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Danbury area companies to watch in 2015
Dirk Perrefort
Published 9:04 pm, Friday, January 2, 2015
Mannkind
One of several pharmaceutical companies in the Danbury area, Mannkind got a big boost this past year when the company received U.S. Food and Drug Administration approval for its Afrezza, an inhalable form of insulin under development by the company as its main product candidate. Matt Pfeffer, the chief financial officer for the company, said recently that the company initially expects to produce up to 400 million units of the drug, the only inhalable insulin on the market today with FDA approval. The company also expects to hire as many as 100 employees as it ramps up production. Pfeffer said the company could generate close to $4 billion in sales annually out of the Danbury facility. Some analysts, however, have been concerned about the company's selection of Sanofi as its marketing partner for the drug. In November, Sanofi fired its chief executive officer, Chris Viehbache, a big supporter of Afrezza and the company's partnership with Mannkind.
http://www.newstimes.com/business/article/Danbury-area-companies-to-watch-in-2015-5991138.php
So does this rebalancing mean anything to short interests?
Trading Biotechs From His Bedroom Nate Pile Beats The Street
This story appears in the December 29, 2014 issue of Forbes.
Nate Pile, 45
Healdsburg, CA
Day Job: Newsletter Editor, Stay-At-Home Dad
Strategy: Technology and Biotech Investing
Ten-Year Average Return: 17.6%
Top Pick: MannKind MNKD -0.55%
As a math major at UC Berkeley in the 1980s Nate Pile’s awakening to the stock market came quite literally every morning at 6:30 a.m., when his college roommate, an active trader, got a call from his broker at the market open in New York City. The bull market of the 1980s hooked Pile, who landed a part-time job stuffing envelopes at one of the top-performing investment newsletters of the day, Jim McCamant’s Medical Technology Stock Letter.
Pile launched his own investment newsletter, Nate’s Notes, in 1995 from his bedroom, but for eight years he needed to teach junior high school math during the day to pay bills. Today Pile’s newsletter, focused on biotech and technology, is still headquartered in his home, in part because he is caregiver for his two daughters, but it is also one of the top-performing of its type, according to Hulbert Financial Digest. Ten-bagger recommendations of biotech giant Celgene CELG +0.41% and Apple AAPL +1.54% have given a big boost to Pile’s returns.
Strategy: Pile pays attention to traditional fundamentals and technicals, but because some of his picks are biotechs he doesn’t fixate on traditional metrics. To understand the “story” of a stock, he drills down into the minute details found in the financial statements of the companies he is following. His portfolio tends to be concentrated, holding only 20 stocks. According to Pile, the key factors in his decision to invest are whether the company has a game-changing product that has the potential for huge growth and whether he would be happy to own the company even if the stock market didn’t exist.
Best Idea: Pile likes biopharmaceutical MannKind of Valencia, Calif., trading $3 below the level at which he first recommended it. In June the company finally received FDA approval for an inhaled diabetes treatment called Afrezza, but the stock is still down 60% from its 2004 IPO. Pile says many investors lost hope after Pfizer PFE -0.06% pulled a similar drug from pharmacies because of weak sales. Yet he points to two crucial differences: Pfizer’s product was the size of a liter bottle and MannKind’s the size of a lifeguard’s whistle. More important, Afrezza works faster, thus giving patients more control.
–
http://www.forbes.com/sites/samanthasharf/2014/12/10/trading-biotechs-from-his-bedroom-nate-pile-beats-the-street/?partner=yahoomag
Listen to what Jay Skyler, MD, PhD, Deputy Director, Diabetes Research Institute, The University if Miami has to say about super rapid acting insulins.
The short position in the stock has now started to reduced by savvy investors. Maybe they are well aware of the upcoming marketing launch of Afrezza would likely hit them hard?
http://www.nasdaq.com/symbol/mnkd/short-interest
SI as of Nov 28, 2014: 79.7 million shares
Thanks ClayTrader. I always enjoy and get benefit reading the video clips.
