On July 29, 2016 Sanofi reported financial results for the quarter ended June 30, 2016 (Press release, Sanofi, JUL 28, 2016, http://mediaroom.sanofi.com/solid-performance-in-the-first-quarter-of-2016-with-business-eps1-up-5-3-at-constant-exchange-rates_30156_30156/ [SID:1234514128]).
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Second quarter financial results and 2016 guidance confirmed
Aggregate Company sales(1) decreased 0.2%(3) (down 4.3% at 2016 exchange rates) to €8,868 million. Excluding Venezuela,
Aggregate Company sales grew 1.9%
IFRS EPS reported was down 10.0% to €0.90
Business EPS(2) was down 2.1% at CER to €1.31 and down 7.1% on a reported basis
Sanofi continues to expect 2016 Business EPS(2) to be broadly stable(4) at CER, barring unforeseen major adverse events
Performance of Global Business Units (GBU) led by Sanofi Genzyme
Strong double-digit growth of Sanofi Genzyme (+20.1%) across multiple sclerosis and rare disease franchises
Sanofi Pasteur sales increased +6.3%, despite anticipated supply constraints of Pentacel in the U.S.
General Medicines & Emerging Markets(5) sales declined 5.6%, or down 1.9% excluding Venezuela.
Diabetes and Cardiovascular sales were down 3.5%. Global diabetes franchise sales declined 3.2%
Animal Health sales were up 9.1% to €725 million, driven by the success of the NexGard family of products
Aggregate sales in Emerging Markets grew 6.7% excluding Venezuela
Major launches update
Toujeo generated worldwide sales of €141 million
Praluent launch advancing globally with approval in Japan and market share improvement in the U.S.
Dengvaxia uptake delayed by recent political changes and economic volatility in Latin America
Key R&D milestones achieved
Positive CHRONOS data for dupilumab in atopic dermatitis
Adlyxin (lixisenatide) approved in the U.S.
FDA Advisory Committee recommended approval of LixiLan
Sanofi Chief Executive Officer, Olivier Brandicourt, commented:
"Our second quarter financial performance was in-line with expectations and reflected anticipated headwinds. Sanofi Genzyme grew 20% and Sanofi Pasteur performed well despite a delay in Dengvaxia uptake. Recent highlights included the signing of the CHC asset swap, the approval of Praluent in several countries and positive Phase III CHRONOS data for dupilumab. Following our first half performance, we confirm our broadly stable 2016 Business EPS guidance at CER."
(1) Including Merial (see Appendix 10 for definition of Aggregate Company sales) which is reported on a single line in the consolidated income statements in accordance with IFRS 5 (Non-current assets held for sale and discontinued operations). Additionally, Sanofi comments include Merial for every income statement line using the term "Aggregate"; (2) 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 10 for definitions). The consolidated income statement for Q2 2016 and H1 2016 is provided in Appendix 4 and a reconciliation of business net income to IFRS net income reported is set forth in Appendix 3; (3) Percentage changes in net sales and Aggregate sales are expressed at constant exchange rates (CER) unless otherwise indicated (see Appendix 10); (4) 2015 Business EPS was €5.64;(5) See page 8
Investor Relations: (+) 33 1 53 77 45 45 – E-mail: [email protected] – Media Relations: (+) 33 1 53 77 46 46 – E-mail: [email protected]
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2016 second-quarter and first-half Aggregate Sanofi sales
Unless otherwise indicated, all percentage changes in sales in this press release are stated at CER(7).
In the second quarter of 2016, Aggregate Company sales were €8,868 million, down 4.3% at 2016 exchange rates. Exchange rate movements had a negative effect of 4.1 percentage points with the adverse evolution of the U.S. dollar as well as several emerging market currencies more than offsetting the positive effects from the Japanese Yen. At CER, Aggregate Company sales decreased 0.2%. First-half Aggregate Company sales reached €17,411 million, down 3.2% at 2016 exchange rates. Exchange rate movements had an unfavorable effect of 3.4 percentage points.
This performance included a negative currency impact related to the change of exchange rate applied for the translation of Venezuela operations, resulting from the evolution of the exchange system in February 2016 as well as from the persistent inability to exchange Venezuelan bolivars for U.S. dollars at the privileged official rate(8). In addition, in the second quarter of 2015, Sanofi benefited from a significant increase in product demand in Venezuela, due to buying patterns associated with local market conditions. As a consequence, sales in Venezuela were €6 million in the second quarter of 2016 compared to €199 million in the second quarter of 2015. Excluding Venezuela, Aggregate Company sales increased 1.9% and 2.5% in the second quarter and in the first half of 2016, respectively.
Global Business Units
The table below presents sales by Global Business Units (GBU) and reflects the organization of the Sanofi which became effective as of January 1, 2016. In this organizational structure, all Pharmaceutical sales in Emerging Markets are now included in the General Medicines and Emerging Markets GBU. This new reporting structure simplifies Sanofi, deepens specialization and allows clear focus on growth drivers.
Net Sales by GBU
(€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Sanofi Genzyme (Specialty Care)(a)
1,245
+20.1%
2,414
+20.3%
Diabetes & Cardiovascular(a)
1,603
-3.5%
3,102
-4.6%
General Medicines & Emerging Markets(b)
4,498
-5.6%(c)
8,988
-4.9%(d)
Sanofi Pasteur (Vaccines)
797
+6.3%(e)
1,422
+7.1%(f)
Merial (Animal Health)
725
+9.1%
1,485
+13.2%
Total Aggregate Company sales
8,868
-0.2%(g)
17,411
+0.2%(h)
(a) Does not include Emerging Markets sales- see definition page 8; (b) Includes Emerging Markets sales for Diabetes & Cardiovascular and Specialty Care; (c) Excluding Venezuela:-1.9%; (d) Excluding Venezuela: -1.1%; (e) Excluding Venezuela:+7.0%; (f) Excluding Venezuela: +7.8%; (g) Excluding Venezuela:+1.9%; (h) Excluding Venezuela: +2.5%.
