Sanofi Q3 2012 - Interview with CFO Jérôme Contamine en

EuroBusiness Media: Sanofi, a global and diversified healthcare leader, reports results for the third quarter of 2012. Jérôme Contamine, welcome. You are the Chief Financial Officer of Sanofi. What are your comments on the Group’s third quarter results? Despite negative headline EPS growth, due to the impact of the patent cliff, what perspective can you offer in order to understand this figure in a broader context?

Jérôme Contamine: Indeed, the loss of exclusivity of Eloxatin® in the US is a turning point in this recent history of Sanofi. Now all our legacy blockbusters face generic competition. As a result of that, we’ve seen our sales growing slightly by 3.3%, above 9 billion euros for the first time at published exchange rate and declining slightly at a constant exchange rate by 3.1%. Importantly, we have lost on the one hand 448 million euros in sales from generic competition, but at the same time our growth platforms have grown by 6.4% and now represent more than 70% of our sales. We have also managed tightly our costs over the quarter in order to limit the impact of patent expiry and patent cliff on our business EPS. As a result, our business EPS has declined by 14.5% over the quarter. Given the performance over 9 months, we have adjusted our guidance for 2012. We now expect the decline to be on the high end of the 12-15% range, i.e. around -12% on a full-year basis at constant exchange rate, barring unforeseen unfavourable events.

EBM: What is your update on the performance of Lantus® and what are your plans to expand your Diabetes franchise?

Jérôme Contamine: Actually, our Diabetes franchise has performed extremely well over the quarter; it has posted - for the seventh consecutive quarter - double digit growth at 17.5%. First and foremost, Lantus® has performed well, with more than 20% growth driven by the US and Emerging Markets. Lyxumia®, our GLP-1, has been filed in Europe and we expect a CHMP outcome before year-end. It will be filed in the US before the end of the year with a data package of cardiovascular morbi/mortality study. We are also working on the combination of Lyxumia® and Lantus® in one single device. Our new formulation of glargine is now entering into phase III with six ongoing clinical trials and, interestingly, we have seen a different PK/PD profile which could be an interesting outcome of this new formulation. Last but not least, we are continuing to develop our offer of devices. Over the quarter, AllStar™ has been made available in India. It is the first device manufactured in India for an international company.

EBM: What is your update on your advances in Multiple Sclerosis, given recent regulatory approval for your oral drug Aubagio® in the US, and the resubmission for another one of your products, also in the US?

Jérôme Contamine: You are right. An important step has been reached over the quarter with the approval by FDA of Aubagio® as an oral drug to treat Multiple Sclerosis patients with recurring relapses of Multiple Sclerosis. Aubagio® is once-daily oral therapy which is the only one which has shown a significant reduction of disability in two different clinical trials. It’s also an easy drug to be used as compared to other drugs which are injectables. Aubagio® is now being launched in the US since October, with a newly hired sales force, hired by Genzyme. When it comes to Lemtrada™, the resubmission of our file is on track and we will communicate as soon as the FDA has accepted this file. Also, importantly, the full result of the two key studies, CARE-MS I and CARE-MS II, will be made available in a Peer Review journal - an important Peer Review journal - in the coming weeks.

EBM: What is your update on Rare Diseases products at Genzyme?

Jérôme Contamine: Well actually, it’s fair to say that we are pretty satisfied with the outcome of what has happened in Genzyme since we acquired Genzyme at the beginning of 2011. More precisely, if you look at sales, they have grown by more than 20% over the quarter, mainly driven by the recovery of Fabrazyme®. Fabrazyme® clearly benefits from the availability of products coming from the new Framingham facility and also by the withdrawal by Shire of the Replagal® BLA in the US. So all in all, sales of Fabrazyme® for the quarter have been 87 million euros as compared to just 32 million euros one year ago. All in all, since the beginning of the year, the growth of sales in Genzyme Rare Diseases has been 15%.

EBM: Q3 is generally a strong quarter for seasonal flu vaccines — what is your update for your Vaccines business this quarter?