Good find. I also noticed at the bottom the logo of Sanofi and a statement:
You are encouraged to report negative side effects of prescription drugs to Sanofi US at (1-800-633-1610) or FDA at (1-800-FDA-1088) or www.fda.gov/medwatch
Sanofi is starting the launch soon.
Bought more at $5.44 and still have dry powder for further accumulation.
Maybe you can ask the moderator to delete it, if you think this post is not relevant.
Maybe you should read the following link to find out more facts about the story with LLEN.
https://drive.google.com/file/d/0B3rC2N3YZ_YRb25aUEVTLWctTHhTcFpFeVB5aVVZRjdtOGFJ/edit?hl=en&forcehl=1
Both price and words are sometimes the HONEST reflection of MANIPULATION, imo.
Typical effort of under promise & over deliver, imo.
For sure, Sanofi confirms today that Afrezza plays an important role as one of the new medicines in their broaden strategy!
Somehow I love this POS more than I can say!
503 $7 Call option contracts (Nov 22) traded!
Why the drop today, any idea?
No profit, no marketing teams, no distribution network, no more R&D on Afrezza, more dilution, more short positions, etc. .... yet the pps seems to head north everyday. Why?
In fact, it was a pity that I did not get too many shares below $5.80. TOday the ppd broke above $6.22 and off it goes now! GLTA
But F-15 always says this is a scam, no revenue but huge debt ....
SI = Short Interest
Short interest of SNY, partner of MNKD, has just reduced its short position by 50%.
Yes 50% to 1.3 million shares as of Oct 31, 2014. Diabetes business accounts for 21% revenue of SNY. Maybe shorts of MNKD shares need to find out why.
Are short call & long put options included in SI report?
I do not have any target price at this moment as we really need to have sales data on Afrezza for any meaningful projection. Nevertheless, I am pretty sure to say we have reached the bottom which may be re-tested in November. Any pullback will be a buying opportunity to me. GLTA
$4.75 is now a bit too remote for me. I have mine at 5.40, 5.20, 5.00.
Integrity369, may I have your excuse now as MNKD did not drop to $4 as predicted by you. LOL!
Shorts will get sun burn. The day is counting down now... Yet they may still give last ditch effort in Nov to drive the pps down a couple more time to cover so many short position as they can between $5.50 to $6.00. Very unlikely they can cover below $5.50, imo.
Sticking Point: Sanofi’s Diabetes Franchise Is Crucial to Sorting Out a Mess
In Wake of CEO’s Dismissal, Investors Look for Strategy for Rejuvenating Pipeline
By ED SILVERMAN
In two weeks, Sanofi SA Chairman Serge Weinberg faces a crucial test.
He must quarterback a long-planned meeting with investors to review the pipeline the beleaguered drug maker is trying to develop. This is a task that former Sanofi Chief Executive Chris Viehbacher had been expected to handle, of course, but he was dismissed last week amid a tumultuous set of events that revealed some strategic disarray.
The timing is tough. Like many other global drug makers, Sanofi has its share of challenges. But one particularly vexing issue is likely to be on investors’ minds: How can Mr. Weinberg and, later, whoever is hired as chief executive, rejuvenate the all-important Sanofi diabetes franchise?
To what extent the diabetes business played a role in the recent boardroom intrigue remains unclear. Mr. Weinberg has maintained Mr. Viehbacher’s downfall was caused by management style and a failure to communicate, such as not telling the board about plans to sell an $8 billion portfolio of drugs that would have likely meant a loss of jobs in France. Local employment is a very sensitive issue.
Nonetheless, the diabetes franchise is key to Sanofi’s fortunes. Its existing portfolio accounts for about 21% of revenue, but nearly all of that is generated by one medicine, the Lantus insulin. And the outlook suddenly grew dim, when Mr. Viehbacher disclosed last week that price discounting was rampant and the 2015 sales outlook was flat.
The revelation sent Sanofi shares down 10% that day. Unlike Eli Lilly & Co. and Novo Nordisk A/S, Sanofi lacks a wide array of medicines. But touting a few pipeline candidates on Nov. 20 is unlikely to assuage investors. Only the Toujeo insulin is near approval, and there is skepticism this is only an incremental improvement upon Lantus.