Global Franchises
The table below presents sales by global franchises. The performance by franchise provides a bridge to our previous reporting methodology and allows straightforward peer comparisons. Appendix 1 provides a reconciliation of sales by GBU and by franchise.
Net sales by Franchise
(€ million)
Q2 2016
Change
(CER)
Developed
Markets
Change
(CER)
Emerging
Markets
Change
(CER)
Specialty Care
1,493
+19.5%(a)
1,245
+20.1%
248
+16.8%(b)
Diabetes & Cardiovascular
1,962
-2.0%(c)
1,603
-3.5%
359
+4.7%(d)
Established Products
2,617
-9.7%(e)
1,676
-10.9%
941
-7.7%(f)
Consumer Healthcare (CHC)
800
-4.3%(g)
511
+2.1%
289
-13.0%(h)
Generics
474
-1.9%(i)
271
-5.5%
203
+2.6%(j)
Vaccines
797
+6.3%(k)
463
+3.8%
334
+9.8%(l)
Animal Health
725
+9.1%
565
+7.3%
160
+15.6%
Total Aggregate net sales
8,868
-0.2%(m)
6,334
0.0%
2,534
-0.5%(n)
(a) Excluding Venezuela : +20.3%; (b) Excluding Venezuela : +21.1%; (c) Excluding Venezuela : -0.9%; (d) Excluding Venezuela : +11.4%; (e) Excluding Venezuela :
-6.6%; (f) Excluding Venezuela: +1.5%; (g) Excluding Venezuela: +0.6%; (h) Excluding Venezuela:-1.8%; (i) Excluding Venezuela: +0.4%; (j) Excluding Venezuela: +8.2%; (k) Excluding Venezuela: +7.0%; (l) Excluding Venezuela: +11.5%; (m) Excluding Venezuela: +1.9%; (n) Excluding Venezuela: +6.7%.
(7) See Appendix 10 for definitions of financial indicators. (8) In Q2 2016, the exchange rate used was the DICOM rate (628VEF per USD) versus the privileged official CENCOEX rate of 6.3VEF per USD in Q2 2015.
The table below presents sales for global franchise for the first half of 2016.
Net sales by Franchise
(€ million)
H1 2016
Change
(CER)
Developed
Markets
Change
(CER)
Emerging
Markets
Change
(CER)
Specialty Care
2,864
+19.0%(a)
2,414
+20.3%
450
+13.3%(b)
Diabetes & Cardiovascular
3,794
-2.8%(c)
3,102
-4.6%
692
+5.6%(d)
Established Products
5,208
-9.0%(e)
3,343
-11.2%
1,865
-5.1%(f)
Consumer Healthcare (CHC)
1,705
-3.6%(g)
1,105
+1.8%
600
-11.4%(h)
Generics
933
+0.6%(i)
553
0.0%
380
+1.4%(j)
Vaccines
1,422
+7.1%(k)
810
-1.7%
612
+20.7%(l)
Animal Health
1,485
+13.2%
1,177
+10.1%
308
+25.2%
Total Aggregate net sales
17,411
+0.2%(m)
12,504
-0.4%
4,907
+1.7%(n)
(a) Excluding Venezuela : +19.7%; (b) Excluding Venezuela : +17.3%; (c) Excluding Venezuela : -1.8%; (d) Excluding Venezuela : +11.8%; (e) Excluding Venezuela :
-5.7%; (f) Excluding Venezuela : +4.9%; (g) Excluding Venezuela: +1.5%; (h) Excluding Venezuela: +1.0%; (i) Excluding Venezuela: +3.3%; (j) Excluding Venezuela: +7.7%; (k) Excluding Venezuela: +7.8%; (l) Excluding Venezuela: +22.7%; (m) Excluding Venezuela: +2.5%; (n) Excluding Venezuela: +9.7%.
Pharmaceuticals
Second-quarter sales for Pharmaceuticals were down 1.7% to €7,346 million impacted by a decrease in Diabetes, CHC and Established Rx Products sales that was partially offset by the Multiple Sclerosis and Rare Disease franchises. Excluding Venezuela, second-quarter sales for Pharmaceuticals were up 0.8%. First-half sales for Pharmaceuticals decreased 1.5% to €14,504 million. Excluding Venezuela, first-half sales for Pharmaceuticals increased 1.0%.
Rare Diseases franchise
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Cerezyme
199
+8.0%(a)
381
+5.9%(b)
Myozyme / Lumizyme
182
+13.9%
348
+11.2%
Fabrazyme
167
+17.8%
316
+12.2%
Aldurazyme
50
+6.0%
98
+5.1%
Cerdelga
26
+62.5%
49
+88.5%
Total Rare Diseases
707
+14.2%(c)
1,353
+11.4%(d)
(a) Excluding Venezuela: +9.2%; (b) Excluding Venezuela: +7.9%; (c) Excluding Venezuela: +15.5%; (d) Excluding Venezuela: +12.7%;
In the second quarter, Gaucher (Cerezyme and Cerdelga) sales increased 12.1% to €225 million, sustained by Cerezyme in Emerging Markets (up 27.3% to €70 million) and the increasing contribution of Cerdelga (€26 million versus €16 million in the second quarter of 2015). In the U.S., second-quarter sales of the Gaucher franchise increased 4.7% to €65 million reflecting declining Cerezyme sales (€45 million, down 4.1%) which were more than offset by increasing Cerdelga sales (€20 million, up 33.3%). In Europe, where Cerdelga is now available in Germany, France, Denmark, and Nordic countries, sales of the Gaucher franchise were €76 million, up 5.5%. In the first-half, Gaucher sales were up 11.1% to €430 million. First half sales of Cerezyme and Cerdelga increased 5.9% (to €381 million) and 88.5% to €49 million, respectively.
