EuroBusiness Media (EBM): Sanofi-aventis, one of the world’s largest diversified healthcare companies, reports earnings for the first quarter of 2010. Jérôme Contamine, welcome. You are the Chief Financial Officer of sanofi-aventis. What are your comments on the group's performance in the first-quarter?
Jérôme Contamine (JC): Actually I think we have had a very good start in to the year. We have posted an increase of sales by 5.8%, which we have achieved despite the generic competition of Eloxatin in the US and Plavix in Europe. If we have achieved this increase of sales, it’s mainly thanks to the growth of our growth platforms. Diabetes has grown by 11%, driven by Lantus, Amaryl and Apidra. Emerging markets have grown by 18%, which is quite remarkable. Vaccines have had a very strong growth thanks to H1N1 and also we have launched Multaq. And then I should mention also the acquisition of Chattem, which has boosted our sales in the consumer health activity, which has increased by more than 40%. So all in all, we are implementing our strategy and - thanks to the growth platforms - replacing progressively the loss of sales which comes from generification. Also in terms of profit, we have increased our profit by more than 15% on a constant exchange rate basis, precisely 15.9% EPS growth. On a current exchange rate basis, it has been more than 9%, so it shows that not only are we growing by sales, but also we are growing by profit more than sales, which is really the result of leveraging our growth platforms and also implementing our cost savings program.
EBM: You just mentioned a very positive contribution in the first quarter from the sales of H1N1 flu vaccines. Could you tell us a bit more about that and also what is the situation today regarding fears of renegotiations with governments over H1N1 vaccine sales?
JC: So you are right to say, Adrian, that we have sold around 400 million euros of H1N1 vaccines in Q1, which is roughly the same amount as what we had sold during Q4/2009; so we have sold around 100 million doses during Q1/2010 and 100 million doses during Q4/2009. But also beyond H1N1, we are also preparing for the seasonal flu seasons, both for the Southern Hemisphere and for the Northern Hemisphere. We have concentrated our efforts during Q1 to produce H1N1 to be delivered in various places in the world, so that - by the way - we are not afraid at all by this renegotiation issue and I would say that everything is taken into account in our Q1 accounts. But also we have been preparing for the seasonal flu, as I mentioned, for Southern Hemisphere. There has been some delay because we concentrated on H1N1 production – so the seasonal flu vaccines for the Southern Hemisphere will come more in April and May. Then we will launch the seasonal flu campaign for the Northern Hemisphere, and I can tell you that already we expect that it could be better than what we achieved last year, both in terms of volumes and in terms of value.
EBM: How are Multaq sales doing in Q1, and what is your answer to those who think that the take-up has been slower than could be expected?
JC: Actually Multaq is really on track with our expectations and our plans. We launched Multaq in the US last year and we have delivered more than 20 million euro of sales in Q1 in the US. Now more than 50.000 patients have benefited from Multaq since the launch in the US. We received tier-two categorisation for reimbursement for Medicare part D for more than 50% of the Lifes and more than 70% in the commercial area. When it comes to Europe, we have now launched Multaq in several European countries. We started with Switzerland and we launched in Germany at the beginning of Q1 and we benefit from a very nice uptake, which basically is actually doing better than most of the recent launches which took place in Germany. We got a positive recommendation from NICE in the UK and now we are expecting the final recommendation from France somewhere in Q2.
EBM: What is your update today on the ongoing Transforming Program? Is everything advancing according to plan, are there still many more things left to do?
