EuroBusiness Media (EBM): Sanofi, a global and diversified healthcare leader, reports results for the second quarter of 2014. Chris Viehbacher, you are the CEO of Sanofi, welcome. What are your comments on the group's performance in the second quarter of 2014?
Chris Viehbacher: Back in 2013 we noted that we were getting through the patent cliff and really from September onwards we expected to grow. And when you look at the second quarter of this year, this is just another continuation of that growth strategy. So group sales were up 6.4%, driven largely by Genzyme, which were up 29% and Diabetes up over 16%. Our growth platforms now represent 76% of our total business. They were up 14.5%. So you can see that the growth platforms have really become the mainstay of the company. So if we couple good sales with tight cost control, we were able to grow our earnings per share by 13.4%. Cost control is important, because on the one hand we continue to seek economies, but we are also entering into an investment phase, so I think we’ve been able to do a pretty good job of resource allocation. What’s really exciting though is that Research & Development is now starting to become a major factor for Sanofi’s future. Just this week we announced results for 9 phase III clinical studies for our new LDL-Cholesterol medicine. All of those results demonstrate that we are going to be able to lower cholesterol really to unprecedented levels. We have a new Dengue vaccine, Dengue is a huge problem in the Southern Hemisphere. This is the first Dengue vaccine to come along. We had our first phase III studies, which show that we can make a real difference to healthcare and potentially one day eliminate Dengue. Atopic Dermatitis is a disease that is very difficult for patients to live with. Here again, we had some pretty spectacular phase IIb results. So I think when I look at this, we’ve got potential approval of a new oral medicine for Gaucher’s disease, we are awaiting an FDA decision on a new multiple sclerosis medicine with Lemtrada™, we have filed a new Diabetes medicine called Toujeo®, so there’s an awful lot going on with new medicines and I think that’s going to play an ever greater role in Sanofi’s future.
EBM: At the half-year mark, can you confirm your full guidance?
Chris Viehbacher: We had a very good performance in the first half and as a result, we have adjusted slightly our guidance. Now, obviously we live in a complicated world, when we look at what’s going on around with different events in different countries and particularly we’ve also seen in the pricing and payer environment in the US an increasing competitive situation. Nonetheless, at the beginning of the year we had announced earnings per share guidance of a growth of about 4 to 7% and we have now adjusted that to expecting earnings per share growth for the year of about 6 to 8%.
EBM: In Diabetes, what is your update on the competitive landscape surrounding Lantus®?
Chris Viehbacher: Diabetes is clearly one of the core growth drivers of our company and results did not disappoint in the second quarter. We were up 16% that includes a very solid 20% growth in the US and 16% growth in emerging markets. Even in Europe we were able to grow at mid-single digits. This is obviously important for the here and now, but we are also thinking about the next generation of our Diabetes franchise and we have filed in the EU, in the US and in Japan, a new medicine called Toujeo®. Toujeo® offers the same level of efficacy and control of Diabetes as Lantus® but with less risk of hypoglycaemia, particularly at night. Now this is very important, because hypoglycaemic fear is one of the main reasons that people hesitate to use insulin. So by being able to offer a new medicine with a flatter PK/PD profile we believe we are going to be able to offer much more comfort in the use of insulin while retaining the same level of efficacy and safety that has made Lantus® the gold standard over many years. We are also rolling out Lyxumia®, which is a GLP-1 and we have also begun phase III studies of a new combination between Lyxumia® and Lantus® that we are calling LixiLan. So we are already thinking about the next generation, even while realising a terrific performance today.
EBM: Can you update us on the performance of Genzyme in rare diseases and multiple sclerosis for the first half of 2014?
