LONDON - Sanofi-Aventis CEO Chris Viehbacher appeared uncomfortable discussing the expected timing of generic competition to Lovenox (enoxaparin) during a Feb. 10 earnings call.

Lovenox is Sanofi's second-largest product, with sales of about $4.1 billion last year, which amounted to an 8.8 percent increase. But generic competition is expected soon and, of course, would alter the drug maker's financial picture. And how soon this will happen isn't clear.

As a result, this great unknown made it difficult for Viehbacher to offer financial guidance for 2010. So Sanofi is not going to quantify the impact of generic competition to Lovenox - instead, the drug maker says it expects to grow EPS this year by 2 percent to 5 percent without taking into account potential generic competition to its blockbuster low molecular weight heparin product.

As Viehbacher pointed out, it was not only the timing of generic competition that was unknown. Another rub - it will also matter whether a generic is judged to be substitutable or not substitutable, or if just one or several generics are approved.

Sanofi has told regulatory authorities that it believes much more clinical data is required to assess the safety and efficacy of generic Lovenox, which is a biologic product, than with chemical-substance generics.

What might also have been preying on Viehbacher's mind was the unexpected generic competition that arose during 2009 to Eloxatin (oxaliplatin) in the U.S. and to Plavix (clopidogrel) in Europe. Consequently, U.S. sales of Eloxatin declined by 37.2 percent to roughly $930 million in 2009, compared with 2008, and Plavix sales in the EU declined by 10.4 percent to nearly $2.1 billion.

Pandemic Flu Vaccine Boost

Last year, Sanofi's sales increased by 5.3 percent at constant exchange rates to about $40.3 billion. Adjusted EPS, excluding certain items, increased by 13.1 percent to reach about $8.92, while net income totaled $11.7 billion, a 17.9 percent increase.

Analysts at Ambrian noted the results were close to consensus, and a fraction higher than company guidance, while Citi analysts thought they were slightly weaker than expected but nevertheless on track.

Like other companies with pandemic flu products, the company's growth during 2009 was boosted by sales of its pandemic flu vaccine, which totaled about $639 million, while sales of its seasonal influenza vaccines reached $820 million. Despite some countries cancelling their pandemic flu vaccine orders, Viehbacher still expects significant demand for these products in the current year.

Initial sales of the anti-arrhythmic, Multaq (dronedarone), were reported to be promising, amounting to $34 million in the year. The product was launched in Germany, its first EU market, in January.

Externalization Is Key

When Viehbacher took over at Sanofi-Aventis last year, he said he found there were not enough products in R&D to sustain the company over the long term. After a review, more than 30 R&D projects have now been terminated and 60 percent of the portfolio features biologics or vaccines.

More important, Viehbacher claimed, there has been a massive cultural change over working in partnerships with other companies. This is in keeping with moves made by many of Sanofi's peers, who have also realized that innovation resides more often than not in smaller companies and biotech.

In fact, 55 percent of its development portfolio is now from external sources. Sanofi invested $9 billion in 33 partnerships and acquisitions during 2009. Currently, the drug maker is implementing a new R&D organization in which 11 management layers have been reduced to six, and "scientists have been placed in scientific jobs, not in management." This will feature "patient approaches and entrepreneurial units." R&D spending, meanwhile, declined 7 percent in 2009 to $1.6 billion.

However, the development of high potential late-stage pipeline products is being accelerated. Lixisenatide , a GLP-1 agonist, is in Phase III trials, and a combination of lixisenatide with Lantus (insulin glargine) is in Phase I. A new taxoid anticancer, Jevtana (cabazitaxel), is being filed in a rolling submission for the second-line treatment of prostate cancer in the U.S., and an EU filing is expected in the second quarter of this year.

BSI-201 , a potential first-in-class PARP inhibitor, which Sanofi obtained in 2009 as part of the BiPar Sciences acquisition, is in Phase III trials in metastatic triple-negative breast cancer. This type of breast cancer is virtually untreatable, Viehbacher noted. BSI-201 is also in Phase III trials in non-small cell lung cancer, and in Phase II trials in ovarian cancer.

Like other big pharma companies, Sanofi execs highlighted the company's diversification into different market segments, like consumer health care, and into emerging markets, as a means of protecting it from the volatility of the prescription pharmaceuticals segment, with its patent cliffs and the like.

In 2009, consumer health sales totaled $1.9 billion, an increase of 26.8 percent over the previous year. It is in this segment where Sanofi has just completed its tender offer for Chattem. Before this, Sanofi did not have a U.S. presence in the OTC market, and the acquisition will allow it to switch products like Allegra (fexofenadine) to OTC status there - a U.S. filing to do exactly that is expected in the first quarter of this year ('¹ Also see "Sanofi-Aventis Will Enter U.S. OTC Market By Paying $1.9 Billion For Chattem" - Pink Sheet, 21 December, 2009.).

Emerging Markets

Although other big drug makers, such as GlaxoSmithKline, also claim to have an emerging market focus, Sanofi believes it has a leadership advantage. It has been in India for more than 50 years and was the first foreign company in China, which means it has local management and good contacts with the authorities. In 2009, sales in emerging markets rose by 19 percent to $10.2 billion, and Sanofi has also just entered into a joint venture with the Chinese firm, Minsheng Pharmaceutical Group ² Also see "Sanofi Expands Consumer Health Reach In China With Minsheng VMS Joint Venture" - Pink Sheet, 3 February, 2010.).

Emerging markets are one place where having a long "tail" of small products is not as unfashionable as it is always made out to be. Having a portfolio of brands and products helps a company's message and allows better penetration of some of these emerging markets, Viehbacher said.

In animal health, Sanofi execs indicated a decision on merging its Merial business with that Merck's Intervet/Schering-Plough would be taken within the next few weeks.

[Editor's note: Keep up with European biopharma news with free email alerts at ³ EuropharmaToday.com]

- John Davis ( ⁴ jdavis@elsevier.com )

Unknown Timing of Lovenox Generics Complicates Sanofi-Aventis' Outlook

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