Interview with CEO Chris Viehbacher - FY 2013 en

EuroBusinessMedia (EBM): Sanofi, a global and diversified healthcare leader, reports results for 2013. Christopher Viehbacher, welcome. You are the CEO of Sanofi, what are your comments on the evolution of your business in the fourth-quarter of 2013? You previously noted top-line growth of 6% in September 2013, the first month post-patent cliff. Did you see a confirmation of those trends in Q4?

Christopher A. Viehbacher: Yes we did, and in fact at the beginning of 2013 we had predicted that we would return to growth. I always like to say that it was return to growth by subtraction, because really what happened is that the patent cliff really got behind us from the end of August. From the first of September we are now in like-to-like periods where we don’t have patent expiries in the previous quarters. September was the first month we saw that, and in fact we saw the trends continuing into the fourth quarter with sales up 6.5%. When we look at the growth platforms, I think we also saw a very satisfactory performance. Growth platforms were up 10% in the quarter. That was really led first and foremost by Diabetes, Diabetes continuing a strong series of growth over 12 quarters – 19% for Diabetes. Lantus® sales within that, up 20%. What was also reassuring was to see emerging markets returning to very robust growth, they grew at 10.4% in the quarter and that was really across many regions; double digit growth in Latin America, in Asia and in Intercontinental. We were also able to resolve our manufacturing supply issues in Toronto, so we have been progressively coming back to supply as we indicated back in the third quarter. Not completely – and so sales were stable – but the supply is now regular. When I look at Genzyme, I see a very strong performance. Sales up over 30%. That was driven both by our Rare Disease franchise, where we have regained leadership in all of our disease categories, but also the very successful launch that we had of Aubagio® in the United States at the end of 2012 really continued into 2013. We saw sales of €69 million for Aubagio® in the fourth quarter. So, Genzyme really performing strongly. Our Animal Health business continued the trend with Frontline® under pressure, both from a point of view of seasonality, the flea and tick season, in particular in the US, was not as strong this year so the market was actually down in contrast to prior years and so that trend continued in the fourth quarter. However, we saw the approval of successor products to Frontline®, notably NexGard™ for dogs and Broadline™ for cats. So all in all, I think we were able to demonstrate that some of the issues that we faced in 2013 have been resolved and really I think we are able to demonstrate that return to growth. Obviously, when you look to the future, one of the most important things is to make sure that you have got new products to launch and there I’m very satisfied as well. I think we have been able to build a very robust phase III pipeline with 9 new products in that late stage pipeline. Some very exciting compounds. So, all in all, I think we are well set for 2014 with that performance.

EBM: What is your guidance for 2014? Should we expect to see a rebound from 2013?

Christopher A. Viehbacher: Well, you saw a return to growth in the fourth quarter and that will continue into 2014. We actually see our growth platforms continuing to perform strongly. One of the most exciting aspects I think of Sanofi today is our Research & Development pipeline. That means we will continue to invest in both our development programmes as well as the launch of new products. So when I take all of that together, we see our business earnings per share growing from between 4 and 7% in 2014.

EBM: And what are you proposing to shareholders for the dividend?

Christopher A. Viehbacher: The dividend has been a core part of the value proposition for Sanofi now for some years and in fact we are proposing an increase again, actually for the 20th consecutive year. So we will be proposing a dividend of €2.80, which represents a pay-out ratio of 55%. That’s above the target that we had set for ourselves in this period, of 50%, but we’d always said that 50% was a target and not a ceiling and that has proven to be the case.

EBM: What is your expectation of Lantus® in 2014? How sustainable is the double-digit growth rate which you have posted for 12 consecutive quarters now?

Christopher A. Viehbacher: As we’ve said before, Diabetes is an extremely important market, also an extremely important aspect of public health. There are over 350 million people worldwide who suffer from type-two diabetes and clearly Lantus® is the Gold Standard of treatment within that. Over 8 million people every year benefit from Lantus® therapy and again, because of the underlying market conditions, we saw very strong growth of 20% in the quarter. This is an area that will be a growth driver for Sanofi for quite some time. We clearly have Lantus® today, but we are also rolling out Lyxumia®, a GLP-1. We have Apidra® as a shorter acting insulin. I think one of the most exciting opportunities is a new insulin called U300. We have just completed EDITION I, II, III and IV studies, all of which have met their primary end points and which will enable us to file later this year and launch in the course of next year. And finally, we have just announced that we have started phase III of the combination of Lyxumia® and Lantus® called LixiLan. So this really will present a strong portfolio in the area of Diabetes.

EBM: Turning now to another one of your business lines: How was the fourth quarter in Vaccines? Is everything back on track now following some manufacturing challenges?

Christopher A. Viehbacher: Everything is back on track. Vaccines are probably the most difficult product to make in the Healthcare space. It’s why there is only a handful of companies involved in that. But I am pleased to say that the recovery has occurred. We are shipping out of our Toronto facility. The supply is progressive and as a result sales were stable for the quarter, but within that there was some very good news about our flu franchise. We had a record flu season, over €900 million of sales in flu vaccine. And this is actually a very nice story, because we have been able to demonstrate value added products even with a flu vaccine which has been on the market now for some time. We have developed specialty products for seniors, we have a quadrivalent that is in the process of being rolled out, we have a flu Intradermal. So we have been able to innovate in this space and that has allowed Sanofi to maintain its leadership. One of the things we are looking forward to this year is our Shantha facility in India. This was a facility we acquired a few years ago with the idea of being able to ensure that we had affordably priced vaccines, particularly for emerging markets. We would expect in the first half of this year, WHO pre-qualification, which will allow us to launch our Shan5® vaccine. So I think that 2014 should be a good year for vaccines.

