Sanofi Q3 well on track
PARIS, Oct. 31, 2019 /PRNewswire/ -- Sanofi (NASDAQ: SNY; EURONEXT: SAN)
Q3 2019 Change Change
9M 2019 Change Change
at CER at CER
IFRS net
sales
reported
EUR9,499m +1.1% -1.1%
EUR26,518m +4.1% +2.2%
IFRS net
income
reported
EUR1,766m -22.3%
EUR2,816m -30.5%(2)
IFRS EPS
reported
EUR1.49 -18.6%
EUR2.33 -28.3%(2)
---
Business
net
income(1)
EUR2,399m +4.3% +0.2%
EUR5,805m +6.4% +4.1%
Business
EPS(1)
EUR1.92 +4.3% 0.0%
EUR4.65 +6.4% +4.1%
---
Experience the interactive Multichannel News Release here: https://www.multivu.com/players/English/8637251-sanofi-earnings-results-q3-2019/
Third-quarter 2019 sales
performance(3) led by Sanofi Genzyme
and Emerging Markets
Net sales were EUR9,499 million, up
1.1% on a reported basis, down
1.1%(3) at CER and up 0.5% at CER/
CS(4).
Sanofi
Genzyme sales increased 19.5% driven
by continued strong uptake of
Dupixent(R).
Vaccines sales decreased
9.8% reflecting anticipated weighting
of U.S. flu vaccines supply towards
fourth quarter.
CHC sales up 0.4%, impacted by
Zantac(R) voluntary recall, non-core
divestments and increased regulatory
requirements.
Primary Care sales declined 12.7% at
CER/CS due to lower sales in
Diabetes and Established Products.
Emerging
Markets(5) sales grew 9.7% due to
strong performance in most regions.
Full-year business EPS guidance
confirmed
Q3 2019 business net income increased
4.3% to EUR2,399 million and 0.2% at
CER.
Q3 2019
business EPS(1) was stable at CER at
EUR1.92.
Q3 2019 IFRS EPS was EUR1.49,
down 18.6% reflecting the capital
gain on the European generics
divestment in Q3 2018.
Sanofi expects
2019 business EPS(1) to grow
approximately 5% at CER(6) barring
unforeseen major adverse events.
Applying the average October 2019
exchange rates, the currency impact
on 2019 business EPS is estimated to
be around +3%.
Key R&D and regulatory milestones
achieved
Dupixent(R) approved by European
Commission for severe chronic
rhinosinusitis with nasal polyposis.
Dupixent(R)
approved by European Commission for
adolescents with moderate-to-severe
atopic dermatitis.
Dupixent(R) demonstrated
positive topline phase 3 results in
children aged 6 to 11 years with
severe atopic dermatitis.
MenQuadfiTM,
a meningococcal vaccine candidate,
submitted in EU.
Flublok(R), a quadrivalent
influenza vaccine, submitted in EU.
---
Sanofi Chief Executive Officer, Paul
Hudson, commented:
"Since joining Sanofi only two
months ago, I am increasingly
excited about the strength of our
businesses, our ability to develop
transformative medicines and the
diverse talent of our teams across
the organization. Building on this
foundation, Sanofi delivered a
resilient underlying performance in
the third quarter with strong sales
in Specialty Care, largely driven
by the continued outstanding
performance of Dupixent
(R)
. I am encouraged
by the organization's early
achievements in our efficiency
initiatives, which will allow us to
further drive innovation in our
business. I'm looking forward to
discussing Sanofi's strategic
priorities at our Capital Markets
Day in Cambridge, MA on December
10".
(1) In order to facilitate an
understanding of operational
performance, Sanofi comments on the
business net income statement.