Sales of Fabrazyme were up 17.8% to €167 million in the second quarter driven by the U.S. (up 14.5% to €85 million), Europe (up 14.3% to €40 million), Japan and Emerging Markets (up 23.5% to €16 million). First-half sales of Fabrazyme increased 12.2% to €316 million.
Second-quarter sales of Myozyme/Lumizyme increased 13.9% to €182 million, driven by the U.S. (up 15.7% to €58 million) and Europe (up 11.7% to €84 million). In Emerging Markets, sales were up 7.1% to €26 million. First-half sales of Myozyme/Lumizyme increased 11.2% to €348 million.
Multiple Sclerosis franchise
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Aubagio
315
+58.3%
594
+61.0%
Lemtrada
108
+100.0%
196
+113.8%
Total Multiple Sclerosis
423
+67.3%
790
+71.6%
In the second quarter, sales of Aubagio increased 58.3% to €315 million driven by the U.S. (up 55.6% to €216 million) and Europe (up 68.8% to €80 million). First-half sales of Aubagio increased 61.0% to €594 million.
Second-quarter sales of Lemtrada were €108 million (versus €56 million in the second quarter of 2015), including €56 million in the U.S. (up 96.6%), and €40 million in Europe (versus €21 million in the second quarter of 2015), mainly in the UK and Germany. First-half sales of Lemtrada were €196 million (versus €94 million in the first half of 2015).
Oncology franchise
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Jevtana
88
+8.5%
178
+12.6%
Thymoglobulin
69
+4.3%
134
+10.5%
Taxotere
46
-21.0%
92
-16.5%
Eloxatin
44
-15.8%
86
-17.1%
Mozobil
37
+11.4%
72
+7.2%
Zaltrap
17
-15.0%
34
-15.0%
Total Oncology
363
-3.6%
721
-1.2%
Second-quarter Oncology sales were €363 million, down 3.6% due to lower sales of Taxotere and Eloxatin. First-half sales of Oncology were €721 million, down 1.2%.
Sales of Jevtana (cabazitaxel) increased 8.5% to €88 million in the second quarter led by the U.S. (up 12.1% to €37 million) and Japan. First-half sales of Jevtana were up 12.6% to €178 million.
Second-quarter Thymoglobulin sales increased 4.3% to €69 million supported by the U.S. performance (up 7.9% to €39 million). First-half sales of Thymoglobulin increased 10.5% to €134 million.
Second-quarter sales of Eloxatin were down 15.8% to €44 million reflecting generic competition in Canada more than offsetting the performance in China. Over the same period, sales of Taxotere (docetaxel) decreased 21.0% (to €46 million), impacted by generic competition especially in Japan more than offsetting the performance in China. First-half sales of Taxotere and Eloxatin were down 16.5% (€92 million) and down 17.1% (€86 million), respectively.
Diabetes franchise
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Lantus
1,465
-11.2%
2,860
-11.1%
Toujeo
141
ns
244
ns
Total glargine
1,606
-3.5%
3,104
-4.3%
Amaryl
93
-9.2%
181
-7.3%
Apidra
93
+3.2%
178
0.0%
Insuman
34
+8.8%
66
+4.5%
BGM (Blood Glucose Monitoring)
17
+6.3%
34
+6.3%
Lyxumia
8
-10.0%
17
0.0%
Total Diabetes
1,857
-3.2%(a)
3,591
-3.8%(b)
(a) Excluding Venezuela: -2.0%; (b) Excluding Venezuela:-2.8%
In the second quarter, Diabetes franchise sales were down 3.2% to €1,857 million, reflecting lower sales of Lantus in the U.S. Second-quarter U.S. Diabetes sales were down 7.1% to €1,033 million. Outside the U.S., sales were €824 million, an increase of 2.0% driven by Emerging Markets (up 5.0% to €358 million; excluding Venezuela up 11.7%). Sales in Europe were €338 million, an increase of 0.9% reflecting the performance of Toujeo which offset lower sales of Lantus. First-half sales for the Diabetes franchise were €3,591 million down 3.8%.
Second-quarter sales of Sanofi’s glargine (Lantus and Toujeo) were €1,606 million, down 3.5%. In the U.S., Sanofi’s glargine sales of €1,002 million were down 6.7%. In Europe, sales of Sanofi’s glargine increased 1.2% to €255 million despite the launch of a biosimilar glargine in several European markets. First-half sales of Sanofi’s glargine were €3,104 million down 4.3%.
Over the quarter, sales of Lantus were €1,465 million down 11.2%. In the U.S., as anticipated, sales of Lantus decreased 15.7% to €896 million mainly reflecting lower average net price and patients switching to Toujeo. In Europe, second-quarter Lantus sales were €228 million, down 9.1% while in Emerging Markets, sales were €250 million, up 5.3% (up 9.8% excluding Venezuela), driven by China. First-half sales of Lantus were €2,860 million, down 11.1%.
Second-quarter sales of Toujeo were €141 million of which €106 million were recorded in the U.S. and €27 million were from Europe. The global roll-out of this product continues and Sanofi expects Toujeo to be available in over 40 countries by the end of 2016. First-half sales of Toujeo were €244 million.