Jérôme Contamine: So vaccine sales for the quarter have been around 1.5 billion euros, a slight increase versus last year. It reflects a solid underlying growth, driven particularly by the launch of Imovax® in Japan, which posted 65 million euros in sales since its launch. But it reflects also the impact of the limitation of order intake of Pentacel® in the US and also some seasonality and fluctuation of the sales as usual of our flu vaccines in the northern hemisphere. So this year we have sold less flu vaccines over this quarter as compared to last year, but the plan is, as last year, to sell more than 60 million doses over the season, therefore we expect a sort of shift of sales from Q3 to Q4 in 2012 as compared to 2011. On the front of new vaccines, a new Quadrivalent formulation of our Fluzone® vaccine has been accepted for review by the FDA and also our joint venture, Sanofi Pasteur MSD in Europe, has already filed a new hexavalent vaccine to be made available in Europe next year.

EBM: Are austerity measures in Europe having any noticeable impact on Sanofi?

Jérôme Contamine: Well, austerity measures in Europe have continued to impact all pharmaceutical players in Europe over the quarter. You could even say that they have somewhat intensified, in particular in the Southern European countries. The good news for Sanofi is that we have anticipated these trends now for a few years in several ways:
a) through acquisitions or business development we have been able to reduce our exposure to Western Europe through the expansion of our activity, both in the US and in emerging markets. As a result, the share of our Western European sales has been just 22.6% in Q3 2012 as compared to 33.0% just three years ago;
b) we are diversifying our exposure to Europe through non prescribed drugs or drugs which are not reimbursed by social securities, typically in Consumer Health, in Animal Health or even in Vaccines, which is definitely not small molecule pills.
And c), we continue to grow our growth platforms also in Europe. As an example in Q3, our Diabetes sales have increased by more than 7%; our new Genzyme Rare Disease sales have grown by 21.4% over the quarter. Maybe also our shareholders will be pleased to know that we have reduced significantly the amount of receivables outstanding in our balance sheet in Europe over the year and therefore reduced our exposure to European risk.

EBM: You will be doing an Investor Relations seminar on Latin America in November. As we wait to find out more about your outlook in this region, how are Emerging Markets performing in Q3?

Jérôme Contamine: Emerging Markets continue to be a strong driver of growth for the group as a whole. Our sales for the third quarter have reached 2.8 billion euros, up 6.8%, and the growth of our growth platforms in Emerging Markets, such as Diabetes (+26.5%) or CHC (+16.1%), have been above 10%. Just the four BRIC countries - Brazil, Russia, India and China - represent now 1 billion euros of sales, growing double digit. Also Latin America and Asia have continued to post strong growth around 10%. Also you noticed that in October we announced the signing for an acquisition of Genfar, a pharmaceutical company in Columbia, which is a leader in this country and other countries in the region. This acquisition will reinforce the position of Sanofi in Latin America and increase the scope of products and drugs - and affordable drugs - which will be made available for the Latin American market.

EBM: Lastly, what is your update today on some of your recent product launches or recent R&D activity?

Jérôme Contamine: We continue to make significant progress with our pipeline. Over the quarter we see three approvals from the FDA; Aubagio®, our MS product which I mentioned already; also Zaltrap® for metastatic colorectal cancer and the Auvi-Q™ device for patients with life threatening allergies. Also, two new indications of Plavix® have been approved in Japan. We have filed in Vaccines, two vaccines; one in the US and one in Europe. In the US a new Quadrivalent Fluzone® and in Europe our joint venture has filed a new hexavalent paediatric vaccine. We have engaged in a number of new phase III, significant phase III programs; one for our new glargine formulation, a second one for our anti-PCSK9 antibody. This one has the potential to be a first-in-class with significant potential and can contribute and help millions of patients who today suffer from uncontrolled levels of cholesterol. And last but not least, eliglustat, a novel oral compound for Gaucher disease, has reached its primary end-point through its phase III ENGAGE study. So at the end of October we have 65 new molecular entities in phase of development, including 17 which are either in phase III or just being submitted for approval.

EBM: Jérôme Contamine, CFO of Sanofi, thank you very much.

Jérôme Contamine: Thank you Adrian.

Paris, October 25, 2012 — Sanofi, a global and diversified healthcare leader, reports results for the third-quarter of 2012. Jérôme Contamine, Chief Financial Officer of Sanofi, comments on results and outlook.
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