Chris Viehbacher: Genzyme really was a transformational acquisition for us. It really made us the leading Life Sciences employer in a key ecosystem in the world, in the Boston Cambridge area and it’s offered us a huge opportunity for growth. We refocused Genzyme between rare diseases and multiple sclerosis. The first task was to restore the productive capability of Genzyme and that you really see continuing to grow at solid double digits. Fabrazyme®, for example, last year managed to regain its position in the United States, but is now gaining market share in the rest of the world. It grew an amazing 44% in the quarter. So all of our rare disease businesses are going very well. But the new part of Genzyme is the multiple sclerosis franchise. We saw last year the launch of Aubagio®. Aubagio® has grown strongly in this quarter. It offers a new oral alternative for people on therapy. We also launched Lemtrada™ in Europe and this is a completely different type of proposition. Lemtrada™ is a medicine that really is going to offer an unparalleled level of efficacy for multiple sclerosis patients. We are still awaiting an FDA decision for Lemtrada™ in the US, but when I see growth of 29%, it really looks like the Genzyme model is really working. Genzyme is a very patient-centric company, a very patient-centric team. This is a part of a culture that we’re trying to build throughout Sanofi. So I’m very proud of the performance of our Genzyme team this quarter.
EBM: Is the return to supply in vaccines proceeding on track and how are things shaping up for your Dengue vaccine?
Chris Viehbacher: Vaccines was a difficult aspect of our 2013 results. We had a difficulty with supply. Vaccines are inherently difficult to make so supply shortages unfortunately are part of doing business in this area. Nonetheless, at the end of last year, we had got that supply situation back under control and we have actually seen a nice return to supply in the first half of this year. Now, the growth hasn’t been there because it takes a long time to make vaccines, and so as you come out of the supply shortage it takes a while to get the whole supply chain filled. Nonetheless, we would expect very solid double digit growth in the second half for vaccines. Two things that are very exciting in vaccines, the first is in flu. Here Sanofi Pasteur I think has been very good. They have taken the standard flu shot and really tried to rethink that. So we’ve come up with a flu idea. This is a means of administering the flu vaccine without the needle that many people are afraid of. So it’s a very short needle called a flu ID. Then of course, your immune system starts to weaken as you grow older. So we actually developed a stronger form of the flu shot for those over the age of 65. And finally, one of the curious things about flu is that, of course, the flu shot needs to change every year because the flu that’s circulating is different every year. And typically, you had three strains of flu, but that didn’t really seem to offer enough coverage, so with the CDC it was agreed that we would develop a quadrivalent, so we would protect against four strains of flu. So we have been able to now create a portfolio of flu vaccines and that has really cemented Sanofi Pasteur’s position as a leader in the flu vaccine business in the United States. We have over 50% of the market and again we were the first ones out to be able to supply that. So flu is a very core part of that vaccines franchise. And of course, what’s really exciting is the ability now to contemplate and plan for the launch of the Dengue vaccine. Unlike in the pharmaceutical world, you only launch a new vaccine in the entire vaccines industry about every ten years. There’s been no real new flu vaccine launched since the HPV vaccines over a decade ago. So this is a big deal when you launch a new vaccine. Dengue is a huge problem in the Southern Hemisphere. We have been able to demonstrate over 50% protection. Now, why does that not sound as strong as it really is? Because the Dengue shot is not just there to protect the individual. You actually, with vaccines, protect people by reducing the number of people who are infected. These mosquitos go and bite one person who is infected and then go and bite another who is not infected. The fewer the people there are who are infected, the less likely it is that you are going to get Dengue. And it’s for this reason that Dengue is actually concentrated in cities, because the mosquitos don’t fly very far between people. So when you look at cities like Singapore, Kuala Lumpur, Sao Paulo, all of these cities really are looking to this Dengue vaccine as a way of reducing the burden on hospitals, and in fact this Dengue vaccine demonstrated a 67% reduction in hospitalisation. And Dengue comes in different forms as a haemorrhagic fever associated with this and here we were able to demonstrate that we are able to reduce that by almost 89%. This is a huge public health opportunity, but also a huge opportunity for Sanofi Pasteur.
EBM: Can you give us your update on alirocumab in cholesterol treatment?
