Sanofi-Aventis's CEO Discusses Q1 2012 Results - Earnings Call Transcript

sanofi-aventis (SNY)

Q1 2012 Earnings Call

April 27, 2012 09:00 a.m. ET

Executives

Sébastien Martel - VP, IR

Chris Viehbacher - CEO

Jerome Contamine - CFO

Hanspeter Spek - President, Global Operations

Analysts

Tim Anderson – Sanford Bernstein

Mark Dainty - Citigroup

Peter Verdult – Morgan Stanley

Luisa Hector – Credit Suisse

Vincent Meunier – Exane BNP Paribas

Mike Leuchten – Barclays

Philippe Lanone – Natixis

Kyle Rasbach – Cowen & Co.

Jeff Holford – Jefferies

Presentation

Operator

Welcome to the Sanofi Conference Call. I’ll now hand over to Mr. Sébastien Martel. Sir, please go ahead.

Sébastien Martel

Thank you. Hello everyone and welcome to our First Quarter Conference Call. As always, I would like to draw your attention to the Safe Harbor statements. I must advise you that information presented in the call today will contain forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause actual results to differ materially. I invite you to refer to our [inaudible] with the SEC and also out for description of those factors.

Today with us on the call, we have Chris Viehbacher, our CEO, Hanspeter Spek our President of Global Operations as well as Jerome Contamine, our CFO. Without any further adieu I will hand the call over to Chris.

Chris Viehbacher

Thank you Sébastien. Good morning and good afternoon everybody. I think we have got a very strong set of results in the first quarter. Sales up 7% at constant exchange rate. Business earnings per share up 7.2% at constant exchange rates, clearly benefiting from the acquisition of Genzyme, which you may remember was completed on the 4th of April last year. I think it’s always useful to come back and say where we have been going strategically. If I go back to 2009, you will all remember that really the story around Sanofi was in genericized products, how many sales were going to be lost. And you can really see the cliff graphically here. The products, and they are noted in the footnote on the bottom that are subject to patent expiry amounted to some €2.2 billion in Q2 of 2009, which was kind of the last quarter before the cliff started. That €2.2 billion on the same set of products today is now down to €813 billion.

So, as we have seen and I think we have roughly €250 million drop in the quarter due to generics in the first quarter, but that’s down from the average of about €500 million from what we have been seeing up till now. So, increasingly we get the cliff behind us, certainly from a sales point of view it’s pretty much behind us. From a profit of view of course the second shoe has now dropped on the patent cliff. We are really about T minus three weeks from the patent expiry of Plavix in the US. Avapro went at the end of March, and of course we’ll see generic activity restart actually in August of this year. But clearly the impact of Plavix is the biggest one.

This shouldn’t be a surprise for anyone. We have been detailing this amount since September of last year. This is roughly a €2 billion effect on a full 12 month basis because this is occurring in May, we are obviously not going to have a full 12 month. So the impact on the bottom-line and on net after tax profit of losing both Plavix and Avapro to generics is around €1.4 billion for the year. So Q1 obviously is great because we still have Plavix. You know, the next fourth quarters are certainly going to be impacted by that.

But none of that is a surprise, it’s something we have been preparing for quite some time. We built our growth platforms not only as a means to compensate for the loss of sales but to put Sanofi on a track for sustainable growth. These are all businesses that we believe are not depended on patents that has long lives because of either our strategic positioning or the extensiveness of capital investment, the knowhow, faith in brands. But we believe the growth platforms provide long term sustainable growth.

To that we now add new Genzyme. New Genzyme is essentially the rare disease business today and will in future include the multiple sclerosis business. So Genzyme is really focused on Cerezyme and Fabrazyme. Myozyme, Thyrogen, Aldurazyme, and to that we will add Aubagio and Lemtrada as we launch those and you can see the benefit of the improvement in production. We hit an important milestone in the first quarter and that the new production facility in Framingham, Massachusetts was approved by both the FDA and EMA. Already in the first quarter we were able to fully supply patients on Fabrazyme in the United States and we are now looking on extending supply to other markets.

This means of course that we will now be able to shift our production of Fabrazyme from Austin progressively to Framingham which simplified Austin allows us to get faster out of our consent decree situation. And really I think it can have an important benefit in terms of capacity for Cerezyme. As you can see all of these have performed pretty well. We have good solid performance.

Diabetes is up 14.4%, really driven by Lantus with over 17% increase. Emerging markets going at close to 10% including obviously the benefit of Genzyme but also including the effect of vaccines. Vaccines is not showing stellar growth, but this is nothing more than what we see on the Northern hemisphere in the third and fourth quarter. Some years we have the flu vaccine in the third quarter some years it’s in the fourth quarter. Well, the same kind happens in the southern hemisphere in their winter time. Sometimes it’s in the first quarter as it was last year. This year the sales will be in the second quarter.

Hanspeter will come back on Animal Health, but again I think you will see that actually when you look at it on a quarterly basis the business continues to perform in line with expectations.

The Cerezyme is now coming through, we are busy ramping up. Approval of a site doesn’t mean immediate release of product. We have essentially been able to sell the three validation batches, but there is a time that is necessary to ramp up production. We continue for the moment to still produce Fabrazyme in Allston as well as in Framingham and progressively we will phase that out.

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