JC: Well, Transforming is several-fold, in fact. It’s firstly being more active in business development and chasing for acquisitions or partnerships. We have signed up another seven agreements - partnerships, acquisitions - during Q1, including the acquisition of Chattem, which is now putting us in a very nice position in the consumer health activity in the US. And we have, as you know, decided to exercise the option to combine Merial with Intervet/ Schering-Plough which will become a common joint-venture between Merck and sanofi-aventis in the coming months. Also we have signed some other partnerships more in the R&D side, both for the Diabetes Division, where we have come to an agreement with AgaMatrix to be able to produce devices which will monitor both the blood glucose and, at the end of the day, the monitoring of the use of our insulin – Lantus. We have also come to an agreement with CureDM for a new partnership for a new type of molecule to cure diabetes, which is a molecule which is still at an early phase, which is an R&D project. The other side of Transformation is the internal transformation of the company. Here also we have been very active. Now, our new R&D organisation has been rolled out and is in place, there are a certain number of business units which have been put in place, and quite a large number of people have been reallocated to different positions and places, while we have totally flattened the organisation in order to try to make it more innovative, more productive and more entrepreneurial. More generally, we are continuing to reorganise the company, to make it more efficient, to cut costs down and we can say today that we are definitely - as we said at the time of the full 2009 results - that we are on track, and even a bit in advance, as compared to what was our initial plan.
EBM: Following up on what you just said, what is your update today on your pipeline? Now that your R&D has been restructured as you just mentioned, which products could we now expect to see emerge from the pipeline? What are the next important milestones to watch out for in terms of news flow or clinical trials?
JC: As I just mentioned, we have reinforced our early stage R&D pipeline and in particular we have signed this agreement with CureDM for a quite innovative, regenerative way to treat diabetes. It’s still at early phase, due to come in clinical phase by year-end - we should get an IND by year-end - but also we have been rather active and we have had some good news on the late stage pipeline. First of all, we now have submitted for approval Jevtana®, formerly cabazitaxel, in prostate cancer treatment which is hopefully due to be approved in Q3 and we have completed the recruitment for the Phase 3 study for BSI-20I when it comes to metastatic triple-negative breast cancer and we have launched a Phase 3 study as well for lung cancer coming from BSI-201. I would also like to mention the positive results of our Phase 3 study for our GLP-1, once daily GPLGLP-1 agonist, whose name is Lixisenatide, and this product will be a sort of base for the combination with our insulin, Lantus, to create a unique combination which is now in Phase 1, which we expect to come into Phase 3 as early as Q4/2010.
EBM: You recently signed an agreement with makers of generic Eloxatin in the US. What are the implications of this new development?
JC: Well, actually, this is good news. We came to a settlement with generic companies which are presently selling the generic of Eloxatin and, as a result of this settlement, they will refrain from marketing this generic as from the end of June this year. It’s still a bit difficult to assess exactly the level of inventories, therefore it’s a bit difficult to know exactly when wholesalers will stop selling actually – this is why we have not taken any sales for 2010 in our forecast today and that it will not have any impact on our guidance in 2010. But we can already assume that we will resume sales of Eloxatin as early as the beginning of 2011 up to August 2012, when these companies will be allowed to come back to the market and sell generics again.
EBM: Lastly, we've recently seen some pharmaceutical companies downgrade their earnings guidance as a consequence of the new healthcare reforms in the US. What is the impact of these reforms for you, and do you confirm your previously stated guidance?
JC: As you can imagine Adrian, we had taken into account, when we released our guidance in February, everything which could happen in the environment, including the outcome of the healthcare reform which was under discussion at the time. We didn’t know exactly, precisely the details, but we took some assumptions. So I can really confirm today that we maintain our guidance for the full year, despite the healthcare reform which is now approved, because we took that into account. Also we took into account the fact that in this year we will have some fluctuations in our earnings per share, quarter after quarter, just as a result of the generic impact, quarter after quarter, of our activities, keeping in mind that we didn’t have exactly the same profile of sales last year because we didn’t have any generic competition, for instance, in Q1 and Q2. So all in all, I can tell you that we are really confirming our guidance, taking all that is available as information today, barring of course, any material, adverse events which we cannot foresee for the time being.
EBM: Jérôme Contamine, Chief Financial Officer of sanofi-aventis, thank you very much indeed.
JC: Thank you.
