EuroBusiness Media (EBM): Sanofi-aventis, one of the world’s largest diversified healthcare companies, reports results for the third-quarter of 2010. Joining me now is Jérôme Contamine, Chief Financial Officer of sanofi-aventis, welcome. What are your comments on your third-quarter earnings? Particularly on your performance in Emerging Markets?
Jérôme Contamine (JC): First of all, good morning Katherine. Our third-quarter results have shown good resilience during a quarter when we have suffered from generic competition. As we all know, Lovenox® has got a generic competitor since the 23rd of July, and despite that our sales have been up by 5.7% on a reported basis and slightly down, -1.7%, on a constant exchange rate basis. And also, profits have been up 8.6% on a reported basis and slightly down, again, on a constant exchange rate basis. This shows that while we have lost more than 500 million euros during the quarter of sales from generic competition, we have basically been able to replace these sales through our growth platforms, both in terms of sales and also in terms of profit. To speak specifically on your question about Emerging Markets, Emerging Markets are clearly a driver of growth, of long-term growth, for sanofi-aventis that now represents close to 30% – precisely 29.6% – of our overall sales during the quarter and they have been growing purely organically by 13%, which is a very good performance. With maybe a specific notice for Brazil and Russia which both have been above 20% growth.
EBM: And is there any chance of upgrading your 2010 guidance?
JC: You remember that, when we got the information that we would get a generic of Lovenox® in July, we gave a guidance that our net results for the full year should evolve between 0 and -4%. Thanks to the good results of the Q3 and the visibility we have now for the end of the year, we have slightly revised upwards our guidance and we will post an EPS, on a constant exchange rate basis, moving from 0 to 2% as compared to 2009.
EBM: Lovenox® generic sales in the US were relatively strong in Q3 – what are your comments on the pace of sales erosion in the US?
JC: So, as we remember, we’ve got a generic competitor in the US since the 23rd of July.The overall sales of Lovenox® for the third-quarter have been 589 million euros, declining 26%, but out of which more than half is outside the US. Outside the US, we are continuing to grow – around single digit growth – both in Europe and also in Emerging Markets. When it comes to the US, we have basically lost half of our sales, and I would say, so far, we are keeping some significant market share in the hospital segment, while we have lost more on the retail market. And I would say that we are continuing to post, on a monthly basis, around half of the sales we were posting before the generic competition.
EBM: Can you give us an update on recent launches? What is the ramp up of Jevtana® in Q3 compared to expectations? And are the latest Multaq® figures satisfying?
JC: Well, we are very pleased with the launch of Jevtana®. Jevtana® was launched at the beginning of July after an approval which took place in the US on the 17th of June, after priority review. Jevtana® is a drug for patients who suffer from prostate cancer, to be used as second-line therapy after docetaxel-based treatment. This is the only drug available for this category of patients. We have posted 41 million euros of sales over the third-quarter, which is beyond our own expectations, which makes me comfortable that we could beat the 60 million euros of sales for the first year that we have just given as guidance at the time of our Oncology Seminar at the end of September. Now, regarding Multaq®, Multaq® is available now in 23 countries in the world. We have launched it in most of the European countries over Q3 and the beginning of Q4. The launch in France is precisely taking place this week. The performance in Europe is good, particularly in Germany. And when it comes to the US, we have posted 35 million euros of sales during Q3.
EMB: Do you think that your seasonal flu vaccine sales this season are set to benefit from a greater general awareness, following last year’s pandemic?
JC: Yes, probably, specifically in the US, but we are also launching other versions of flu vaccines in the US, such as the Fluzone® High Dose, which has just been launched. So as you’ve noticed, the overall sales of our vaccine division are up 14% as compared to last year, if I exclude H1N1 precisely, which is quite a good performance and definitely driven by seasonal flu sales.
EBM: Eloxatin® sales in the US seem to be picking up faster than expected – why is that and how do you project sales to evolve in the next few quarters?
JC: Well, due to a judgment which was passed during the first half, generic providers of Eloxatin® have been asked to cease selling since the end of June. We are now in the period where we see a workdown of inventories. Nevertheless, we are starting to see a pick-up of sales of Eloxatin® in the range of 20 million euros per month in the US as compared to a much lower level before this situation. So we should see some pick-up of sales of Eloxatin® over the second half of the year and clearly even more next year. And generic competitors will not be allowed to sell Eloxatin® generics until August 2012.
