Analysis: Bleak Outlook for Sanofi-Aventis

By STEVE MITCHELL

Sanofi posted weak third-quarter numbers Tuesday, and analysts say the company is on shaky ground, based in part on the potentially rocky launch of the company’s new weight-loss drug Acomplia.

The third-quarter numbers were below expectations, but also in the future, they will have a lot of potential problems with all of the patent trials ongoing and the Acomplia issues, Kepler Equities analyst Matthias Steger told United Press International.

Overall, Steger said he doesn’t expect the company’s revenues to recover for the next two years.

The third-quarter numbers show how much trouble they have, he said.

Specifically, Eloxatin is facing patent expiration. Lovenox’s patent is being challenged by Amphastar and Teva, prompting a patent infringement suit from Sanofi that is scheduled to start in December. Sanofi, along with marketing partner Bristol-Myers Squibb, is also challenging Apotex’s generic version of Plavix in a trial slated to begin in January.

Sanofi’s future depends on its obesity drug Acomplia, so getting it approved by the Food and Drug Administration is vital to the company, Steger said.

The FDA issued an approvable letter for the drug in February, and Sanofi said Tuesday it has sent the agency a complete response and should receive a decision in April 2007.

What makes up the lost sales should be Acomplia, so Sanofi depends now on whether they get approval in April or whether it gets delayed again, Steger said.

Further clouding the Acomplia outlook is its difficulties in Europe, where it has already been launched.

Acomplia has problems in Europe, such as a potential lack of reimbursement in Germany, Steger said. So they will face this reimbursement problem in other European countries, and this is hindering prescriptions.

German authorities appear slated to declare that the drug that does not qualify for reimbursement, but Sanofi said if that happens, it intends to challenge the decision.

The company also noted that Ireland has deemed the drug reimbursable without restrictions, and Denmark considers it reimbursable for obese patients with life-threatening conditions such as type 2 diabetes or dyslipidemia.

Net sales of Acomplia in Europe and the United Kingdom totaled $14 million.

Sanofi said overall net sales for the quarter were down 1.1 percent to $8.8 billion. The company attributed part of the decrease on the introduction of four generics in the United States.

Lovenox sales were up 9.2 percent to $744 million, while Plavix sales increased 2.5 percent to $693 million.

Taxotere sales were up 5.1 percent to $547 million, and Eloxatin sales rose 1.7 percent to $523 million.

Vaccine sales fell by 7 percent to $860 million, a drop Sanofi attributed to the delay in shipment of flu vaccine to the United States.

Navid Malik, an analyst with Collins Stewart, told UPI the weak third quarter was not entirely unexpected, but it was still concerning.

The bottom line really is the numbers are disappointing, Malik said, adding that he thinks the stock will be quite volatile for the next year or two.

He also had concerns about the future of Acomplia. Sanofi said the drug was gaining acceptance in Europe, but Malik said he didn’t fully believe it.

The issues surrounding reimbursement problems and I think long-term safety issues are going to loom with that drug, he said. The safety concerns include depression and multiple sclerosis-type side effects, he said.

Malik questioned whether the FDA had concerns about the drug’s safety profile and whether that was the reason for Sanofi’s long delay in responding to the agency.

I don’t know if FDA had questions about that, Malik said. It’s unclear why it took so long, and it’s unclear what the safety profile will be and how sales will grow.

Malik also faulted the lackluster showing of Eloxatin and Taxotere.

One thing I didn’t like in the numbers was the very anemic growth in their oncology franchise, he said, noting that Eloxatin and Taxotere turned in very disappointing performances.

In addition, Sanofi has a raft of generic competition to deal with, Malik said, citing the patent challenges to Lovenox and Plavix.

But Sanofi’s pipeline products have not panned out, and lifestyle drugs, such as Acomplia and extended versions of their sleep drug Ambien, will not be enough to make up for those shortcomings, he said.