#4: Sanofi
Headcount 100,000
Year Established 2004
Pharma Revenues $37,403 -4%
Total Revenues $40,347 -1%
Net Income $7,597 -4%
R&D Budget $5,844 -9%
Top-Selling Drugs in 2010
Drug |
Indication |
$ |
(+/- %) |
Lantus |
diabetes |
$4,661 |
9% |
Lovenox |
thrombosis |
$3,726 |
-12% |
Plavix |
heart attack, stroke |
$2,766 |
-24% |
Taxotere |
cancer |
$2,818 |
-7% |
Aprovel |
hypertension |
$1,762 |
2% |
Eloxatin |
colorectal cancer |
$567 |
-58% |
Ambien |
insomnia |
$1,088 |
-11% |
Allegra |
allergic rhinitis |
$806 |
-21% |
Copaxone |
multiple sclerosis |
$681 |
5% |
Delix/Tritace |
hypertension |
$544 |
-9% |
Amaryl |
diabetes |
$635 |
9% |
Account for 56% of total pharma sales, down from 57% in 2009.
Sanofi’s total vaccine sales were $5.0 billion in 2010, up 4% from last year. Vaccines comprised 14% of total sales, up from 12% in 2009. Sanofi earned $1.7 billion (+16%) from influenza vaccines, driven by pandemic flu fears. Revenues from pediatric combination and polio vaccines fell 3% to $1.3 billion, meningitis/pneumonia vaccines fell 7% to $700 million, and adult and adolescent boosters rose 5% to $596 million for the year.
PROFILE
Sanofi was the first company to drop in last year’s ranks, falling from #2 to #4 as generics offset the growth in its pharma revenues. (The 5% drop in the value of the Euro against the dollar didn’t help, either, but even at a constant exchange rate, its 1% growth rate would have left it behind Merck at #3.) Sanofi saw significant losses from generics of Lovenox, Plavix, Ambien and Allegra; sales of its top 11 drugs fell a combined $1.2 billion for the year. Eloxatin also saw a steep revenue drop in 2010, but its generics were ordered off the market by U.S. court in June 2010, giving Sanofi breathing room for that colon cancer treatment until August 2012.
Things got so tough for Sanofi that I thought the company had lost the patent to the name “Aventis,” but it turns out the management just decided to shorten the name in May 2011. The company also adopted a new logo, “The Bird of Hope.” It’d be too easy to make a joke about that, so I’m going to pass. Just this one time.
Sanofi’s diversification strategy in consumer health, vaccines, emerging markets and diabetes treatment gave it a buffer for the first wave of generic erosion, but those major drugs still have a lot of revenue to lose. A one-time (we hope) boost for H1N1 pandemic influenza vaccine helped in 2010, but the absence of a pandemic this year means a big drop in 2011 revenues.
We all know that pharmaceuticals are where the money and the margins are, so Sanofi responded to its declining fortunes and relevance in a time-honored tradition: mega-merger!
In August 2010, the company made its first advances on Genzyme, with the intention of adding a rare diseases growth platform (and around $4.0 billion in existing revenues). Negotiations dragged on for months, with Genzyme’s management holding out to get fair value for Lemtrada, an MS treatment. In a bizarre misstep before the Genzyme news went public, Sanofi chief executive officer Christopher Viehbacher mentioned that he had around $20.0 billion to spend on acquisitions. Sanofi’s initial bid for Genzyme was $18.5 billion.
The deal finally wrapped in April 2011, at a value of $20.1 billion. The companies negotiated some contingent value rights (CVR) for the deal, mostly centered on Lemtrada (there are also CVRs related to Genzyme fixing its manufacturing problems). The CVRs for Lem-trada extend to 2020, and their top tier is tied into Lemtrada revenues greater than $2.8 billion over the course of four consecutive quarters, reflecting the optimism of Genzyme’s management.
Sanofi has said that it plans to keep Genzyme as a standalone unit; I never believe those statements, but we’ll see if it holds up. Last year, I also wrote, “I doubt [Sanofi] will resort to another mega-merger just to keep up with the Joneses,” so take my wisdom with a grain of salt.
Sanofi also responded to 2010’s decline with another time-honored pharma tradition: job cuts. The firm laid off 1,700 U.S. employees around Thanksgiving last year, mainly sales reps whose days were numbered once the U.S. rights to Lovenox went poof. In all, Sanofi spent $1.8 billion on restructuring costs in 2010, which covered those U.S. layoffs — 300 were office positions, 1,400 were sales — and converting the company’s manufacturing footprint in France.
Internally, the company still hopes to see Multaq, the atrial fibrillation treatment approved in 2009, become a major contributor. Multaq has made a steady rise in revenues, posting $228 million in 2010 and $86 million in 1Q11, but it’s still a few years off from (potentially) reaching blockbuster status, and safety questions about it continue to swirl. For the moment, Sanofi’s diabetes play is keeping it afloat. Lantus revenues grew 14% (in Euros) in 2010, and were up 17% (in Euros) in 1Q11, with sales of $1.3 billion.
Sanofi hopes to keep the diabetes franchise rolling with lixisenatide, a once-daily GLP-1 receptor agonist meant to knock off Byetta (which would put it around the $500 million mark for annual revenues). The company hopes to file that one this year, after good Phase III results in February 2011.