Business net income is a non-GAAP
financial measure (see Appendix 8
for definitions). The consolidated
income statement for Q3 2019 is
provided in Appendix 3 and a
reconciliation of reported IFRS net
income to business net income is set
forth in Appendix 4; (2) including
in Q2 2019 a EUR1.8 billion
impairment charge mainly related to
Eloctate
(R)
; (3) Changes in net sales are
expressed at constant exchange rates
(CER) unless otherwise indicated
(see Appendix 8); (4) Constant
Structure: Adjusted for divestment
of European generics business and
sales of Bioverativ products to
SOBI; (5) See definition page 9; (6)
2018 business EPS was EUR5.47.
R&D update
Consult Appendix 6 for full overview of Sanofi's R&D pipeline
Regulatory update
Regulatory updates since July 29, 2019 include the following:
-- In October, the European Commission approved Dupixent(®) (collaboration
with Regeneron) as an add-on therapy with intranasal corticosteroids for
the treatment of adults with severe chronic rhinosinusitis with nasal
polyposis (CRSwNP) for whom therapy with systemic corticosteroids and/or
surgery do not provide adequate disease control.
-- In October, MenQuadfi(TM), a meningococcal quadrivalent conjugate
vaccine, was submitted in the European Union for the prevention of
invasive meningococcal disease in individuals 12 months of age and
older.
-- In October, a quadrivalent recombinant influenza vaccine was submitted
in the European Union for the prevention of influenza disease in persons
18 years of age and older (vaccine registered in the U.S. under the
trade name Flublok(®)).
-- In August, Dupixent(®) was approved by the European Commission for
adolescents 12 to 17 years of age with moderate-to-severe atopic
dermatitis who are candidates for systemic therapy.
At the end of October 2019, the R&D pipeline contained 85 projects, including 37 new molecular entities in clinical development (or that have been submitted to the regulatory authorities). 34 projects are in phase 3 or have been submitted to the regulatory authorities for approval.
Portfolio update
Phase 3:
-- In September, the findings from the CARD study of Jevtana(®)
(cabazitaxel) were presented at the 2019 European Society of Medical
Oncology (ESMO) Congress. Data were also published in the New England
Journal of Medicine and showed that patients with metastatic
castration-resistant prostate cancer (mCRPC) previously treated with
docetaxel and who progressed within 12 months on an androgen receptor
targeted agent (abiraterone or enzalutamide) experienced significantly
longer radiographic progression free survival (rPFS) with Jevtana(®)
plus prednisone compared with abiraterone plus prednisone or
enzalutamide. Overall survival (OS) with Jevtana(®) was also
significantly longer.
-- In August, positive topline phase 3 results for Dupixent(®) in children
aged 6 to 11 years with severe atopic dermatitis were announced.
Phase 2
-- In the third quarter, the NSCLC and Prostate Cancer combination cohorts
with cemiplimab and isatuximab were discontinued due to efficacy
considerations. This decision was not safety related. The ongoing
combination trials in Multiple Myeloma and Lymphoma as well as
combination trials with isatuximab and atezolizumab in solid tumors
continue.
Phase 1:
-- A phase 1 trial evaluating SAR442085, an anti-CD38 monoclonal antibody,
was initiated in multiple myeloma.
-- SAR443122, a RIPK1 inhibitor (collaboration with Denali) entered into
phase 1.
-- BIVV020, a complement C1s inhibitor, entered phase 1.
-- The combination SAR442720 (SHP2 inhibitor) and cobimetinib entered phase
1.
-- SAR441255, a trigonal GLP1R/GIPR/GCGR agonist was discontinued.
Collaboration
In September, Sanofi and Abbott announced a partnership to integrate glucose sensing and insulin delivery technologies that would help to further simplify how people with diabetes manage their condition.
Corporate Social Responsibility
Sanofi's commitment to good corporate citizenship is rooted in its heritage. The company recognizes that its core business creates value for society, and it works to ensure that the benefits of this societal value are accessible to as many people around the world as possible. The company also has a longstanding commitment to the communities where it operates and to minimizing its impact on the environment.