Sales of Amaryl were €93 million (down 9.2%, up 2.1% excluding Venezuela) in the second-quarter of which €74 million were generated in Emerging Markets (down 6.9%). Excluding Venezuela, sales of Amaryl in Emerging Markets increased 8.0%. First-half sales of Amaryl were €181 million, down 7.3%.
Second-quarter sales of Apidra were up 3.2% to €93 million, reflecting lower sales in the U.S. (down 11.8% to €30 million), which were more than offset by the performance in Emerging Markets (up 27.8% to €20 million). First-half sales of Apidra were stable at €178 million.
Cardiovascular franchise
Praluent (alirocumab, collaboration with Regeneron) was launched in the U.S. in 2015 and in a number of European markets in 2015 and 2016. Second-quarter sales of Praluent were €21 million of which €18 million were in the U.S. and €3 million in Europe, where the product has recently become commercially available in a few countries (including the UK, Germany, Spain, Netherlands, and Nordic countries). First-half sales of Praluent were €33 million reflecting current payer restrictions limiting uptake.
Second-quarter sales and first-half sales of Multaq were €84 million (down 1.1%) and €170 million (up 0.6%), respectively.
Established Rx Products
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Plavix
392
-25.7%
780
-22.2%
Lovenox
414
+0.5%
818
-1.7%
Renvela/Renagel
208
-7.4%
442
-2.4%
Aprovel/Avapro
175
-16.1%(a)
344
-14.6%(b)
Synvisc /Synvisc-One
109
-3.4%
197
0.0%
Myslee/Ambien/Stilnox
78
+5.4%
148
0.0%
Allegra
39
-2.7%
114
-7.7%
Other
1,202
-7.4%(c)
2,365
-7.7%(d)
Total Established Rx Products
2,617
-9.7%(e)
5,208
-9.0%(f)
(a) Excluding Venezuela: -1.1%; (b) Excluding Venezuela: -1.9%; (c) Excluding Venezuela: -4.5%; (d) Excluding Venezuela: -4.1%; (e) Excluding Venezuela: -6.6%; (f) Excluding Venezuela: -5.7%;
Second-quarter sales of Established Rx Products were €2,617 million, down 9.7%, reflecting lower sales in Venezuela and generic competition to Plavix in Japan. Excluding Venezuela, sales of Established Rx Products were down 6.6%. In Emerging Markets, sales of Established Rx Products were €941 million, down 7.7% and up 1.5% excluding Venezuela. In Europe and the U.S., sales of Established Rx Products were down 3.0% (to €942 million) and 8.3% (to €374 million), respectively. First-half sales of Established Rx Products decreased 9.0% to €5,208 million and down 5.7% excluding Venezuela.
Second-quarter sales of Lovenox increased 0.5% to €414 million and 1.6% excluding Venezuela. In Emerging Markets, sales of Lovenox were up 2.4% to €113 million, and up 6.6% excluding Venezuela. In Europe, sales of the product were down 0.8% to €262 million. In July, two biosimilars containing enoxaparin sodium received positive opinion from the CHMP (European Medicines Agency’s Committee for Medicinal Products for Human Use). First-half sales of Lovenox were €818 million down 1.7% and down 0.7% excluding Venezuela.
In the second quarter, Plavix sales declined 25.7% to €392 million due to generic competition in Japan that started in June 2015 (sales in Japan were down 59.1% to €93 million), which was partially offset by the growth in China (up 10.4% to €177 million). First-half sales of Plavix decreased 22.2% to €780 million.
Second-quarter sales of Renvela/Renagel decreased 7.4% to €208 million. In the U.S., sales of the product were €170 million (down 0.6%). Generics of the product are currently marketed in a number of European countries, which resulted in Europe sales of Renvela/Renagel down 32.3% to €21 million. Sanofi expects generic competition in the U.S. in 2016. First-half sales of Renvela/Renagel were down 2.4% to €442 million.
Sales of Aprovel/Avapro were down 16.1% to €175 million in the second quarter. Excluding Venezuela, sales of Aprovel/Avapro were down 1.1%. First-half sales of Aprovel/Avapro decreased 14.6% to €344 million and 1.9% excluding Venezuela.
In the second quarter and the first half of 2015, sales of Auvi-Q and Allerject were €35 million and €52 million, respectively. Sanofi no longer commercializes this product in the U.S. where no sales were recorded in 2016.
Consumer Healthcare
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Allegra
97
-11.2%
237
-5.0%
Doliprane
77
+11.4%
154
0.0%
Enterogermina
43
+27.8%
85
-3.2%
Essentiale
32
-22.2%
71
-17.9%
Nasacort
23
-25.0%
68
-6.8%
Lactacyd
22
-42.9%
41
-32.4%
Maalox
21
-15.4%
45
-11.1%
No Spa
19
0.0%
40
+2.3%
Magne B6
16
-19.0%
36
-4.9%
Dorflex
15
-15.0%
34
-2.3%
Other CHC Products
435
+0.9%
894
0.0%
Total Consumer Healthcare
800
-4.3%(a)
1,705
-3.6%(b)
(a) Excluding Venezuela: +0.6%; (b) Excluding Venezuela: +1.5%;
Second-quarter Consumer Healthcare (CHC) sales were €800 million, down 4.3%. Excluding Venezuela and the divestiture of smaller products, CHC sales were up 2.7% driven by the strong performance in Australia, Mexico and Argentina, which was partially offset by Russia. Second-quarter sales of CHC in the U.S. were down 0.8% to €229 million reflecting a mild allergy season impacting sales of Allegra (down 18.3% to €56 million). In Emerging Markets, sales were down 13.0% to €289 million (down 1.8% excluding Venezuela) impacted by lower sales in Russia. In the Rest of the World, second-quarter sales grew 18.0% to €69 million sustained by the allergy franchise and the vitamins business in Australia. Over the quarter, in Europe, sales increased 0.9% to €213 million (impacted by divestitures of small products), buoyed by a strong Doliprane performance due to a successful DTC campaign. First-half sales of CHC reached €1,705 million, down 3.6% and up 3.4% excluding Venezuela and the divestiture of several small products.