This may be another issue for Sanofi, since a biosimilar version of Lantus is pending. A biosimilar is designed to emulate a brand-name biologic.
European regulators recommended a Lilly biosimilar and Sanofi filed a lawsuit to block Lilly from introducing its product in the U.S.
There is another potential wrinkle involving a biosimilar. Right now, there is no regulatory mechanism by which biosimilars are seen as interchangeable with a brand-name biologic. Sanford Bernstein analyst Tim Anderson said this may be possible with insulin, since the FDA has traditionally used a different mechanism to approve insulin.
Such a scenario would matter to Sanofi, because doctors would seemingly have greater confidence to prescribe a biosimilar if they know the FDA believes a medicine is essentially identical to a brand-name drug. Mr. Anderson believes this is “highly unlikely” right now.
But “for Sanofi, interchangeability with generic insulins could be quite damaging,” he writes in an investor note. “If it were to become apparent that substitutable generics to Lantus were increasingly likely, the investment case for Sanofi would weaken even more than it recently has.”
Meanwhile, Sanofi must hope a recent deal Mr. Viehbacher struck with MannKind Corp. to market the Afrezza inhaled insulin product will be a winner. Opinion is divided. Despite a crash-and-burn experience Pfizer Inc. suffered with such a product, supporters say Afrezza has a better delivery system and many diabetics don't like injectables.
Afrezza will be priced similarly to some injectable devices, but skeptics say diabetics will still have other options and payers must be convinced to give Afrezza preferential treatment for deciding reimbursement.
If the Afrezza deal sputters, one analyst says Sanofi may have to make a drastic decision.
“Sanofi will have to go big or go home,” says David Kliff of Diabetic Investor, who believes Sanofi should either acquire another company or diabetes portfolio. A prime candidate, in his view, is AstraZeneca PLC. “The simple fact is that Lilly and Novo have experience and formulary presence on their side.”
http://online.wsj.com/articles/sticking-point-sanofis-diabetes-franchise-is-crucial-to-sorting-out-a-mess-1415299834
This is exactly what is in my mind. I do not know if they have high stake in options expiring on Nov 7, 14, 28.. $5.50 & $6.00 contracts were actively traded.
Yet there was no continuous dumping of shares after the quick recover of price. Should there be bad news as you believe, more down ticks of and drop in pps would have been detected for the rest of the trading day.
With the immediate bounce back and closed in green, I believe strong accumulation has been happening. I look forward to seizing the opportunity of pull back.
Break the circuit breaker?
Sanofi revamps 'underperforming' U.S. sales team under new diabetes chief
By Tracy Staton Comment | Forward | Twitter | Facebook | LinkedIn
Sanofi's U.S. diabetes sales team are under a worldwide spotlight--and not because it's time to take a bow. It was bad enough that Sanofi ($SNY) announced poor expectations for 2015 sales as part of its earnings report last week. But then, the now-ex-CEO Chris Viehbacher suggested that U.S. sales of Lantus, the French drugmaker's diabetes powerhouse, were to blame for the expected shortfall.
Chairman Serge Weinberg wasn't as coy: On a call with analysts, he said "local management" in the U.S. weren't doing their jobs. Sales managers in particular. "It appears that our sales force management on Lantus in the U.S. could have been better," Weinberg said. "[C]learly we have not been as good as we should have in managing this sales force in this market."
Weinberg declined to be much more specific. He said sales reps' work with doctors was inadequate, and rep-physician relationships were a bigger problem than Sanofi's relations with payers. Managers weren't focused on "adequate targets." The company's "market access capabilities" needed to be reinforced. "We really had been underperforming there," he said.
In fact, he admitted after some pressing from analysts, Sanofi had lost market share in the U.S.
He promised that Sanofi got to work on fixing those problems earlier this year. With problems in the U.S. evident at the beginning of 2014, "changes have been made" in the months since, he said. "I hope we will recover a better position in the next quarters," he added.