EBM: Genzyme sales grew by more than 30% in 2013. What is the outlook for Genzyme in 2014 for Rare Diseases and Multiple Sclerosis?

Christopher A. Viehbacher: Genzyme had an extraordinarily successful year in 2013. In 2012 the story was really about recovery. We were able to re-establish manufacturing, we were able to get patients back on full therapy. The supply situation really allowed us now to expand our market again. We have regained leadership with Cerezyme®, we have regained leadership with Fabrazyme® as well. Myozyme® is alone in the market place and we have been busy expanding that market – it grew at 12%. We have a new oral therapy in the process of registration. This will allow an oral option for patients with Gaucher’s Disease. It will not be indicated for children, but I think it will be a very interesting option for adults who either have difficulty accessing infusion centres or perhaps who have a milder form of the disease and who have not wanted to go through the difficulty of having the infusion therapy. So I think that’ll really underscore our leadership in the area of rare diseases. We secured a partnership with Alnylam which gives us access to some fantastic new technology in RNA interference. They have developed a portfolio of new medicines for rare diseases and we will actually have options on those and this will really expand our horizon in Rare Diseases. The other part about Genzyme of course, is that this is also where we have put our Multiple Sclerosis franchise. They launched Aubagio® with very good success in the US and we are now rolling this out in Europe. We achieved sales of €166 million in the year, €69 million in the fourth quarter. Lemtrada™ has been approved in 30 countries and is rolling out - it’s too early to talk about the sales yet. We did have a disappointment with the FDA approval. We do plan to appeal that decision but in the meantime we are getting on with launching the product successfully in the rest of the world.

EBM: You’ve communicated a lot in the past about your strengths in Emerging Markets, compared to your peers. Some investors worry about the stability of some of these Emerging Markets, in part due to strong currency fluctuations, what is your message about the potential of Emerging Markets?

Christopher A. Viehbacher: It’s very true there is an awful lot of concern at the beginning of this year, particularly on currencies in emerging markets and there’s no question that there will be some impact on the economic growth of those countries. What’s important to recognise in emerging markets though is that healthcare tends to perform a little differently than the broader economy of those countries. Healthcare is something that’s essential to people. So what we actually see are the trends towards urbanisation are important, because people who move from rural areas to cities actually have greater access to healthcare. What we also see is that even though the economy may rise and fall somewhat, there is actually a steady shift to middle classes in most markets. And as people enter the middle class, they have more disposable income to provide their families with healthcare. So what we have seen is that there is a continuous increase in healthcare spending and that’s why I believe you have to go with demographics. 80% of the world’s population live in emerging markets. Many of those people are not treated today. Many of those people are gaining greater incomes and Sanofi is a leader in that area and we believe that that’s going to be a strong growth driver for us going forward.

EBM: And lastly, what would you say are the most promising products coming out of your pipeline? Are there any promising products not yet on the market’s radar?

Christopher A. Viehbacher: I think the R&D pipeline is the thing I’m most excited about. We spent the first five years building sustainable growth platforms. We needed those cash flows to take the risk of developing new medicines and I think we have achieved that. We have restructured our R&D, we have found new innovation models. What’s really interesting now is to see these molecules about to be launched. I can take the product alirocumab, the PCSK9. This is an exciting product because we’re really able to take LDL-Cholesterols to new low levels that really have never been possible before. We have a new product called IL-4 that has already demonstrated very interesting results in severe asthma as well as atopic dermatitis and when you have a drug that works in two auto-immune diseases, it’s actually quite interesting to think about what other indications that could be developed for and in fact we have a list of 14 other indications that we are looking at. We have a new vaccine for Dengue. This is a major health problem that affects half the world’s population and not just in Sub-Saharan Africa. We are talking about places like Singapore, in Southern China, in Brazil, so we believe this is going to be an important contribution to public health as well as to the growth of the company. We have an IL-6 for rheumatoid arthritis. This is a $21 billion worldwide biologics market and the IL-6 part of that market is rapidly growing and we believe that our IL-6 will have a major contribution here. We have Cerdelga® which is the new oral therapy for Gaucher’s Disease. We have another new vaccine coming along for infections called Clostridium Difficile. We’ve seen a real problem in antibiotic resistant infections in hospitals and this would be a vaccine that you could take for elective surgery or use in long-term care. Now, all of our businesses are actually demonstrating innovation; we have NexGard™ and Broadline™ in our pet segment within Animal Health. We have been relaunching Rolaids® and we are about to do an over-the-counter switch for Nasacort® in our Consumer Business. So pretty much everywhere we look we are seeing innovation, and this is really what’s exciting, because the mission of the company at the end of the day is to bring new solutions to patients, so that’s what we are getting on with.

EBM: Chris Viehbacher, CEO of Sanofi, thank you very much.

Christopher A. Viehbacher: Thanks Adrian.

Paris, February 6, 2014 — Sanofi, a global and diversified healthcare leader, reports annual results for 2013. CEO Chris Viehbacher comments on results and outlook.
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