On June 27, 2016, Sanofi and Boehringer Ingelheim announced the signing of contracts to secure the strategic transaction initiated in December 2015 which consists of an exchange of Sanofi’s animal health business and Boehringer Ingelheim’s consumer healthcare business. This step marks a major milestone before closing of the transaction which is expected by year-end 2016 and remains subject to approval by all regulatory authorities in different territories.
Generics
Second-quarter sales of Generics were down 1.9% to €474 million. Excluding Venezuela, sales were up 0.4% driven by Emerging Markets (up 8.2%) offsetting lower sales of the Plavix authorized generic in Japan. First-half sales of Generics increased 0.6% to €933 million (up 3.3% excluding Venezuela).
Vaccines
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Polio/Pertussis/Hib Vaccines
(incl. Pentacel, Pentaxim and Imovax)
339
+28.6%
627
+17.1%
Meningitis/Pneumonia Vaccines
(incl. Menactra)
139
-1.4%
261
+10.3%
Adult Booster Vaccines (incl. Adacel )
104
-9.3%
184
-12.2%
Influenza Vaccines
(incl. Vaxigrip and Fluzone)
96
-10.5%
116
-8.1%
Travel and Other Endemic Vaccines
101
+7.2%
184
+6.1%
Dengvaxia
1
–
20
Other Vaccines
17
-36.7%
30
-34.7%
Total Vaccines (consolidated sales)
797
+6.3%*(a)
1,422
+7.1%*(b)
*Comparability based on the new presentation of VaxServe sales (see below)
(a) Excluding Venezuela: +7.0%; (b) Excluding Venezuela: +7.8%;
VaxServe sales
VaxServe is a U.S. entity of the Vaccines segment. VaxServe activities include products distribution in the U.S. in channels that are not the primary focus of Sanofi Pasteur. VaxServe complements its Sanofi Pasteur products offering by distributing vaccines and other products from third party manufacturers. All VaxServe sales were reported on the line Net sales in the past.
In order to provide more relevant published information, VaxServe sales of non-Sanofi products are reported on the line Other revenues in the income statement from January 1, 2016. Accordingly, prior period comparative net sales have been reclassified to the line Other revenues.
The 2015 quarterly and full-year 2015 business P&L as well as sales of GBUs and franchises by geographic region reflecting this reclassification are available on the Investors section of Sanofi’s website.
In the second quarter of 2015 and in full-year 2015, sales of VaxServe(9) of non-Sanofi products were €110 million and €482 million, respectively.
Vaccines
In the second quarter, consolidated vaccines sales were up 6.3% to €797 million driven by the Polio/Pertussis/Hib Vaccines franchise in Emerging Markets and Travel and other endemics vaccines. In the U.S., sales of vaccines decreased 2.3% to €331 million due to increased competitive pressure on Adacel and lower sales of Menactra reflecting favorable CDC order phasing in the U.S during the first quarter of 2016. In Emerging Markets sales of vaccines increased 9.8% driven by Pentaxim and Hexaxim growth. First-half sales of Sanofi Pasteur were up 7.1% to €1,422 million.
Second quarter sales of Polio/Pertussis/Hib Vaccines were up 28.6% to €339 million. In Emerging Markets, sales of the franchise increased 43.6% to €178 million driven by the growth of Pentaxim and Hexaxim in the Middle-East, Africa, Turkey and Mexico. This performance more than offset lower sales of Pentaxim and Polio vaccines in China due to local market disruption. In the U.S., sales of Polio/Pertussis/Hib Vaccines were down 1.1% to €88 million reflecting a slight decrease in sales of IPV vaccines. Pentacel sales in the U.S. were €56 million, up 1.8%. As previously communicated, Sanofi Pasteur is experiencing Pentacel manufacturing delays and is not meeting all current demand. Supply improvements are expected in the second half of 2016. First-half sales of Polio/Pertussis/Hib vaccines increased 17.1% to €627 million.
Dengvaxia, the world’s first dengue vaccine is now approved in five countries (Mexico, the Philippines, Brazil, El Salvador and Costa Rica). Dengvaxia was launched in the Philippines in the first quarter and in El Salvador in July. Additionally, a public vaccination program in Paraná State in Brazil was announced in late July and is expected to cover half a million people. Despite these developments, the overall uptake of Dengvaxia is delayed by recent political changes and economic volatility in Latin America. With only a limited number of public immunization programs confirmed to date in endemic countries and the majority of regulatory approvals still pending in Asia, Dengvaxia is unlikely to meet Sanofi’s prior sales expectations for 2016. Dengvaxia sales in the second quarter were limited to private market sales in the Philippines. First-half sales of Dengvaxia were €20 million corresponding to the sales of the first dose of the first public dengue immunization program in the Philippines in the first quarter of 2016.
Sales of Influenza Vaccines were €96 million, a decrease of 10.5% reflecting lower sales in Brazil due to increased supply of the Butantan Institute.
(9) Sales of VaxServe in Q2 2016 and first-half 2016 are provided in the Financial Results
Menactra sales were €126 million, a decrease of 3.0% due to favorable CDC order phasing in the U.S in the first quarter of 2016. First-half sales of Menactra increased 10.0% to €237 million.
Second-quarter Adult Booster Vaccines sales were down 9.3% to €104 million reflecting increased Adacel competitive pressure in the U.S. First-half sales of Adult Booster vaccines decreased 12.2% to €184 million.
