Cliff Driving 2013

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Battered by the expiration of exclusivity of blockbuster products, Sanofi is driven to grow other areas of its business.

The patent cliff continued to take its toll on Sanofi during 2012 and first-half 2013. But executives believe that the worst is probably over and they expect a rebound in latter-half 2013. “The second quarter was a difficult quarter,” says Christopher Viehbacher, CEO. “As expected, this was the last quarter with a tough comparison to the prior year due to the residual impact of the patent cliff. Sales were also affected by our business in Brazil, and commercial underperformance in certain business areas. However, sales growth of 7.7 percent of our growth platforms in the first half of 2013 continues to demonstrate the value of Sanofi’s integrated business model. In addition, we keep on making strong progress in delivering a growing portfolio of high potential R&D assets, as highlighted by the multiple clinical and regulatory milestones reached in the second quarter of 2013. We continue to expect to return to growth in the second half of 2013.”

Company and product performance

Though total worldwide sales grew for Sanofi in 2012, net income and earnings per share dipped versus 2011. Total sales for full-year 2012 grew 4.7 percent on a reported basis and 0.5 percent at constant exchange rates to €34.95 billion ($44.94 billion) versus the 2011 amount. Net income attributable to equity holders of Sanofi totaled €4.97 billion ($6.39 billion), a 12.8 percent decrease compared to 2011. Earnings per share for 2012 were €3.74 ($4.81), down 12.8 percent.

Net sales lost due to generic competition totaled €1.35 billion ($1.73 billion) for 2012. This decline was mainly due to generic competition for Lovenox, Taxotere, and Eloxatin in the United States and to Aprovel, Taxotere, and Plavix in the European Union.

The company’s growth platforms – Emerging Markets, Diabetes, Vaccines, Consumer Healthcare, New Genzyme, and Animal Healthcare – recorded sales of €23.55 billion ($30.28 billion), an increase of 9.9 percent compared to 2011. Those growth platforms accounted for 70.4 percent of total sales in the fourth quarter of 2012.

Sanofi’s Diabetes sector recorded very strong sales growth of 16.7 percent to €5.78 billion ($7.44 billion) for 2012, driven by Lantus. The long-acting insulin is the company’s best-selling product, with sales of €4.96 billion ($6.38 billion), 19.3 percent more than in 2011. “New Genzyme” delivered pro-forma sales growth of 16.9 percent, with Fabrazyme sales almost doubling to €292 million ($375 million). Emerging Markets sales for 2012 amounted to €11.15 billion ($14.33 billion), an increase of 8.3 percent. Double-digit growth was recorded in Latin America, Asia, and Africa/Middle East. Consumer Health Care sales reached €3.01 million ($3.87 billion), an increase of 9.9 percent, giving Sanofi the No. 3 global rank in consumer health care. Vaccines delivered 5.7 percent sales growth to €3.9 billion ($5.01 billion), ending 2012 on a high note with 20.5 percent growth in the fourth quarter. Merial, the animal health business, grew 3.1 percent.

As for the first half of 2013, sales, net income and earnings per share each fell lower compared to same-time 2012. In the first six months of 2013, sales were €16.06 billion ($20.65 billion), 7.6 percent less than in the first half of 2011. Net income attributable to equity holders of Sanofi was €1.45 billion ($1.86 billion) compared with €2.96 billion ($3.81 billion) in January-June 2012. Consolidated earnings per share were €1.09 ($1.40) compared with €2.25 ($2.89) in first-half 2012.

First-half sales of growth platforms reached €11.44 billion ($14.71 billion), an increase of 5.4 percent, and accounted for 71.2 percent of total consolidated sales compared with 70.8 percent in the first half of 2012. Excluding Brazil generics, growth platforms were up 7.7 percent over same-time 2012. First-half 2013 sales for the Pharmaceuticals business reached €13.52 billion ($17.39 billion), a decrease of 5.7 percent. First-half sales lost due to generic competition on main legacy products in the United States and EU were €1.04 billion ($1.33 billion).