Chris Viehbacher: First of all, cardiovascular disease, despite many years of research and many new product launches, is still one of the leading causes of death. And one of the four major factors behind cardiovascular disease that can be prevented is excessive LDL levels, which are sometimes known as bad cholesterol. Now, of course, statins 20 years ago completely revolutionised cardiovascular healthcare in that they can reduce that LDL cholesterol by 15 to 20% and this has made a big difference in the lives of many. However, when you actually look at the fact that so many people are still dying needlessly from heart attacks and other forms of cardiovascular disease, one can see that there is still an unmet need. Now many of the people who suffer from cardiovascular disease are going to be fine on a statin. But there are at least three populations of people that I think can really benefit from that. First of all people that have already had a cardiovascular event such as a heart attack. Those people, if they are still suffering from high cholesterol, despite taking statins and other medicine, and perhaps they have other cardiovascular risk factors such as hypertension or diabetes, they could potentially really benefit from a medicine that can reduce their LDL cholesterol, on top of a statin by another 50 to 60%. There is a second group of people who genetically, despite taking statins, have too high a cholesterol level. One of the things we know is that high cholesterol and the risk of a cardiovascular event such as an MI are completely correlated. So if we can help people who have genetically too high a cholesterol, known as familial hypercholesterolemia, we can help them to reduce their cholesterol, we are going to make a big difference as well. And of course, despite the benefit of statins, not everybody can tolerate statins. So there are a group of people who either don’t take a strong enough dose of statin or don’t take it at all because of the side effects, so here is an alternative for those people. So we see this as making a major healthcare benefit for many people who are inadequately controlled on statins. Now, we have just announced results from 9 clinical phase III studies, that’s in addition to a further 10th study that we already announced. All of those met their primary end points. And beyond that though, in a long-term safety study of over 2000 patients, we were actually able to see an imbalance between some of the safety events, this is a study that’s not meant to determine outcomes, but we saw in analysing side effects that we had actually fewer cardiovascular events and deaths in the alirocumab arm compared to placebo. Now this is an experimental analysis at this point, it’s not the final analysis and there is a major health outcome study that will look at these very same end points over time. But I think it’s encouraging in showing that actually, not only can we reduce LDL, but there’s the first signal that potentially we’re going to be able to affect outcomes. So we expect to file by the end of this year. We have also just announced that we have acquired, with our partner Regeneron, a voucher that allows the company to request from the FDA an accelerated review. So if we are able to file by the end of this year and if we are able to achieve an accelerated review, that would potentially allow the company to launch the product some time in late 2015.
EBM: Has the performance of Animal Health recovered after a challenging few quarters?
Chris Viehbacher: It has. We are very pleased to see our Animal Health business return to growth this quarter. As many of our investors know, our Animal Health business is divided into two parts, there is a Pets business and there is what is called Production Animal business. The Pets business has been completely dominated by the very successful brand, Frontline®, for many years. This is the only brand in the entire Animal Health market that has achieved $1 billion. By far and away the most important product in this segment. Of course it’s been off patent for a few years and we have been losing slightly market share. But really what happened in the past was we had a change in the seasonality, so we’ve had two years of seasons where there were a lot of fleas and ticks, but 2013 was a real challenge because the colder, damper weather meant that there weren’t so many fleas and ticks around and so we actually saw a decrease in the overall market, where the prior two years it had been growing. Well, this year weather has been kinder to us and unfortunately we see more fleas and ticks out there and of course that means our dogs and cats need to be protected against that. So one of the big successes is that we have been able to stabilise Frontline® again instead of seeing an erosion in that. Now, of course, because it’s off patent, it’s extremely important for us to be thinking about the next generation of product and there we had a very successful launch of a new product called Nexgard™. Nexgard™ is a tremendous improvement over Frontline® because whereas Frontline® is a topical product where you put drops on the back of an animal’s neck, this is just a beef flavoured chew that you can feed your dog once a month, and dogs love beef flavoured chews, so it’s a very easy-to-administer product and that’s been off to a tremendous success. In our Production Animal business, we are very strong in poultry and that’s been going very well. We had some small setbacks in some of our biologics business but in general our Animal business is off to a strong start for this year and should be able to grow now going forward.