Second-quarter sales of Travel and Other Endemic Vaccines increased 7.2% to €101 million driven by increased sales of rabies and typhoid vaccines. First-half sales of Travel and Other Endemic Vaccines were up 6.1% to €184 million.
Sales of Sanofi Pasteur MSD (not consolidated), the joint venture with Merck & Co. in Europe, increased 9.0% (on a reported basis) to €175 million and 13.4% (on a reported basis) to €340 million in the second quarter and first half of 2016, respectively. In March, Sanofi Pasteur and Merck announced their intent to end their joint vaccines operations in Europe, Sanofi Pasteur MSD, to pursue their own distinct growth strategies in Europe. Sanofi Pasteur and Merck expect the project to be completed by the end of 2016, subject to local labor laws and regulations and regulatory approvals.
Animal Health(10)
Net sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
Companion Animal
493
+8.6%
1,022
+14.2%
Production Animal
232
+10.1%
463
+11.1%
Total Animal Health
725
+9.1%
1,485
+13.2%
of which Vaccines
205
+4.9%
417
+11.3%
of which fipronil products
169
-10.3%
350
-7.5%
of which avermectin products
142
+12.2%
312
+10.4%
In the second quarter, Animal Health sales were up 9.1% to €725 million driven by the success of NexGard family of products, Merial’s next generation flea and tick products for dogs, in the U.S., Europe and Japan.
Second-quarter sales of the Companion Animals segment increased 8.6% to €493 million boosted by the success of NexGard and NexGard Spectra which more than offset the decline in the Frontline family of products. HeartGard also contributed to growth in the Companion Animals segment.
Sales of the Production Animals segment increased 10.1% to €232 million in the second quarter reflecting strong performance of the Avian business in Emerging Markets as well as Ruminant business in the U.S. and Europe.
Aggregate Company sales by geographic region
Aggregate Sanofi sales (€ million)
Q2 2016
Change
(CER)
H1 2016
Change
(CER)
United States
3,118
+1.3%
6,084
+1.4%
Emerging Markets(a)
2,534
-0.5%
4,907
+1.7%
of which Latin America
698
-15.1%
1,269
-15.0%
of which Asia
804
+5.3%
1,637
+10.2%
of which Africa, Middle East and South Asia(b)
736
+10.3%
1,404
+11.0%
of which Eurasia(c)
270
+4.3%
529
+6.9%
Europe(d)
2,360
+3.3%
4,732
+2.5%
Rest of the world(e)
856
-12.3%
1,688
-12.8%
of which Japan
446
-24.4%
893
-24.9%
Total Aggregate Sanofi sales
8,868
-0.2%
17,411
+0.2%
World excluding U.S., Canada, Western & Eastern Europe (except Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico
India, Pakistan, Bangladesh, Sri Lanka
Russia, Ukraine, Georgia, Belarus, Armenia and Turkey
Western Europe + Eastern Europe except Eurasia
Japan, South Korea, Canada, Australia, New Zealand, Puerto Rico
In the second quarter, sales in the U.S. increased 1.3% to €3,118 million. The strong performance of the multiple sclerosis franchise (up 62.6%), rare disease franchise (up 12.3%) and Animal Health (up 4.6%) more than offset lower sales of the diabetes franchise (down 7.1%), Vaccines (down 2.3%) and the Auvi-Q impact.
(10) Merial is reported on a single line in the consolidated income statements in accordance with IFRS 5 (Non-current assets held for sale and discontinued operations). Sanofi will continue to manage and report the performance of Merial, which will remain an operating segment consistent with IFRS 8.
First-half sales in the U.S. increased 1.4% to €6,084 million.
Aggregate sales in Emerging Markets were down 0.5% to €2,534 million in the second quarter. Excluding Venezuela, Aggregate sales in Emerging Markets grew 6.7% driven by Diabetes (up 11.7%), Rare Diseases (up 28.2%), Vaccines (up 11.5%) and Animal Health (up 15.6%). In the Asia region, Aggregate sales were up 5.3% to €804 million in the second quarter. Over the quarter, sales in China increased 2.6% to €512 million; the strong performance of Pharmaceuticals (up 11.7%) was partially offset by lower vaccines sales (-84.9%). In Latin America, second-quarter Aggregate sales were down 15.1% to €698 million and up 5.7% excluding Venezuela driven by sales in Argentina, Colombia and Mexico. Aggregate sales in Brazil were down 3.3% to €280 million impacted by lower sales of Flu vaccines and Renagel. Aggregate sales in the Eurasia region increased 4.3% to €270 million driven by Turkey. Sales in Russia were down 12.6% to €110 million associated with the CHC business. In Africa, the Middle-East and South Asia, Aggregate sales were up 10.3% to €736 million sustained by the strong performance in Africa (up 16.6%). In the Emerging Markets, first-half sales increased 1.7% to €4,907 million. Excluding Venezuela, Aggregate first-half sales in Emerging Markets grew 9.7%.
Aggregate sales in Europe were up 3.3% to €2,360 million in the second quarter. The performance of Multiple Sclerosis (up 78.3%), Rare Diseases (up 10.7%) and Vaccines (up 34.9%) franchises was partially offset by lower sales of Established Rx products (down 3.0%) mainly impacted by generic competition to Renagel. In Europe, first-half sales increased 2.5% to €4,732 million.
Aggregate second-quarter sales in Japan decreased 24.4% to €446 million, impacted by generic competition to Plavix (down 59.1%). In Japan, first-half sales decreased 24.9% to €893 million.