Among those changes: Sanofi brought in Andrew Purcell to head up its U.S. diabetes business; he joined the company a few months ago, spokeswoman Susan Brooks told FiercePharmaMarketing.
And then there's the change at the top of North America Pharmaceuticals. This summer, U.S. chief Anne Whitaker left Sanofi for a CEO post at Synta. Obviously, she was deeply involved in the diabetes business, because it's among Sanofi's biggest. There's been no suggestion that she was forced out; obviously, she had a job waiting for her. So, her departure may simply illustrate the problems in the company's U.S. operations. But Weinberg did mention execution issues among local management. After Whitaker left, Sanofi quickly brought in Jez Moulding, who previously headed up its operations in Japan, to replace her.
"Under their leadership, we are assessing and evolving our commercial approach to continue to offer our existing treatments to help people living with diabetes," Brooks said in an emailed statement. "We are also preparing for the upcoming launch of Afrezza in Q1 2015 and the potential launch of Toujeo in 2015."
Afrezza, of course, is MannKind's ($MNKD) brand-new inhaled insulin product; Sanofi recently signed on to market the product, which has some very vocal supporters--and some equally vocal detractors. Toujeo is a longer-acting basal insulin intended to step into Lantus' big shoes; it's awaiting approval by the FDA.
The Sanofi dust-up hasn't gone unremarked in the diabetes world. During last week's earnings call with Novo Nordisk ($NVO), the biggest seller of drugs for the disease, analysts specifically asked whether Sanofi's plans to revamp its U.S. sales approach would prompt Novo execs to do the same.
"[A]re you worried about them getting their act together, so to speak, if I may say so?" Novo CEO Lars Rebien Sørensen asked President and COO Kåre Schultz.
Schultz wouldn't comment on Sanofi's sales force performance, but gave kudos to Novo's sales operations in the basal insulin market, where Sanofi's Lantus competes with Novo's Levemir. "We're very happy with the market share gains we've been seeing consistently on Levemir over the past couple of years," he said. "I don't have any plans to dramatically change the size and the way our salesforce works. We're very happy with the way it's working right now."
You may need to come up with some excuse to explain why the share price does not drop to$4. I would be glad to know by the end of this week. You still have time to work on this.
The market seems to be reacting to the facts from CC now up 3.72%.
MNKD has already changed its tune and started repositioning itself as a company that specializes in developing innovative technologies which enable pulmonary delivery of medicine. MNKD now strives to help bring medicinal concepts to market in the form of sensible, patient-friendly treatment solutions.
In Nov and Jan 2015, its board members will meet to talk about company developments. Just love the company.
News From Sanofi About MannKind's Afrezza And Its Future
Summary
In the absence of actual news MNKD investors have been deluged with opinions designed to move the stock.
These articles, pro and con, have just recycled the same old arguments.
At last we have received two important pieces of news this week from MannKind's marketing partner which need to be carefully considered.
In the absence of news about MannKind Corporation (NASDAQ:MNKD) since the signing of the deal with Sanofi (NYSE:SNY) to market MNKD's innovative fast-acting inhaled insulin, Afrezza, the stock has been moving entirely in response to reports by analysts and others who may have shorted the stock.
Their hit pieces have been countered by optimistic posts intended to reassure investors. But all these articles have simply replayed the same scripts without adding anything new to the discussion. This is understandable, because it's been impossible to add something new to the discussion as there had been absolutely no new developments since the announcement of the Sanofi-MannKind partnership.
But as of this past week, we now have several very interesting new developments to consider.
On Tuesday, Chris Viehbacher, the CEO of Sanofi held a post-earnings conference call after the company released very disappointing quarterly results. During the call, Sanofi revealed that sales of their flagship product, the long-acting insulin, Lantus were suffering. This was because price cutting by Novo Nordisk (NYSE:NVO) was causing insurers to switch Lantus users to NVO's long-acting insulin, Levimir.