EBM: What news do you have from the recent OTC launch of Nasacort® and how important is your collaboration with Lilly to make Cialis available without a prescription at some point?
Chris Viehbacher: OTC is an extremely important part of Sanofi’s business. Why is that? Brands live for decades and this is exactly the type of long-term revenues a company like ours, which undertakes so much risk in R&D, needs in order to be able to have the financial stability to make those kinds of risky investments. The other thing I like about the OTC business is this is one of those businesses where we are in touch regularly with actual consumers. And that’s important for a company like ours, to never forget the people aspect of our business. So how is the business doing? Well, we are actually growing this business incredibly well, we are growing faster than anybody in fact in this segment - 9.2% in the quarter. Now, one of the most interesting parts of this market is taking products which have been prescription to OTC category. So there’s usually a large reservoir of prescriptions in the prescription market and suddenly you offer the convenience of being able to go to your local drug store and get these products. So the latest of this is Nasacort®. Now Nasacort® has been a long prescription product, very successful, and now conveniently available in the pharmacy. And it builds upon our allergy franchise because we already had the very successful launch of Allegra® a couple of years ago. So now on the pharmacy shelves you will find Allegra® and Nasacort® and that’s really helped to drive a lot of the growth of our global franchise. Following on from that, what other switches can you expect from us? In this past quarter we were able to sign a new agreement with Lilly for the OTC rights for Cialis. Cialis has global sales, today, of $2.1 billion and now we have the rights from Lilly to launch Cialis in the OTC market in the United States and in Europe. This is going to be the first probably in its category, it’s a very exciting opportunity for us and another opportunity to continue the very strong growth within our OTC franchise. Our emerging markets business also continues to grow well, so our OTC business, even though it is there to provide those long-term cash flows, is also contributing nicely to our growth profile.
EBM: And finally, what are the next major R&D pipeline news-flow items to watch for?
Chris Viehbacher: First of all, I think we have to be honest about where we have been as a company. If I talk to many of our investors, yes, we have done a great job of turning around this business, we have built the growth platforms, we’ve stabilised the business after the patent cliff, but most of our investors have not yet really associated Sanofi with really outstanding research and development and that, I think, is now really going to start to change. Not only have we announced these very solid results for our new cholesterol lowering medicine, we are going to be able to launch a major new medicine globally every six months for the next four years. There has been a real revolution in our research and development, everything that we have been launching up to now are things that we inherited from the past. Alirocumab, if you like, is really the first of a new generation of products that are coming along. We have Toujeo® that has been filed in the EU and the US. This offers a whole new generation of insulin protection for patients. We have Cerdelga®. This is an oral form of treatment for Gaucher’s disease. This is a disease where patients begin treatment often from childhood, infusions every two weeks. By being able to offer an oral therapy for adults at least to start, this will be much more convenient for many patients than the infusions. And what’s actually quite interesting is the patient insight, because the ability to have a rare disease and simply solve it by taking a pill has been described to us as patients feeling again “normal”, so this is a nice opportunity for us. We are also expecting a decision later this year on Lemtrada™. Now, Lemtrada™ offers a much different profile on efficacy than any other product in the market place. Phase III results demonstrated against an active comparator, against the standard of care which is Rebif®, a 50% reduction in relapses and in some patients we actually saw some reduction in physical handicap. This product has been launched in Europe, it has been approved in 31 countries and we are now just waiting for the FDA decision. But it’s a whole new area for Genzyme, the successful launch of Aubagio® when coupled with Lemtrada™ means that we are actually going to see a second leg of growth in Genzyme on top of its already successful rare disease business. Now, behind that there is a whole series of new products coming along. Our partnership with Regeneron is extremely important. We signed a new partnership with Alnylam in RNA interference. I think that our open innovation concept of being able to use Sanofi’s competencies with many external partners is paying off, because I think we’ve got an extraordinarily strong pipeline and I think that’s going to drive an awful lot of growth for Sanofi going forward.
EBM: Chris Viehbacher, CEO of Sanofi, thank you.
Chris Viehbacher: Thanks Katherine.
