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Falling Diabetes Drug Sales Worry Sanofi’s Pharma Segment

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Mar. 7 2016, Published 8:01 p.m. ET

Performance of pharmaceuticals segment

Total revenue from Sanofi’s (SNY) Pharmaceuticals segment stood at 29.8 billion euros in 2015, reflecting 0.8% growth. Diabetes drug sales amounting to 7.6 billion euros comprised ~20.5% of total group sales. The operating margin of the Pharmaceuticals segment declined to 26.9% in 2015, reflecting a margin contraction of 200 basis points.

As the graph above depicts, Sanofi’s Pharmaceuticals segment includes diabetes drugs, Genzyme revenue, Consumer Healthcare (or CHC) business, generics, oncology drugs, and established treatment drugs.

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Performance of diabetes drugs

In 2015, Sanofi’s sales of diabetes products fell by 6.8%. Lantus, its lead product, brought 6.4 billion euros, which was 84% of total diabetes sales. Lantus revenues fell by 10.8% in 2015. The major reasons for this decline were slower basal insulin market growth as well as higher discounts than the previous year. For detailed information on Lantus, please refer to How Can Sanofi Maintain Its Leadership in the Diabetes Field?

To curb the anticipated sales fall of Lantus, Sanofi had launched Toujeo in 2015 that earned 164 million euros. The product faces competition from Tresiba from Novo Nordisk (NVO), Tanzeum from GlaxoSmithKline (GSK), and Bydureon and Farxiga from AstraZeneca (AZN).

CHC performance

Sanofi’s CHC business earned 3.5 billion euros in 2015. For detailed information on CHC, please refer to Can Consumer Healthcare Drive Sanofi’s Revenue?

The reshaping strategy of the company by performing the business swap of its Animal Health business worth 11.4 billion euros with the CHC business of Boehringer Ingelheim, which has an enterprise value of 6.7 billion euros, would further fuel the growth of the CHC segment.

Established Treatment Products

Plavix and Lovenox are the major drugs in the Established Treatment Products segment. Following the generic competition in Japan, Plavix sales fell by 4.1% in 2015. As there is stiff competition in the Generic Drug segment, Lovenox also experienced a fall in sales.

Investors who wish to avoid news-driven volatility in the pharma or biotech industries can opt for the PowerShares International Dividend Achievers ETF (PID), which holds 1.24% of its total holdings in Sanofi stock.

The next article will deal with the performance of Sanofi’s Vaccines segment.

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