To counter this very bad news, Viehbacher mentioned Afrezza eight times in the transcript of the earnings call, always in the context of "things that should cheer up investors despite our bad quarter." This was very good news for MNKD investors, whatever effect it had on those invested in SNY, as MNKD investors have expressed concern at how silent SNY had been until now about Afrezza's launch.
But MNKD investors probably also noticed that Afrezza's launch was not treated as the most important launch the company was looking forward to. Viehbacher cited two other new Sanofi drugs before mentioning Afrezza. One was Toujeo, Sanofi's longer-lasting version of Lantus, and the other was a cardiovascular drug, Praluent, which lowers cholesterol.
But even so, what Viehbacher said about Afrezza during the conference call was very important. That's because it gives us more insight into the company's marketing plan for Afrezza. Viehbacher said, "We also ... have brought in a new medicine in diabetes called Afrezza ... an awful lot of people I think we have got Exubera." i.e. a terrible product destined to fail, addressing the primary argument of the loudest bears.
But Viehbacher immediately addressed this concern, saying, "...we know Exubera, Sanofi sold it to Pfizer for a nice chunk of money. But I think because we knew of Exubera, we also were able to I think assess why Afrezza is different." To illustrate one reason it was different, he cited the small inhaler. But he immediately moved on to explain that Afrezza"... has a PK profile that really can mimic the natural prandial insulin response."
PK means "pharmacokinetic" and it refers to the pattern in which a drug is absorbed, becomes active, and then is eliminated from the body. Despite the torrent of articles on SA claiming that Afrezza's main selling proposition is that it eliminates the need to inject insulin using a needle, it is actually the unique PK profile of Afrezza, which closely mimics the insulin our bodies secrete, that excites people who know something about blood sugar control. And it is specifically the population of endocrinologists whose support for this drug is essential in getting it to patients who find this the most exciting.
So that SNY is stressing this feature is very good news for those of us who hope it is marketed correctly to endocrinologists.
But Sanofi has already learned that having a superior PK profile doesn't necessarily sell fast-acting insulin. Sanofi already owns a fast-acting insulin that has a superior activity profile to the two other fast-acting insulins that dominate the market. That insulin is called Apidra. But Apidra never got traction in the marketplace because it came to the market too late, after Humalog and Novolog had dominated the marketplace.
In addition, a lot of prescriptions for fast acting insulin are written by general practitioners who don't actually understand blood sugar control very well and didn't understand why Apidra's superior PK mattered. They aren't likely to understand why PK makes Afrezza superior, either.
So I was very pleased to hear Viehbacher also explain, "We are not necessarily seeing it [Afrezza] just to replace injection but [what] we know is that there is often a lost decade that many specialists refer to, and this is a time it often takes for people to move from oral therapies, which have really stopped working and transfer to an injectible product. So we think actually that, even as an add on to oral could be an interesting way to get people on insulin therapy a little bit faster."
I find the fact that this is mentioned as a main selling proposition for Afrezza very heartening. Because if Afrezza is marketed against the often ineffective and extremely expensive oral drugs, it suddenly becomes a much more interesting drug to general practitioners and when that happens, its market expands hugely. And it does so without any need to prove Afrezza's superiority to injected insulin. All it needs to be superior to is the oral drugs, since it will be much more acceptable to patients currently using those drugs and seeing poor blood sugars.
So this bit of news answered one of the most important of the Known Unknowns I described in a previous article: How will Sanofi pitch Afrezza to doctors and insurers?
All this is well and good, but as you probably have heard by now, Mr. Viehbacher, the CEO who addressed investors at the conference call, was fired by Sanofi the very next day. His firing came as a shock to investors and caused the stock's price to tank dramatically.
And this firing also increased the already crippling amount of uncertainty long-term MNKD investors must live with. Because we all know what happens when any new manager comes in. Projects dear to the heart of the ousted manager get killed or sidelined, while those that will redound to the credit of the new guy take front and center stage.
So a lot is riding on who takes over the Sanofi CEO job and what their connection has been with the decision to partner with MNKD. Do they see the Afrezza deal as one of Viehbacher's mistakes, or was it something those now running the company will see as a way of fixing those mistakes?
