Sanofi Upbeat On China Growth, Investment Despite Q4 Weakness
Executive Summary
Sanofi remains confident of its pharma business and growth prospects in China despite a decline in overall sales in this key emerging market in the fourth quarter.
While Sanofi’s total sales in emerging markets edged up by 2.4% at constant exchange rates in 2016 to €9.59bn ($10.18bn; +7% excluding Venezuela), the French group put in a less than stellar performance in China, where its overall business barely flickered up less than 1% to €2.04bn in the 12 months.
Chief financial officer Jérôme Contamine conceded during the fourth-quarter earnings call that “when it comes to China, yes the numbers are not very strong.”
Weighing in on an answer to an analyst’s question on the China figures during the conference, CEO Olivier Brandicourt also admitted that overall Sanofi sales in the country had been decreasing for the last quarter. (In this period, Sanofi’s total China business was down by around 11% to €496m.)
However, “Those sales include our vaccines that have been impacted by the disruption in the distribution market that we think is now resolved,” he noted.
“Those disruptions that itemized at the Shandong case are not specific to Sanofi, but are impacting the whole [vaccines] industry. We feel that now this situation has improved and those difficulties have been resolved.”
In a scandal that began to break publicly almost a year ago, a mother and daughter team in Shandong was found to have been widely distributing for years vaccines without the proper cold storage chain. The fallout from the affair and changes in oversight systems have broadly affected the national flow of vaccines. (Also see "China Vaccine Scandal: Hundreds Demoted But Root Causes Remain" - Scrip, 14 Apr, 2016.)
Pharma Stronger
Brandicourt noted that as far as Sanofi’s full-year pharma sales in China went, “we continue to outgrow the market, double-digit growth. We think that our portfolio continues to be well fit to the Chinese market with a significant presence in chronic disease with the strong sales of Plavix [clopidogrel, a platelet anti-aggregant] and Lantus [insulin glargine].
According to data released in the earnings, Sanofi’s pharma product sales as measured by the China IMS Hospital Pharmaceutical Audit grew by 12%in the October-November period.
“We are happy also to report the strong performance of our Oncology business that after a couple of years of sluggish sales has significantly recovered,” Brandicourt added. China-only figures were not broken out by the company, but emerging market Oncology sales in 2016 rose by around 3% to €372m.
Despite the quarterly weakness, the CEO remained upbeat on China, where he said Sanofi continued to outgrow the pharma market in 2016 as a whole. “For 2017, we expect that we will continue to grow double-digit [in pharma]…We are really happy with the performance of our primary business unit, which is our approach to the Western provinces [in China], where we feel that we still have room to grow.
“So, overall, we'll continue to invest in China. And I can tell you that the month of January has confirmed that we're off to a good start.”
Contamine also stressed that Sanofi remains “very confident in our future growth in China,” pointing to the double-digit increase for the pharma business in the country in the last three months. “So, we still have a pretty strong position there,” he declared.
Other Emerging Markets
Brandicourt noted that overall, Sanofi’s Emerging Markets franchise grew by 7% in 2016, excluding Venezuela, “which was consistent with the plus 5% to plus 9% growth band we had previously achieved.” Asia accounted for €3.11bn for the year, and Russia is also starting to recover, although the economic situation in Brazil remains “challenging”.
The CEO sees Sanofi’s global group sales as now well balanced geographically, with only about 37% of the overall figure (27% for prescription pharma) coming from the US.
From the editors of PharmAsia News.