Sales in the Diabetes sector in first-half 2013 were €3.16 billion ($4.07 billion), 17.8 percent more than in the first half of last year. Lantus sales reached €2.75 billion ($3.53 billion, 19.4 percent more than in first-half 2012. Apidra sales were €134 million ($172 million), 27.8 percent more than in the same period last year. First-half 2013 Consumer Health Care sales totaled €1.54 billion ($1.98 billion), 2.5 percent more than the same period in 2012. Vaccines grew 7.2 percent from first-half 2012 to €1.46 billion ($1.87 billion). Animal Health sales dipped 4.4 percent to €1.08 billion ($1.39 billion), due to competition with Frontline.

Genzyme sales were 25.5 percent more than in the first half of last year, climbing to €1.02 billion ($1.31 billion). Sales of Cerezyme in the first half of 2013 were €342 million ($439.8 million), 17.4 percent more than in first-half 202. Myozyme sales grew 9.8 percent to €242 million ($311 million), and Fabrazyme sales shot up 56.2 percent to €183 million ($235 million). Aldurazyme sales reached €78 million ($100.3 million), 12.7 percent more than in first-half 2012.

Executives say the company is on track to meet 2012-2015 objectives for sustainable growth.

Pipeline progress

In September, Sanofi’s biotech subsidiary Genzyme shared positive news when the company announced that the European Commission granted marketing authorization for Lemtrada for the treatment of multiple sclerosis. This follows the August approval of Aubagio. The company is preparing launches for both products in the European Union.

“The approvals of Lemtrada and Aubagio in the European Union represent an important milestone for Genzyme and demonstrate our focus on scientific innovation and commitment to multiple sclerosis patients,” says Genzyme CEO and President David Meeker, M.D. “This is particularly exciting as the EU approval is the first for Lemtrada globally. We look forward to making these unique therapies available to MS patients very soon.”

Lemtrada is indicated for the treatment of adult patients with relapsing-remitting multiple sclerosis with active disease defined by clinical or imaging features. Lemtrada 12 mg has a novel dosing and administration schedule of two annual treatment courses. The first treatment course of Lemtrada is administered via intravenous infusion on five consecutive days, and the second course is administered on three consecutive days, 12 months later.

The Lemtrada clinical-development program included two pivotal randomized Phase III studies comparing treatment with Lemtrada to high-dose Rebif in patients with RRMS who had active disease and were either new to treatment or who had relapsed while on prior therapy as well as an ongoing extension study. In CARE-MS I, Lemtrada was significantly more effective than Rebif at reducing annualized relapse rates; the difference observed in slowing disability progression did not reach statistical significance. In CARE-MS II, Lemtrada was significantly more effective than

Rebif at reducing annualized relapse rates, and accumulation of disability was significantly slowed in patients given Lemtrada versus Rebif.

Aubagio 14 mg is a once-daily, oral therapy indicated for treating adult patients with RRMS. The EU approval was based on data from the Phase III TEMSO (TEriflunomide Multiple Sclerosis Oral) and TOWER (Teriflunomide Oral in people With relapsing remitting multiplE scleRosis) trials. The EU approval of Aubagio includes new active substance designation.

FDA action on Genzyme’s supplemental biologics license application seeking U.S. approval of Lemtrada for the treatment of relapsing MS is expected in late 2013. Lemtrada is also under review by other regulatory agencies. Aubagio is approved to treat relapsing MS in the United States, Australia, Argentina, Chile, and South Korea, and is under review by additional regulatory agencies.

There have been some recent stumbles for Sanofi. In June 2013, Sanofi released results of two Phase III clinical studies of its investigational compounds, iniparib and otamixaban. The randomized Phase III ECLIPSE trial of iniparib in squamous non-small cell lung cancer did not meet its primary endpoint. In the study, newly diagnosed, metastatic squamous non-small cell lung cancer patients treated with iniparib plus chemotherapy did not achieve improvement in overall survival compared to patients who received chemotherapy alone. There were no clinically meaningful differences in the main safety parameters between the two arms.

