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How Sanofi’s Franchises Could Perform into 2017

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Revenue projections and latest quarter performance

During the second quarter of 2016, Sanofi’s (SNY) aggregate sales declined by 0.2% to 8.9 billion euros, or about $10 billion. Its diabetes and cardiovascular franchise fell by 2% to 1.96 billion euros, or about $2.2 billion, while established products sales declined by 9.7% to 2.6 billion euros, or about $2.9 billion in 2Q16. Its Specialty Care remained the anchor, which did offset the declines in other franchises.

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Sanofi expects its diabetic franchise to underperform and record a 4%–8% decline on a compounded annual basis from 2015 to 2018. In the diabetes space, Sanofi competes with Novo Nordisk (NVO), Eli Lilly (LLY), and AstraZeneca (AZN). (For details on Sanofi’s under pressure diabetes franchise, please read “How Can Sanofi Maintain Its Leadership in the Diabetes field?“)

Sanofi’s sales growth during 2016 will be supported by key products like Toujeo, Praluent, and Dengvaxia. Wall Street analysts expect Sanofi to record revenues amounting 36.57 billion euros, or about $41.1 billion, in 2016 and 36.59 billion euros, or about $41.14 billion in 2017.

Margin expansion for Sanofi

Sanofi’s net income margin for fiscal 2016 is estimated to be 19.4%, as compared to 15.4% in fiscal 2015. Its net income margin is projected to be 19.1% in 2017. Some of the major reasons behind such margin expansion are synergies following Boehringer asset swap deal, the Praluent and Dengvaxia uptakes, and new launches, which are expected to add 12 billion–14 billion euros, or about $13.5 billion–$15.7 billion, to its top line by 2025.

We should note, however, that it’s often risky to invest directly in a pharmaceutical or biotechnology company. Big pharmaceutical companies are exposed to patent expiries and sales declines for key blockbuster drugs, so to remain on the safe side, investors can invest in ETFs like the First Trust Value Line Dividend Index Fund (FVD), which has 0.53% of its total holdings in Sanofi.

Continue to the next part for a closer look at Sanofi’s franchise performances in 2016.

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