R&D update
Consult Appendix 8 for full overview of Sanofi’s R&D pipeline
Regulatory update
Regulatory updates since the publication of the first quarter results on April 29, 2016 include the following:
In July, the Ministry of Health, Labor and Welfare in Japan granted marketing authorization for Praluent (alirocumab) for the treatment of uncontrolled low-density lipoprotein cholesterol in certain adult patients with hypercholesterolemia at high cardiovascular risk. The 300mg once-monthly dosing of Praluent was also filed in U.S. and EU.
In July, the file for the Marketing Authorization Application for sarilumab in Rheumatoid Arthritis was accepted for review by the European Medicines Agency (EMA).
In May, the Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) of the FDA recommended the approval(11) of the New Drug Application (NDA) for Adlyxin (lixisenatide) and for the fixed-ratio combination of basal insulin glargine 100 Units/mL and GLP-1 receptor agonist lixisenatide for the treatment of adults with type 2 diabetes. The fixed-ratio combination of basal insulin glargine and GLP-1 receptor agonist lixisenatide is undergoing FDA review, with decisions anticipated in August 2016. Adlyxin (lixisenatide) was approved in the U.S. at the end of July.
At the end of July 2016, the R&D pipeline contained 44 pharmaceutical new molecular entities (excluding Life Cycle Management) and vaccine candidates in clinical development of which 14 are in Phase III or have been submitted to the regulatory authorities for approval.
Portfolio update
Phase III:
In June, the results of the pivotal Phase III LixiLan-O and LixiLan-L clinical trials with the investigational titratable fixed-ratio combination of basal insulin glargine 100 Units/mL and lixisenatide in adults with type 2 diabetes were presented at the American Diabetes Association scientific Sessions. Both studies met their primary endpoints, demonstrating statistically superior reduction of HbA1c with the titratable fixed-ratio combination versus comparators (lixisenatide and insulin glargine 100 Units/mL, respectively).
(11) The members of the Advisory Committee voted 12-2 for an approval of LixiLan
In June, Sanofi and Regeneron announced that a one-year Phase III study, known as LIBERTY AD CHRONOS, evaluating investigational dupilumab met its primary and key secondary endpoints. In the study, dupilumab with topical corticosteroids (TCS) was compared to TCS alone in moderate-to-severe atopic dermatitis adult patients. Patients enrolled in the study were inadequately controlled by TCS with or without topical calcineurin inhibitor. Dupilumab with TCS significantly improved measures of overall disease severity at 16 and 52 weeks, when compared to placebo with TCS.
Based on the results of the FIRSTANA Phase III study comparing Jevtana (cabazitaxel) versus Taxotere (docetaxel) in chemotherapy-naïve metastatic castration resistant prostate cancer, the decision was made not to submit a first line indication for Jevtana as the results did not provide the level of benefit that is needed for claiming new indication. Jevtana currently has a second line indication and FIRSTANA was conducted as part of the post marketing commitment with the FDA.
Phase II:
SAR439684, a PD-1 inhibitor (alliance with Regeneron), entered Phase II in advanced cutaneous squamous cell carcinoma.
Phase I:
It has been decided not to pursue the development of SAR438544, a stable glucagon analog, in diabetes.
2016 second-quarter and first-half Aggregate financial results(12)
Business Net Income(12)
In the second quarter of 2016, Sanofi generated Aggregate sales of €8,868 million, a decrease of 4.3% (down 0.2% at CER).
First-half Aggregate sales were €17,411 million, down 3.2% on a reported basis (up 0.2% at CER).
Aggregate other revenues decreased 10.4% to €173 million and include VaxServe sales of non-Sanofi products (down 19.1% to €89 million) following the change in presentation as of January 1, 2016(13). At CER, Aggregate other revenues were down 8.3%. First-half Aggregate other revenues decreased 12.1% to €328 million of which €172 million were generated by VaxServe (down 18.1%)
Aggregate gross profit was €6,276 million, down 3.8% and up 0.2% at CER in the second quarter. The Aggregate gross margin ratio improved by 0.4 percentage points to 70.8% versus the second quarter of 2015. The positive impact from the multiple sclerosis franchise, pharmaceuticals in China and industrial productivity largely offset the negative impact of U.S. Diabetes, and Plavix generic competition in Japan. Sanofi expects its 2016 Aggregate gross margin ratio to be above 69% and below 70% at CER. In the first half of 2016, the Aggregate gross margin ratio improved by 0.3 percentage points to 70.5% versus the first half of 2015.
Second-quarter Aggregate Research and Development expenses were €1,325 million, an increase of 2.7%. At CER, Aggregate R&D expenses were up 4.6% reflecting in particular the new immuno-oncology alliance with Regeneron. In the first half of 2016, the ratio of Aggregate R&D to Aggregate sales was 1.2 percentage points higher at 15.0% compared to the same period of 2015.
Aggregate selling general and administrative expenses (SG&A) increased 0.1% to €2,650 million in the second quarter. At CER, Aggregate SG&A was up 3.9% mainly reflecting the U.S. launch expenses of Praluent, and pre-launch costs for sarilumab and dupilumab. The ratio of Aggregate SG&A to Aggregate sales increased 1.3 percentage points to 29.9% compared with the second quarter of 2015. In the first half of 2016, the ratio of Aggregate selling and general expenses to Aggregate sales was 0.8 percentage points higher to 29.1% compared with the first half of 2015.
Second-quarter Aggregate other current operating income net of expenses was -€23 million versus -€20 million for the same period of 2015. In the second quarter of 2015, this line included a foreign exchange loss of €34 million booked in connection with Sanofi‘s Venezuelan operations. First-half Aggregate other current operating income net of expenses was €56 million versus -€87 million in the first half of 2015.