Sanofi's corporate social responsibility (CSR) approach was recognized during the third quarter of 2019 by the Dow Jones Sustainability Index (DJSI) for the 13th consecutive year. In 2019, Sanofi ranked as the third most sustainable pharmaceutical company with a score of 82 out of 100, up from 76 last year. The DJSI selects the best companies in each sector based on economic, social and environmental performance.
On October 15, 2019, Sanofi opened a digitally-enabled manufacturing facility in Framingham, one of the first of its kind, to develop transformative treatments for patients while significant reducing environmental waste. The facility will produce 80% less CO2 emissions compared to traditional technologies and reduce water and chemical usage by 91% and 94% respectively.
2019 third-quarter and first nine months financial results((10))
Business Net Income((10))
In the third quarter of 2019, Sanofi generated net sales of EUR9,499 million, an increase of 1.1% (down 1.1% at CER). First nine months sales were EUR26,518 million, up 4.1% on a reported basis (up 2.2% at CER).
Third-quarter other revenues increased 19.9% (up 14.8% at CER) to EUR422 million, reflecting the VaxServe sales contribution of non-Sanofi products (EUR372 million, up 18.7% at CER). First nine months other revenues increased 23.8% (up 17.2% at CER) to EUR1,096 million, driven by the VaxServe sales contribution of non-Sanofi products (EUR915 million, up 24.0% at CER) and the consolidation of collaboration revenues from Swedish Orphan Biovitrum AB (SOBI).
Third-quarter Gross Profit increased 0.9% to EUR6,787 million (down 1.8% at CER). The gross margin ratio decreased 0.2 percentage points to 71.4% (71.2% at CER) versus the third quarter of 2018. The favorable effects from Dupixent(®) and the divestment of the European generics business were more than offset by the negative impact from U.S. Diabetes net price evolution, the decline in Established Rx Products sales in Mature Markets as well as the impact of Vaccines and the Zantac(®) recall. In the third quarter of 2019, the gross margin ratio of segments were 74.8% for Pharmaceuticals (up 1.2 percentage points), 64.8% for CHC (down 2.0 percentage points) and 67.4% for Vaccines (down 2.7 percentage points). First nine months Gross Profit increased 5.1% to EUR19,095 million (up 2.8% at CER). In the first nine months of 2019, the gross margin ratio increased 0.7 percentage points to 72.0% (71.8% at CER) versus the same period of 2018. Sanofi expects its full-year 2019 gross margin ratio to be between 70% and 71% at CER.
Research and Development (R&D) expenses decreased 6.8% to EUR1,362 million in the third quarter of 2019. At CER, R&D expenses decreased 8.1%, reflecting favorable phasing of expenses, lower research costs resulting from restructuring of the immuno-oncology collaboration with Regeneron as well as a EUR45 million payment from SOBI related to the BIV001 opt-in. In the third quarter, the ratio of R&D to sales decreased 1.3 percentage points to 14.3% compared to the third quarter of 2018. First nine months R&D expenses increased 2.8% to EUR4,335 million (up 0.5% at CER). In the first nine months of 2019, the ratio of R&D to sales was 0.3 percentage points lower at 16.3% compared to the same period of 2018.
Third-quarter selling general and administrative expenses (SG&A) increased 0.6% to EUR2,314 million. At CER, SG&A expenses were down 1.5%, reflecting cost efficiency measures notably in Primary Care in Mature Markets and support functions as well as the impact of the European generics disposal which more than offset increased investments in Specialty Care. In the third quarter, the ratio of SG&A to sales decreased 0.1 percentage points to 24.4% compared to the third quarter of 2018. First nine months SG&A expenses increased 0.6% to EUR7,156 million (down 1.4% at CER). In the first nine months of 2019, the ratio of SG&A to sales was 0.9 percentage points lower at 27.0% compared to the same period of 2018.
Third-quarter operating expenses were EUR3,676 million, a decrease of 2.3% and 4.1% at CER. Excluding the payment from SOBI and the disposal of European generics business, operating expenses decreased 1.9% at CER in the third quarter. First nine months operating expenses were EUR11,491 million, an increase of 1.5% and down 0.7% at CER.