Will Viehbacher's successor push for more involvement in the diabetes market or will they try to shift the company's focus to a different market?
Diabetes has been Sanofi's cash cow, with Lantus contributing heavily to the company's profits. But Sanofi dropped the ball badly in preparing for Lantus's upcoming patent expiration and letting Novo Nordisk get ahead of them with Tresiba, which will compete directly with Toujeo and which is already on sale in Europe.
This quarter's loss of Lantus sales to Novo's Levemir seems to have come as an unwelcome surprise and perhaps was the last straw. So if the new Sanofi CEO wants to recover the company's predominance in the diabetes niche and leverage its strong diabetes sales force then he or she may put even more muscle into marketing Afrezza head to head with the oral incretin and SLGT-2 inhibitor drugs. He might even decide to give more priority to Afrezza than Toujeo, sine Afrezza is truly novel and has no competition on the horizon.
But as usual, MNKD investors will have to wait to see how this plays out. I, personally, consider the fact that Sanofi seems to have finally unveiled its marketing plan and that it is a very good marketing plan as being very good news. The fact that they are willing to use the E word openly and aggressively state why Afrezza is not Exubera is also good news.
The rest of the new information we will be getting about Afrezza over the next year will also likely be coming from Sanofi, not MNKD, whose job right now is only to manufacture this product speedily and correctly. Who the next CEO turns out to be will be very important. His attitude towards Afrezza essential to the product's success.
So stay tuned. The Endless Soap Opera that is Afrezza has just started another story line!
http://seekingalpha.com/article/2623065-news-from-sanofi-about-mannkinds-afrezza-and-its-future
dilution is rampant. This is worthless.
Mind telling us specifically why it is worthless? You mean there is no value attached to the partnership with Sanofi or what?
Just wonder who were those analysts & basic of their assumptions. Also do you have any idea if the prediction is in line with SNY's?
MannKind: What To Expect From Earnings
Summary
MannKind reports earnings November 3, which is this coming Monday.
As usual, earnings and revenue can pretty much be ignored.
The important thing to watch for in this earnings report is news concerning the all-important launch of Afrezza.
MannKind (NASDAQ:MNKD) reports earnings this coming Monday, November 3. Earnings per share and revenue are expected to come in at $0.04 and $66 million respectively, though this is not where investors will be focusing their attention. Even though MNKD will have a profitable quarter for the first time in the history of the company, that is not what's important. The only significant aspect of this profitability is that it may be the beginning of many more profitable quarters to come if Afrezza succeeds.
As is usually true with MNKD's earnings reports, and reports for small-cap biotechnology stocks in general, the focus will be on the news. So throw EPS and revenue out the window and watch for any positive or negative news that could affect the company and the stock.
Possible News to Watch For
The company could elaborate on the launch of Afrezza and give more details about the rollout, the drug's insurance coverage and maybe if the company has received any information from doctors about prescription of Afrezza. MNKD has no near-term catalysts because Afrezza is launching in Q1 2015, so the news, or lack thereof, in this earnings report could move the stock. I will list the possible news announcements and discuss the significance of each.
1) If MNKD provides more details on the rollout of Afrezza, such as how many pharmacies will receive the drug and what kind of pricing the drug will have, this could push the stock upward. It is assumed Afrezza's pricing will be competitive with insulin pens already on the market, so any other range could move the stock up or down. If Afrezza is priced higher than the competition, that could negatively affect sales of the drug in the future and the stock may drop. If the Afrezza is priced lower than competing drugs, then that would give Afrezza an edge and will boost sales. However, I believe Afrezza will be priced pretty much equal to currently available treatments.
2) The company may announce that insurance companies will cover Afrezza for patients that want to take the drug. This would be a good thing to get out of the way, though it wouldn't really be considered a positive catalyst as it is already expected that Afrezza will receive this coverage.