The Aggregate share of profits from associates was stable at €30 million in the second quarter. The Aggregate share of profits from associates included Sanofi’s share in Regeneron profit as well as Sanofi’s share of profit in Sanofi Pasteur MSD (the Vaccines joint venture with Merck & Co. in Europe). In the first half, the share of profits from associates was €53 million versus €61 million for the same period of 2015.
Aggregate non-controlling interests were -€23 million in the second quarter versus -€29 million in the second quarter of 2015. First-half non-controlling interests were -€50 million versus -€62 million for the same period of 2015.
Aggregate business operating income was €2,285 million, down 11.0%. At CER, Aggregate business operating income decreased 5.8%. The ratio of Aggregate business operating income to Aggregate net sales decreased 1.9 percentage points to 25.8% versus the same period of 2015. First-half Aggregate business operating income was €4,669 million, down 5.9% (or down 1.6% at CER). In the first half of 2016, the ratio of Aggregate business operating income to Aggregate sales decreased 0.8 percentage points to 26.8%.
Net Aggregate financial expenses were €76 million in the second quarter versus €112 million in the second quarter of 2015. In the second quarter of 2016, this line included a limited capital gain on a minor asset sale. First-half net financial expenses were €194 million versus €209 million in the first half of 2015.
Second-quarter and first-half 2016 effective tax rate (including Animal Health) were 24.0% compared with 25.0% in the same periods of 2015.
Second-quarter business net income(12) decreased 8.7% to €1,680 million (down 3.3% at CER). The ratio of business net income to Aggregate sales was 18.9%, a decrease of 1.0 percentage points compared with the second quarter of 2015. First-half business net income decreased 4.6% to €3,402 million, (stable at CER). The ratio of business net income to net sales decreased 0.3 percentage points to 19.5% compared to the first half of 2015.
(12) See Appendix 4 for 2016 second-quarter and 2016 first-half Consolidated income statement; see Appendix 10 for definitions of financial indicators, and Appendix 3 for reconciliation of business net income to IFRS net income reported
(13) See page 7, chapter on Vaccines
In the second quarter of 2016, business earnings per share(12) (EPS) was €1.31, a decrease of 7.1% on a reported basis and 2.1% at CER. The average number of shares outstanding was 1,286.8 million in the second quarter of 2016 versus 1,305.9 million in the second quarter of 2015. In the first half of 2016, business earnings per share(12) was €2.64, down 3.3% on a reported basis and up 1.5% at CER. The average number of shares outstanding was 1,287.6 million in the first half versus 1,307.2 million in the first half of 2015.
2016 guidance
Sanofi continues to expect 2016 Business EPS to be broadly stable at CER, barring unforeseen major adverse events. In addition, the currency impact on 2016 full-year business EPS is estimated to be around -4%, applying June 2016 average rates to the two remaining quarters of 2016.
From business net income to IFRS net income reported (see Appendix 3)
In the first half of 2016, the main reconciling items between business net income and IFRS net income reported were:
A €877 million amortization charge related to fair value remeasurement on intangible assets of acquired companies (primarily Aventis: €276 million and Genzyme: €431 million) and to acquired intangible assets (licenses/products: €68 million). A €433 million amortization charge on intangible assets related to fair value remeasurement of acquired companies (primarily Aventis: €136 million and, Genzyme: €213 million), and to acquired intangible assets (licenses/products: €34 million) was booked in the second quarter.
These items have no cash impact on the Company.
An impairment of intangible assets of €52 million recorded in the second quarter linked to small products. This item has no cash impact on the Company.
A charge of €67 million (of which €38 million in the second quarter) reflecting an increase of Bayer contingent considerations linked to Lemtrada (charge of €41 million, of which €12 million on the second quarter) and CVR fair value adjustment.
Restructuring costs of €627 million (including €127 million in the second quarter mainly related to transformation in Europe and North America).
A €548 million tax effect arising from the items listed above, comprising €307 million of deferred taxes generated by amortization charged against intangible assets, €210 million associated with restructuring costs, €16 million associated with impairment of intangible assets and €15 million associated with fair value remeasurement of contingent consideration liabilities The second quarter tax effect was €210 million, including €151 million of deferred taxes generated by amortization charged against intangible assets, €39 million associated with restructuring costs and a charge of €16 million associated with impairment of intangible asset (see Appendix 3).
In "Share of profits/losses from associates and joint-ventures", an income of €54 million net of tax (which included a charge of €16 million related to second quarter of 2016), mainly relating to the share of fair-value re-measurement on asset and liabilities of associates and the share of amortization of intangible assets of acquired associates and joint-ventures. This item has no cash impact on the Company.
A tax of €113 million on dividends paid to shareholders of Sanofi.
In Animal Health items, a net expense of €13 million (which included an income of €58 million related to the second quarter of 2016), mainly relating to a change in deferred tax charge resulting from taxable temporary differences relating to investments in subsidiaries since it is likely that these differences will reverse.
(12) See Appendix 4 for 2016 second-quarter and 2016 first-half Consolidated income statement; see Appendix 10 for definitions of financial indicators, and Appendix 3 for reconciliation of business net income to IFRS net income reported
Capital Allocation
In the first half of 2016, net cash generated by operating activities decreased by 17.6% to €2,541 million after capital expenditures of €700 million and an increase in working capital of €753 million. This net Cash Flow has contributed to finance a share repurchase (€1,403 million), dividend paid by Sanofi (€3,759 million), acquisitions and partnerships net of disposals (€663 million) and restructuring costs and similar items (€347 million). As a consequence, net debt increased from €7,254 million at December 31, 2015 to €11,001 million at the end of June 2016 (amount net of €6,076 million cash and cash equivalents).