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[DewDiligence]

Sanofi Posts In-Line Results, but Worries Proliferate

http://www.reuters.com/article/marketsNews/idINL3057976020080430

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Wed Apr 30, 2008 3:06am EDT
By Noelle Mennella and Ben Hirschler

PARIS/LONDON, April 30 (Reuters) - Sanofi-Aventis's sales and profits fell less than expected in the first quarter but the French drugmaker said on Wednesday that saredutant, an experimental antidepressant, had failed in a clinical trial.

The setback leaves uncertain the future of saredutant, one of several new drugs Sanofi had hoped to file for approval this year, although the company said pooled results from other studies could still prove the medicine to be beneficial.

Net sales fell 3.3 percent to 6.937 billion euros ($10.81 billion) and operating profit was down 7.2 percent to 2.522 billion euros, hit as expected by generic competition to sleeping pill Ambien IR and a weak dollar.

Excluding the effect of exchange rates, the profit fall was about 1 percent.

Sales had been expected to fall to 6.877 billion euros and operating profit to 2.422 billion, according to a Reuters Estimates poll of analyst forecasts.

Deutsche Bank analysts said the financial results were encouraging but the R&D news a disappointment.

Key drivers for the business were the anti-thrombotic Lovenox, Sanofi's top-seller, which operations head Hanspeter Spek told analysts had benefited from contamination problems with other heparin products, particularly in the United States. Its sales rose 21.5 percent in local currencies.

Future sales of Lovenox, however, are under a cloud with overnight news that Momenta Pharmaceuticals (MNTA) and Novartis's (NVS) Sandoz unit plan to resubmit a U.S. file to sell generic Lovenox in the third quarter of this year.

Sales of Plavix, the blood thinner, grew 18.9 percent, following the disappearance of a generic form of the drug.

OUTLOOK MAINTAINED

Adjusted net income excluding selected items came in at 1.883 billion euros, or 1.43 euros per share.

After minority interests, net profit fell 12 percent to 1.41 euros per share or 1.863 billion euro, against a forecast 1.834 billion.

Sanofi said it was maintaining its forecast of around 7 percent in adjusted earnings per share growth in 2008, calculated at a constant 2007 euro/dollar rate of $1.371.

Competition in the United States took a toll on sales of sleeping pill Ambien, which fell 62 percent, and cancer drug Eloxatin suffered a 6 percent drop in sales due to competition in Europe.

Excluding the impact of the introduction of generics of Ambien in the United States and Eloxatin in Europe, the top 15 products would have achieved growth of 12.2 percent, Sanofi said.

The strong euro and tumbling Ambien sales pushed U.S. revenues down 2.8 percent on a comparable basis. In Europe sales fell 0.7 percent to 3.1 billion euros.

Net debt was stable at 4 billion euros.

Sanofi shares trade on just 8.6 times forecast 2009 earnings, against 11 times for GlaxoSmithKline (GSK) and 12 times for Novartis, reflecting concerns about its future growth prospects.

Investors are wary about its ability to get new medicines to market following U.S. rejection of its obesity pill Acomplia, or Zimulti, last year.

Analysts also worry Lovenox could face fresh competition from both branded and generic products within the next couple of years, while Eli Lilly's (LLY) new drug prasugrel is set to compete for business with Plavix.

Sanofi reported positive results from GEMS, the third Phase III trial evaluating eplivanserin in sleep quality. It plans to file for approval in the second half of 2008.
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