Sanofi’s Profitability Improved in 2Q15
An Investor’s Guide to Sanofi's 2Q15 Earnings
Sanofi’s profitability
Sanofi (SNY) reported a 4.9% increase in revenues at constant exchange rates to ~9.4 billion euros. The company reported a net profit of 1.84 billion euros in 2Q15, an increase of 0.6% in net margin as compared to 2Q14.
The gross margin improved by 1.0% to 69.6% for 2Q15 over 2Q14. This was driven by the favorable currency effect. Also, the positive impact of Genzyme and Renagel’s higher profit margins was offset by the lower profitability of the vaccines mix and the profitability impact on Lantus in the US due to increased rebates to key players.
The research and development expenses decreased by 0.3% at constant exchange rates to 1.29 billion euros due to lower R&D (research and development) spending on diabetes, immune-oncology, and the Alirocumab compound. However, Sanofi increased spending due to its initiation of a Phase III study for Dupilumab.
Selling and general expenses increased 5.9% at constant exchange rates to 2.65 billion euros due to new product launches in the multiple sclerosis, diabetes, and animal health segments.
Other income and expenses include royalties received on Enbrel sales in Europe, which were stable for the quarter, and payments towards the return of Eligard’s US rights to Tolmar Pharmaceuticals.
Financial guidance for 2015
Sanofi’s 2Q15 results are in line with the full year guidance, which was announced on February 5, 2015. The company expects EPS (earnings per share) to be stable to slightly growing at constant average exchange rates versus 2014, considering the changes in US diabetes markets, new product launches, and late-stage pipelines.
Sanofi has revised its expectations from currency impact and now also expects a positive currency impact on a 2015 full-year business EPS by approximately 10%, under the assumption that exchange rates remain stable in the second half of 2015 at the average rates of June 2015. The earlier expectations were between 4% and 5%.
Companies like Pfizer (PFE), GlaxoSmithKline (GSK), Zoetis (ZTS), and AstraZeneca (AZN) compete with Sanofi on different product mixes for pharmaceuticals and animal health segments. Investors can consider ETFs like the Health Care Select Sector SPDR ETF (XLV) or the Market Vectors Pharmaceutical ETF (PPH) in order to divest the risk.
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