3) It's also possible that MNKD may announce some kind of feedback that the company has received from doctors about prescribing Afrezza. This probably goes hand in hand with the drug becoming covered under insurance plans, which must happen before doctors can prescribe it to their patients. Any indication about patient and doctor sentiment will be very important because the results could affect Afrezza's sales next year.
But the company may announce news that can't possibly be predicted and that may move the stock in either direction. Personally, I think the earnings report will be devoid of any big news, but small tidbits of information could have a big impact on the stock which is still very volatile. MNKD stock has performed very well in the past week, closing at $6.19 Tuesday, which is good for a 7% gain on the day. This upward momentum could continue if the earnings report reveals some good news, or at least as long as the company doesn't report any bad news.
As I mentioned in my last article, I predict a steady rise in MNKD's share price leading up to Afrezza's launch as speculative short sellers flee the stock. It appears from the last week that this rise has already begun, and, coupled with a good or uneventful earnings report, this trend should continue until at least early next year.
Conclusion
There are a few things investors should watch out for in this earnings report, but ultimately I expect an uneventful report. If this occurs, it should not derail MNKD's recent rally. As long as there is no bad news, the stock should continue to steadily rise as shorts retreat and as longs settle down for the long haul (pun intended).
http://seekingalpha.com/article/2610535-mannkind-what-to-expect-from-earnings
Update: Sanofi Will Deliver Growth, But Later Than Expected
Summary
A good quarter was obfuscated by the announcement that pricing pressures in the US will stall growth of the Diabetes division.
As Diabetes delivers probably more than 34% of Sanofi's profits, investors sold off their shares in early trading.
I continue to be optimistic for the French drug maker in the long term, but recognize that investors will have to wait a bit longer for stronger growth.
Today, Sanofi (NYSE:SNY) (OTCQB:SNYNF) posted quarterly results. Great performance in Latin America (sales up 23.7% at CER) was partly offset by the impact of generic competition in Japan. Overall sales grew 5.1% in the quarter and 5% for the 9-month period. Business EPS grew 10.3%, stronger than Business net income (9.4% growth), reflecting the impact of share repurchases. (All figures at constant exchange rates.) Business EPS for the quarter was €1.47 and €3.81 for the 9-month period. Sanofi continued to feel the strong Euro, especially as far as the Argentine Peso, Japanese Yen and Russian Ruble are concerned. Exchange rate movements had a negative effect of 1% in the quarter and of 4.2% YTD. I expect currency translation to provide a tailwind in the fourth quarter, reflecting the steep fall of the EUR/USD exchange rate at the end of Q3.
What spooked investors, causing a 7% sell-off right at the start, was presumably not the alleged tension between BOD and CEO, but the following paragraph in the earnings release:
Sanofi has recently concluded payor negotiations in the U.S. and has secured favorable formulary positions for Lantus® with key payors. The level of rebates required to maintain these positions has increased significantly due to aggressive discounting by competitors. The rebates will not change the Group's Business EPS guidance for 2014. The increased rebates in the U.S. and the impact of the Affordable Care Act will continue in 2015. Sanofi expects to mitigate this impact on the Diabetes division in 2015 through the launches of Toujeo® and Afrezza® as well as continued strong growth in Emerging Markets. Therefore, global sales of the Diabetes division are expected to be broadly stable in 2015.
The Diabetes division is responsible for 28% of Sanofi's sales and I estimate its contribution to profits to be higher than 34%. If growth stalls in Diabetes, the other divisions will need to grow strongly in order to deliver the anticipated 5.6% sales growth for the group in 2015. Considering that YTD sales have grown 5% with a strong 12.3% contribution from Diabetes, analysts will certainly revise downwards their estimates. While my basic investment thesis for the company won't change because of this headwind (of which Sanofi has endured and mastered a great many recently), in the near term I expect slower growth as well. That said, at its current level of roughly 13 times my (already revised) Business EPS estimate for 2015, the stock seems to be undervalued, as the French drug maker has very strong positions in growing economies around the globe and is well positioned to deliver income growth for many years to come.
http://seekingalpha.com/article/2604525-update-sanofi-will-deliver-growth-but-later-than-expected