The topline results of a Phase II study of iniparib in platinum-resistant ovarian cancer do not support further development of iniparib in this patient population. Following these findings, Sanofi decided to terminate the development of iniparib.

Topline results of the completed Phase III study of the investigational anticoagulant otamixaban, an injectable factor Xa inhibitor, showed the study did not meet its primary endpoint of superiority over current therapy. In the TAO study (Treatment of non-ST elevation Acute coronary syndrome with otamixaban), due to efficacy lower than expected, otamixaban did not show superior benefit/risk to the combination of unfractionated heparin (UFH) +/- eptifibatide (a GP IIb/IIIa inhibitor) in non-ST elevation acute coronary syndrome patients planned for early invasive strategy. The primary endpoint of the Phase III TAO study was the reduction of all-cause mortality or new heart attacks. Following the results of the TAO study, the company decided to discontinue the investigational program with otamixaban.

In September 2013, Sanofi announced its decision to withdraw the new drug application for lixisenatide in the United States, which included early interim results from the ongoing ELIXA cardiovascular outcomes study. The company plans to resubmit the NDA in 2015, after completion of the ELIXA study. The decision to withdraw the lixisenatide application follows discussions with FDA regarding its proposed process for the review of interim data. Sanofi believes that potential public disclosure of early interim data, even with safeguards, could potentially compromise the integrity of the ongoing ELIXA study. Sanofi’s decision is not related to safety issues or deficiencies in the NDA. The ELIXA study continues as planned and is fully enrolled. Complete results should be available in about 15 months.

The combination of lixisenatide and Lantus as the investigational LixiLan fixed-ratio product remains on schedule to enter into Phase III studies in the first half of 2014.

Sanofi announced in September GetGoal-L sub-analysis results showing that reductions in HbA1c with Lyxumia, when added to basal insulin, were greatest in patients with type 2 diabetes who had well-controlled baseline fasting plasma glucose. These findings are consistent with the efficacy profile of Lyxumia, which has demonstrated a clinical and statistically significant reduction in HbA1c across different patient populations.

The results also showed that reductions in body weight with Lyxumia, when added to basal insulin, were greatest in this group. The GetGoal-L sub-analysis was shared during an oral presentation at the 49th Annual Meeting of the European Association for the Study of Diabetes in Barcelona.

As type 2 diabetes progresses over time, patients treated with basal insulin may no longer maintain their target HbA1c level (average blood sugar levels over the past 2 to 3 months) despite typically sustaining good control of FPG with basal insulin. For these patients, Lyxumia can significantly reduce HbA1c by primarily reducing post-prandial (after-meal) glucose levels through its complementary action with basal insulin. Targeting both FPG and post-prandial glucose could be an effective way to lower HbA1c in certain patients with type 2 diabetes.

This sub-analysis examined 496 patients with type 2 diabetes and inadequate glucose control. Results showed that the addition of lixisenatide to basal insulin treatment, with or without metformin (oral anti-diabetic therapy), reduced overall HbA1c, body weight and post-breakfast self-monitored post-prandial glucose in all groups. These effects were greater in patients with relatively well-controlled baseline FPG levels (below or equal to 6.7 mmol/L; FPG in people without diabetes is ~5.5 mmol/L1) compared to those with higher baseline FPG levels (between 6.7 and 8.9 mmol/L, and over 8.9 mmol/L, respectively).

In June, Japan’s Ministry of Health, Labour and Welfare (MHLW) approved the manufacturing and distribution of Lyxumia for the treatment of type 2 diabetes. Lyxumia, the first once-daily prandial GLP-1 receptor agonist, is also the first GLP-1 receptor agonist approved in Japan for use in combination with basal insulin. Lyxumia is indicated for patients with type 2 diabetes mellitus when the following do not provide adequate glycemic control: diet and exercise and sulfonylureas (with and without biguanides) or diet and exercise and soluble prolonged-acting or intermediate-acting insulin (with and without sulfonylureas).

