal with Apotex led to the Canadian company selling generic Plavix for about three weeks in August.

A court halted the generic sales, but those sales were significant enough to cause both companies to lower full-year

earnings estimates. Bristol-Myers Squibb issues third-quarter results on Oct. 26.

"Observers are waiting with bated breath" to learn the impact of generic Plavix, says a recent research report on Sanofi-Aventis by Francois Hamon of CM-CIC Securities in Paris. U.S. analysts speculate wholesalers hold enough generic Plavix to last through 2006 and perhaps the first quarter of 2007.

Hamon wonders if Sanofi-Aventis will adjust its Apotex-caused revision in its earnings guidance. Sanofi-Aventis says the generic damage would cut its 2006 EPS growth to 2% vs. last year, down from a previous 12% forecast. Hamon, who has an accumulate rating, doesn't own shares; his firm hasn't had an investment banking relationship with Sanofi-Aventis in at least 12 months.

Another slice of Plavix-induced anxiety is the

Department of Justice investigation of the Apotex deal. If Bristol-Myers Squibb and Sanofi-Aventis are found guilty of criminal behavior, "fines could be as high as twice the economic gain," warns Gbola Amusa, of Sanford C. Bernstein & Co., in a recent report to clients. "Sanofi-Aventis may be asked by its auditors to make a provision for any penalties."

The next non-Plavix cliffhanger starts in early December, when Sanofi-Aventis is scheduled to

defend its patent for Lovenox in a U.S. court. This anticoagulant is the company's best-selling drug, with first-half sales of $1.58 billion. Sanofi-Aventis is suing

Teva Pharmaceutical Industries

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and the private

Amphastar Pharmaceuticals


No Fait Acomplia

As with the Plavix patent, many analysts believe Sanofi-Aventis has a good chance for victory in the Lovenox case; but they're still jittery. Amusa, who has an outperform rating, says the company's stock is trading as if there will be negative news for both drugs, as well as unfavorable news for the obesity drug Acomplia.

Although it has been approved by the European Union, the drug remains under review by the Food and Drug Administration -- and another cliffhanger. Analysts have forecast multibillion-dollar annual sales by the end of the decade, assuming it reaches the U.S. market without delays or restrictions either by the FDA or managed-care organizations.

Investor nervousness is compounded by almost total silence from Sanofi-Aventis ever since the FDA granted

conditional approval in February for Acomplia as a weight-loss drug. The FDA also rejected Acomplia as a stop-smoking treatment.

The company hasn't identified the conditions set by the FDA, although executives have said that they expect FDA approval by the second half of 2006. "We anticipate a bad reaction from the markets if news of the timing of the Acomplia approval is bad," says Hamon of CM-CIC Securities. Still, he predicts the company will forecast a fourth-quarter OK from the FDA.

Acomplia has gotten mixed reviews in Europe. It has recorded strong sales in the U.K. since becoming available in late June. If Acomplia maintains a strong pace in the EU, Amusa predicts it could produce $1 billion in worldwide sales next year, even if the U.S. launch is delayed until the second quarter of 2007. Amusa doesn't own shares; his firm doesn't have an investment banking relationship.

But the drug suffered a setback in Germany on Oct. 18 when a government advisory committee said Acomplia should be considered a lifestyle drug and not covered by government health insurance. A final ruling will come from the Ministry of Health in two months.

Sanofi-Aventis said it will appeal, arguing that the recommendation is "misplaced from a public-policy viewpoint." Until the ministry acts, the drug will be reimbursable, the company said.

"This is another major blow to Sanofi-Aventis, and

it was not fully expected," says an Oct. 19 report from Societe Generale. The investment banking firm says there are more obese and overweight people in Germany than in any other EU nation. Among these countries, "Germany would be the one where such a drug will be needed most," the firm says.