Third-quarter other current operating income net of expenses was -EUR119 million versus -EUR74 million in the third quarter of 2018. This line includes the share of profit to Regeneron of the monoclonal antibodies Alliance, reimbursement of development costs by Regeneron and the reimbursement of commercialization-related expenses incurred by Regeneron. This line also includes the share of profit/loss related to the immuno-oncology Alliance. In the third quarter of 2019, a total of EUR23 million of capital gains on non-strategic CHC brand disposals was also recorded. First nine months other current operating income net of expenses was -EUR312 million versus EUR84 million in the same period of 2018.
The share of profits from associates was EUR132 million in the third quarter versus EUR153 million for the same period of 2018, mainly reflecting the share of profits in Regeneron. In the first nine months, the share of profits from associates was broadly stable at EUR301 million versus the same period of 2018.
In the third quarter, non-controlling interests were -EUR12 million versus -EUR26 million in the third quarter of 2018, reflecting the end of non-controlling interests related to the Alliance with Bristol-Myers Squibb on Plavix(®) and Avapro(®). First nine months non-controlling interests were -EUR27 million versus -EUR84 million for the same period of 2018.
Third-quarter business operating income increased 3.1% to EUR3,112 million. At CER, business operating income decreased 0.9%. The ratio of business operating income to net sales increased 0.7 percentage points to 32.8% versus the third quarter of 2018. Over the period, the business operating income ratio of segments were 39.0% for Pharmaceuticals (up 3.4 percentage points), 32.0% for CHC (down 1.2 percentage points) and 50.0% for Vaccines (down 5.3 percentage points).
(10) See Appendix 3 for 2019 third-
quarter consolidated income
statement; see Appendix 8 for
definitions of financial
indicators, and Appendix 4 for
reconciliation of IFRS net income
reported to business net income.
First nine months business operating income was EUR7,566 million, up 5.9% (up 3.7% at CER). In the first nine months of 2019, the ratio of business operating income to net sales increased 0.4 percentage points to 28.5%.
Net financial expenses were -EUR71 million in the third quarter versus -EUR106 million in the same period of 2018, reflecting lower cost of net debt. First nine months net financial expenses were -EUR201 million versus -EUR211 million in the same period of 2018.
Third-quarter and first nine months effective tax rate was stable at 22.0%. Sanofi is currently actively engaged with the Chinese Ministry of Finance to support and cooperate with a Pharmaceutical sector audit process underway.
Third-quarter business net income((10)) increased 4.3% to EUR2,399 million and increased 0.2% at CER. The ratio of business net income to net sales increased 0.8 percentage points to 25.3% versus the third quarter of 2018. First nine months 2019 business net income((10)) increased 6.4% to EUR5,805 million and increased 4.1% at CER. The ratio of business net income to net sales increased 0.5 percentage points to 21.9% versus the first nine months of 2018.
In the third quarter of 2019,
business earnings per
share(10) (EPS) increased
4.3% to EUR1.92 on a reported
basis and was stable at CER.
The average number of shares
outstanding was 1,252.2
million versus 1,247.1
million in the third quarter
of 2018.
In the first nine months of
2019, business earnings per
share(10) was EUR4.65, up
6.4% on a reported basis and
up 4.1% at CER. The average
number of shares outstanding
was 1,248.9 million in the
first nine months of 2019
versus 1,247.6 million in the
first nine months of 2018.
---
Reconciliation of IFRS net income reported to business net income (see Appendix 4)
In the first nine months of 2019, the IFRS net income was EUR2,816 million. The main items excluded from the business net income were:
-- An amortization charge of EUR1,636 million related to fair value
remeasurement on intangible assets of acquired companies (primarily
Genzyme: EUR550 million, Bioverativ: EUR380 million, Boehringer
Ingelheim CHC business: EUR184 million, Aventis: EUR153 million) and to
acquired intangible assets (licenses/products: EUR80 million). An
amortization charge of EUR520 million related to fair value
remeasurement on intangible assets of acquired companies (primarily
Genzyme: EUR182 million, Bioverativ: EUR108 million, Boehringer
Ingelheim CHC business: EUR62 million, Aventis: EUR46 million) and to
acquired intangible assets (licenses/products: EUR24 million) was
recorded in the third quarter. These items have no cash impact on the
Company.