Sanofi makes a lot of acquisitions, but they have a bit of a mixed record. The 2009 pickup of Chattem has helped solidify Sanofi’s consumer health presence, providing steady cash. Sanofi’s newest major (fingers crossed) product, Jevtana (prostate cancer), came over with the mega-acquisition of Aventis in 2004. That drug posted $109 million in revenues in its partial first year on the market, and $66 million in 1Q11. Its first EU launch was in April 2011, so there’s plenty of room for growth.
Sanofi and Merck had planned to (re-)merge their animal health businesses into a joint venture that would have been the largest company in its class. Antitrust issues became too complex and they scuttled the deal in March 2011. The companies intended to sell off some animal health assets to satisfy regulators, but both companies will now operate their animal health businesses on their own. Sanofi’s Merial unit posted revenues of $2.6 billion in 2010 and $812 million in 1Q11.
On the down side of mergers, the 2009 buyout of BiSpar brought in BSI-201, a highly touted oncology treatment, but that drug failed a big Phase III trial in breast cancer in January 2011, after tremendous Phase II results.
Then there’s 2009 purchase of Shantha, a Hyderabad-based vaccine manufacturer. In July 2010, the World Health Organization dropped Shan5 and Shanthera from its list of approved vaccines, due to manufacturing problems. That led to around $340 million in lost revenues from UNICEF over 2010-12. Sanofi hopes to get the vaccines reinstated by 2013, but Sanofi can’t afford lost opportunities like this.
Still, it’s not like Sanofi’s just spent $20 billion on a company with major manufacturing problems to fix. Oh, wait . . . —GYR
ACQUISITION NEWS
Target: TargeGen Inc.
Price: $75 million plus $485 million in potential milestones
Announced: June 2010
What they said: “The acquisition of TargeGen represents a further significant step to increase our engagement in the field of hematological malignancies.”
—Marc Cluzel, M.D., Ph.D,
Executive Vice-President, R&D, Sanofi
Target: VaxDesign
Price: $55 million, plus $5 million for a development step
Announced: September 2010
What they said: “With this novel model for understanding mechanisms of action, the probability of clinical success increases and the time to market should decrease.”
—Michel DeWilde, Ph.D.,
Senior Vice President, R&D, Sanofi Pasteur
Target: BMP Sunstone
Price: $520.6 million
Announced: October 2010
What they said: “The acquisition of BMP Sunstone will not only leverage our consumer healthcare business in China, but will also bring us unique access to new expanding distribution channels which are expected to account for a third of the pharmaceutical market in China in the coming years.”
—Christopher A. Viehbacher,
Chief Executive Officer of Sanofi
Target: Genzyme Corp.
Price: $20.1 billion
Announced: August 2009
What they said: “Sanofi-aventis’ global reach and significant resources would allow Genzyme to accelerate investment in new treatments, enhance penetration in existing markets and expand further into emerging markets. The combination of both companies would create a global leader in developing and providing novel treatments, giving both companies significant new growth opportunities.”
—Company Statement
OUTSOURCING NEWS
Sanofi made a big outsourcing splash in September 2010 when it announced a 10-year R&D pact with Covance. The deal, with an estimated range of $1.2 to $2.2 billion, involved asset transfers of a pair of Sanofi sites in Porcheville, France and Alnwick, UK. Covance paid $25 million for the two facilities, which bring in CMC services, including preformulation, drug formulation, preclinical and early-phase clinical API manufacturing, as well as radiolabeled chemistry. Covance will keep the sites going for a minimum of five years. Sanofi will utilize Covance as a sole-source for central laboratory services.
In another asset-transfer pact, Famar agreed to take over Sanofi’s solid and steriles facility in Madrid in January 2011. All employees were transferred to Famar. in 2001, Famar acquired Sanofi’s plant in L’Aigle, France. According to a Famar statement, Sanofi will keep a trailing supply agreement at the Madrid site, and both companies will partner to develop the manufacturing activity of the plant. Famar is interested in expanding the plant’s sterile manufacturing capacities, and trying to build a CMO operation in Spain.
In October 2010, Sanofi’s vaccine division, Sanofi Pasteur, named Perceptive Informatics its preferred partner in providing Randomization and Trial Supply Management (RTSM) technologies. Perceptive, a subsidiary of Parexel, will help the unit “achieve more efficient data collection, faster patient enrollment and more streamlined trial supply management for increasingly complex vaccine trials,” according to a Perceptive statement.
In August 2010, Sanofi named UK-based SCM Pharma as the provider for the fast-tracked fill/finish of a radio-labelled product. SCM will provide services for the aseptic manufacture and filling of a cytotoxic oncology compound into vials. The product will be packaged at Sanofi and distributed to clinical trial sites. SCM worked with Sanofi on the initial phase of the project.
THE LOWE DOWN
Remember back when Sanofi was talking about how big mergers weren’t necessarily what they needed to be doing? Ah, but Genzyme was just sitting there. Well, not quite sitting there — actually, Genzyme was frantically sloshing bleach into their manufacturing plant while watching their stock price, but you know what I mean. And so we have another big acquisition. A lot of people expected more drama from this one, but in the end, it was like watching something immobile being enfolded by an amoeba.
But I can’t get too snarky about this one, because it really may be part of a coherent strategy. Sanofi seems to be trying to have more of its revenue coming from biologics, as opposed to small molecules, and buying Genzyme — at contamination-sale prices — was a way to do that in one big stroke. They’ve got a big small-molecule patent expiration coming up with Plavix, and that sort of thing surely has them thinking about that wonderful land where patent expirations don’t seem to matter (for now). —Derek Lowe
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