EBM: What would you say about the outlook for your new diabetes drug lixisenatide given the recent positive Phase III results you reported and the setbacks affecting potential competitor drugs Bydureon® and taspoglutide?
JC: You are right to say that we have published two positive results from our GetGoal Phase III studies which both demonstrate good efficacy in terms of glycemic control and also a good safety profile. There are some other studies that will be published next year. Well, it’s fair to say that, while some months ago lixisenatide was not really on the radar screen of analysts, the difficulties that the once-a-week GLP-1s are now facing quite suddenly gives some more visibility of potential as well for our own GLP-1 once-a-day. So we are reasonably positive now and optimistic on lixisenatide, and we are planning to file it in Europe in the second half of 2011 and in the US in the second half of 2012.
EBM: Following the positive Phase III results for teriflunomide, is it slated to become an important drug, and within what timeframe?
JC: The results of our Phase III study TEMSO have been presented to the recent ECTRIMS (European Committee for Treatment and Research in Multiple Sclerosis) conference in Gothenburg, which has shown, by the way, a lot of innovation in this area of multiple sclerosis. And these results, which show a 31% relapse rate reduction and a good safety profile, have been, I think, well received and drew a lot of attention from the community of this disease. We also have two Phase III studies, TOWER and TENERE, whose results will be available in 2011. And we just launched the TERACLES study which will study the use of teriflunomide in conjunction with interferon beta.
EBM: Some of your competitors say that they are seeing a major impact from the healthcare reforms in the US and price cuts in Europe. How difficult is the situation from your own point of view?
JC: Well, let’s say, first of all, that we are diversified; we have the chance to have 30% of our sales outside either the US or Western Europe. We also have vaccine sales which are not really facing exactly the same price cuts. So this diversification mitigates the risk and the impact of these reforms on sanofi-aventis. When it comes to the US, we announced at the time of Q1 that the impact should be in the range of 190 million dollars for the first year. This was already planned and budgeted, so it’s not so much of a surprise. And if we look forward, in the mid run we should also benefit from the healthcare reforms if you think that there would be more patients having access to reimbursement and coverage, which should be favourable to sales and volumes. When it comes to Europe, it’s fair to say that we have seen a certain number of price cuts all over Europe during Q2 and Q3. I would say we are used to that in Europe; we are one of the largest European companies and for four years now we have seen price cuts happening. This year, clearly, the most stringent and the most important have been in Greece or in Spain. And we are trying to adapt our organization to that, i.e. both cut our costs and revise our sales and marketing model in order to maintain the profitability of our European operations.
EBM: And what’s your update on your ongoing cost-cutting efforts?
JC: You remember that we announced 2 billion euros of savings from 2008 to 2013 to be achieved over this period. Already at the end of 2009 we announced that we had achieved more than 600 million euros, which was ahead of our schedule, and we said that we should at least reach 1 billion euros of total savings in 2010, as compared to 2008. So I’m pleased to say that the programme is doing well and that we should be able to achieve a bit more than 1.2 billion euros of recurring savings if I compare 2010 to 2008.
EBM: Between the US approval of a generic of Ambien CR® this month, and the possible entry of Taxotere® generics in November in the US and Europe, could you provide us with an overview of the patented products situation as we head into 2011?
JC: Well, as you remember, at the beginning of 2009 we clearly announced the impact of the patent cliff and explained how we planned to tackle this patent cliff issue from 2008 to 2012. Now, at the end of 2010, we can say that a chunk of it is already in our figures; we will have seen the generification of Lovenox® as well as Ambien CR®, and we should see a generification of Taxotere®, in particular in the US, but also in Europe, by the end of 2010. So a large part of the patent expiries and the impact of that in our accounts – gross sales and profit – will already have hit our figures in 2010. Yes, there will be a full impact in 2011 of these losses of sales and losses of profit. But on the other hand, if you look at 2010 figures, you will see how we have been able to cope with that through the growth of our growth platforms, and also through some acquisitions, and through the cost reduction and cost cutting that we have embarked upon since 2008. So let’s say that when it comes to 2011, we have now a high visibility on where we are heading. We are going to lose more sales from the full-year impact of the expiry of patents – of Lovenox®, Taxotere® and Ambien CR®. But on the other hand, we have now the base to continue to rebuild and to continue, through growing platforms and also some acquisitions, to give more visibility looking forward for the development of sales or profit of sanofi-aventis.
EBM: Jérôme Contamine, Chief Financial Officer of sanofi-aventis, thank you for joining me.
JC: Thank you Katherine.