-- An impairment of intangible assets of EUR2,023 million (of which
EUR1,835 million in the second quarter mainly related to Eloctate(®
)and EUR183 million in the third quarter which included an impairment
related to Zantac(®)).
-- Restructuring costs and similar items of EUR904 million (of which EUR157
million in the third quarter) mainly related to streamlining initiatives
in Japan, Europe and the U.S.
-- An income of EUR242 million mainly reflecting a contingent price
adjustment on the disposal of SP MSD.
-- A net income of EUR260 million (of which a charge of EUR57 million in
the third quarter) mainly related to litigation.
-- A EUR1,279 million tax effect arising from the items listed above,
mainly comprising EUR906 million of deferred taxes generated by
amortization and impairments of intangible assets and EUR247 million
associated with restructuring costs and similar items. The third quarter
tax effect was EUR374 million, including EUR195 million of deferred
taxes generated by amortization and impairments of intangible assets and
EUR50 million associated with restructuring costs and similar items (see
Appendix 4).
-- An expense of EUR94 million net of tax (of which EUR41 million in the
third quarter) related to restructuring costs of associates and joint
ventures and expenses arising from the impact of acquisitions on
associates and joint ventures.
(10) See Appendix 3 for 2019 Third-
quarter consolidated income
statement; see Appendix 8 for
definitions of financial
indicators, and Appendix 4 for
reconciliation of IFRS net income
reported to business net income.
Capital Allocation
In the first nine months of 2019, net cash generated by operating activities increased 58.2% to EUR4,976 million after capital expenditures of EUR992 million and an increase in working capital of EUR1,365 million (which compared with an increase of EUR1,925 million over the first nine months of 2018). Over the period, the dividend paid by Sanofi was EUR3,834 million, restructuring costs and similar items cash-out was EUR917 million and acquisitions and partnerships net of disposals reflecting a net cash-in during the period were EUR525 million. As a consequence, net debt decreased from EUR17,628 million at December 31, 2018, to EUR16,910 million at September 30, 2019 (amount net of EUR8,606 million cash and cash equivalents).
To access the full press release of the 2019 Q3 results, please click here.
Forward-Looking Statements
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are statements that are not historical facts. These statements include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates", "plans" and similar expressions. Although Sanofi's management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Sanofi, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include among other things, the uncertainties inherent in research and development, future clinical data and analysis, including post marketing, decisions by regulatory authorities, such as the FDA or the EMA, regarding whether and when to approve any drug, device or biological application that may be filed for any such product candidates as well as their decisions regarding labelling and other matters that could affect the availability or commercial potential of such product candidates, the absence of guarantee that the product candidates if approved will be commercially successful, the future approval and commercial success of therapeutic alternatives, Sanofi's ability to benefit from external growth opportunities, to complete related transactions and/or obtain regulatory clearances, risks associated with intellectual property and any related pending or future litigation and the ultimate outcome of such litigation, trends in exchange rates and prevailing interest rates, volatile economic conditions, the impact of cost containment initiatives and subsequent changes thereto, the average number of shares outstanding as well as those discussed or identified in the public filings with the SEC and the AMF made by Sanofi, including those listed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" in Sanofi's annual report on Form 20-F for the year ended December 31, 2018. Other than as required by applicable law, Sanofi does not undertake any obligation to update or revise any forward-looking information or statements.
Media Relations:
Investor Relations:
Ashleigh Koss
George Grofik
908-981-8745
+33 (0)1 53 77 45 45
Email: Ashleigh.koss@sanofi.com
Email: IR@sanofi.com
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