Key Takeaways:
Sanofi reported in-line revenue and a slight beat on EPS. Sales were +0.1% y/y, due to lower Vaccines sales. EPS grew +1.5% (ex-FX). The company raised the lower end of its 2018 EPS guidance from 2-5% growth to 3-5% (ex-FX impact of -6%). R&D expenses increased 13% (ex FX) due to the acquisition of Bioverativ and Ablynx, and investments in immuno-oncology and diabetes. 2H18 should have a better growth profile, however 2018 is not a very exciting growth year for Sanofi. On the bright side, we are pleased to see good growth in its consumer healthcare business, as many peers have been struggling there. We are maintaining our price target.
Key points:
· Vaccines had a tough quarter, down -15.7%, due to supply constraints in China (Pediatric vaccines) and tough comps
· Diabetes sales in developed markets were down 15.6% (-30% in US on change in Part D coverage and price decline), but grew +12% in emerging markets. Lantus was -20.6% but Toujeo +8% (growth in Europe and EM)
· One-time positive impact to operating income from the sale of a small business
· Dupixent (dermatitis drug) sales were strong (+14% above consensus), US prescriptions increased 27% y/y and global roll-out continues
· Continue to build their Rare Blood Disorder franchise as a response to declining Diabetes franchise
· Consumer Healthcare growth of +4.1%, thanks to strong growth in emerging markets
Thesis on SNY:
- Sanofi is approaching the end of its patent cliff, and is well position to grow earnings
- ROIC and ROE are likely to improve from current levels
- Underappreciated pipeline, with eighteen new product launches expected over the next four years
- Attractive dividend yield, valuation and capital allocation
$SNY.US
[tag SNY]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
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Boston, MA 02109
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