“Lyxumia, as the first GLP-1 receptor agonist approved in Japan for use in combination with basal insulin, will be a valuable new treatment option for many of the country’s 6 million plus people living with type 2 diabetes,” said Pierre Chancel, senior VP, of Global Diabetes at Sanofi. “The MHLW decision immediately enables the use of Lyxumia, which works in a way that complements basal insulin.”

In other positive news, Sanofi Pasteur in August 2013 initiated a Phase III study, called Cdiffense, of its investigational Clostridium difficile vaccine to evaluate the safety, immunogenicity and efficacy of the vaccine for the prevention of primary symptomatic C. difficile infection. C. difficile is a potentially life-threatening, spore-forming bacterium that causes intestinal disease. The risk of C. difficileincreases with age, antibiotic treatment and time spent in hospitals or nursing homes, where multiple cases can lead to outbreaks. The investigational vaccine is designed to help protect at-risk individuals from the disease, which is emerging as a leading cause of life-threatening, healthcare-associated infections worldwide.

“With the emergence of difficult-to-manage strains of C. diff, CDI has become more frequent, more severe and more difficult to treat in recent years, raising concerns about how to control it and prevent transmission,” says John Shiver, Ph.D., senior VP for Research & Development at Sanofi Pasteur. “Vaccination could be an efficacious, cost-effective and important public-health measure to protect individuals from C. diff.”

In May, Sanofi reported positive topline results from the pivotal Phase III JAKARTA study for the selective JAK2 inhibitor SAR302503 for myelofibrosis. The compound met its primary endpoint in both dose groups. The primary endpoint assessed the proportion of patients achieving a greater than 35 percent reduction of spleen volume. Myelofibrosis is a rare, debilitating and life-threatening hematologic malignancy characterized by abnormal blood cell production and scarring, or fibrosis, in the bone marrow.

Since Sanofi’s acquisition of the molecule, SAR302503 has moved from Phase I to the completion of pivotal Phase III studies in less than three years. The company is planning regulatory filings with health authorities to make this medicine available for patients.

Sanofi Oncology is developing SAR302503 for the treatment of the three main types of myeloproliferative neoplasms: primary myelofibrosis, including those previously treated with ruxolitinib; polycythemia vera; and essential thrombocythemia.

There has been positive news in the OTC sector of Sanofi. In July, Sanofi announced that FDA’s Nonprescription Drugs Advisory Committee voted 10-to-6, with two abstentions, recommending approval of Nasacort AQ Nasal Spray for OTC use in the United States. If approved, Nasacort AQ would be a first-in-class OTC medicine and marketed by Sanofi’s consumer healthcare division Chattem. The proposed OTC indication is temporary relief of nasal symptoms of hay fever or other upper respiratory allergies in adults and children 2 years of age and older.

“The OTC availability of Nasacort would continue to build on Chattem’s highly successful OTC launch of Allegra and further expand our consumer healthcare offering,” says Anne Whitaker, president, North America Pharmaceuticals, Sanofi.

Product sales and financial performance

PRODUCT	2012 SALES	2011 SALES
Lantus	$6,378	$5,036
Plavix	$2,657	$2,623
Lovenox	$2,434	$2,715
Avapro/Aprovel	$1,480	$1,660
Eloxatin	$1,229	$1,377
Renagel, Renvela	$840	$534*
Cerezyme	$814	$567*
Taxotere	$724	$1,186
Allegra	$711	$746
Ambien/ Stilnox/Myslee	$297	$305
Myozyme, Lumizyme	$594	$396*
Amaryl	$541	$561
Depakine	$527	$499
Synvisc, Synvisc-One	$467	$329*
Tritace	$444	$482
Fabrazyme	$375	$140*
Multaq	$328	$336
Jevtana	$302	$242
Apidra	$296	$244

All sales are in millions of dollars.

*For 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

	2012	2011
Revenue	$44,938	$42,935
Net Income	$6,387	$7,321
EPS	$4.81	$5.52
R&D	$6,329	$6,186

	1H13	1H12
Revenue	$20,650	$22,350
Net Income	$1,862	$3,809
EPS	$1.39	$2.87
R&D	$3,010	$3,095

All figures are in millions of dollars except EPS.