Sanofi's Growth Strategy: Will It Make the Mark?

By Patricia Van Arnum - DCAT Editorial Director

June 15, 2016

Sanofi CEO Olivier Brandicourt is pushing hard to acquire the biopharmaceutical company, Medivation, as Sanofi moves forward to reshape its portfolio and drive growth. So where does the company stand?

Driving the company's strategy is a need to seek additional revenue growth following patent expiry of its top-selling product, Lantus (insulin glargine). Sanofi says it is on track to deliver 18 new products, which includes six major product launches, by 2020. Can the company deliver?

Refreshing product portfolios

   Olivier Brandicourt
        CEO, Sanofi

Key to Sanofi's future growth is to compensate for anticipated revenue decline from its top-selling product, Lantus (insulin glargine), which posted 2015 sales of EUR 6.390 billion  ($7.169 billion), down 10.8% in 2015 over 2014, on a constant exchange rate. In the US, sales of Lantus decreased 20.5% to EUR 4.023 billion ($4.506 billion), mainly reflecting higher discounts, a slowdown in the basal insulin market, and an unfavorable mix toward highly discounted government channels, such as Medicaid. A biosimilar of Lantus was launched by Eli Lilly and Company in several European markets in the third quarter of 2015, including Germany, the UK, Spain, and eight other countries and in Japan. Sanofi and Lilly settled a suit under which Lilly will not sell its insulin glargine product in the US before December 15. 2016. In the US, Sanofi's pediatric regulatory exclusivity for Lantus expired in February 2015. The compound patent expired in the US in August 2014 and in November 2009 in Europe and Japan, which also saw a patent extension expire in November 2014. The supplementary protection certificate for Lantus, including pediatric extension, expired in major European countries in May 2015, according to the company's 2015 annual filing.

 

Table I: Sanofi's Top 10 Selling Prescription Drugs, 2015.
Product 2015 Net sales Therapeutic area; drug categorgy; main areas of use
Lantus (insulin glargine) EUR 6.390 bn ($7.169 bn) Diabetes; long-acting analog of human insulin; Type I and 2 diabetes
Plavix (clopidogrel sulfate) EUR 1.929 bn ($2.164 bn) Established prescription products; platelet adenosine disphosphate receptor agonist; atherothrombosis; acute coronary syndrome with and without ST segment elevation
Lovenox (enoxaparin sodium) EUR 1.719 bn ($1.928 bn) Established prescription product; low molecular weight heparin; deep vein thrombosis and acute coronary syndromes
Renagel (sevelamer hydrochloride)/Renvela (sevelamer carbonate) EUR 935 m ($1.049 bn) Established prescription product; oral phosphate binder; high phosphorus levels in patients with chronic kidney disease on dialysis
Aubagio (teriflunomide) EUR 871 m ($976 m) Multiple sclerosis; immunomodulating agent; multiple sclerosis
Aprovel (irbesartan/CoAprovel (irbesartan & hydrochlorothiazide) EUR 762 m ($854 m) Established prescription products; angiotensin II receptor antagonist; hypertension
Cerezyme (imiglucerase for injection) EUR 757 m ($848 m) Rare diseases; enzyme replacement therapy; Gaucher disease
Myozyme/Lumizyme (alglucosidase alpha) EUR 650 m ($728 m) Rare diseases; enzyme replacement therapy; Pompe disease
Fabrazyme (agalsidase beta) EUR 592 m ($663 m) Rare diseases; enzyme replacement therapy; Fabry disease
Synvisc/Synvisc-One (hylan G-F-20)!-- EUR 413 m ($462 m) Established prescription product; viscosupplements; pain associated with osteoarthritis of the knee

B is billion; m is million .
Exchange rate as of June 14, 2016; 1 EUR = $1.12194
Source: Sanofi, company information

 

Sanofi hopes to return to growth in its diabetes franchise by 2019 by building on associated products with Lantus, namely, Toujeo, the company's next-generation basal insulin. Toujeo gained marketing authorization in the three major markets (US, Europe Union, and Japan) in 2015 and is now approved in 20 countries overall. The uptick for Toujeo is long, with the drug posting sales of EUR 164 million ($185 million) in 2015 although analysts point to its market potential. A recent Thomson Reuters analysis projects 2019 sales of Toujeo at $1.299 billion, pushing the drug into blockbuster status, although not recapturing the full revenue loss from the patent expiry of Lantus. In its diabetes franchise, Sanofi is also seeking gains from a combination product of insulin glargine and lixisenatide, for which it has submitted applications for regulatory approval in the US and Europe and for which decisions on approval are expected later this year.

Among other recent developments in its diabetes franchise, the company formed a licensing agreement in 2015 with Lexicon for sotagliflozin, a SGTL-1/2 inhibitor, and with Hanmi for a weekly GLP-1, a long-acting insulin and a weekly insulin-GLP-1 combination.

The other key piece for Sanofi is growth in its cardiovascular franchise, namely for its anti-cholesterol drug, Praluent (alirocumab), which Sanofi co-developed with Regeneron Pharmaceuticals. Praluent is a monoclonal antibody targeting PCSK9 (proprotein convertase subtilisin/kexin type 9), a new class of anti-cholesterol drug, and is competing against Amgen's and Astella Pharma's Repatha (evolocumab). Praluent became the first PCSK9 inhibitor to be approved in the US and Repatha the first to be approved in the European Union (EU), both in July 2015; EU approval for Praluent followed in September 2015 and US approval for Repatha in October 2015. However, while approval for both Praluent and Repatha was anticipated for the broad indication of primary hypercholesterolemia, the US Food and Drug Administration limited both drugs to a subset of patients predisposed to high cholesterolemia at the limit of their statin therapy, greatly limiting the potential target population. Cardiovascular outcomes studies are ongoing for both Praluent and Repatha and could ultimately broaden the patient population, but recent Thomas Reuters 2019 forecasts are lower (although undoubtedly still blockbusters) than in early 2015 for Praluent ($1.957 billion versus $4.414 billion) and similar for Repatha ($1.994 billion versus $1.862 billion), rising to $2.500 billion and $2.461 billion, respectively, in 2020.

Toujeo, Praluent, and a combination of lixisenatide/insulin glargine represent three of the six major product launches Sanofi has identified. The other products are: sarilumab, a drug for treating rheumatoid arthritis, which is currently under FDA review for which a decision is expected by late October 2016; dupilumab, a monoclonal antibody being developed by Sanofi and Regeneron for treating atopic dermatitis, an indication for which the companies received FDA breakthrough therapy designation; and Dengvaxia, a dengue vaccine.

Sanofi's interest in acquiring the biopharmaceutical company, Medivation, is to add a potential blockbuster to its portfolio. Medivation's key product is Xtandi (enzalutamide), a drug to treat prostate cancer, for which it is partnered with Astellas. In its first-quarter earnings release, Medivation reported that US net sales of Xtandi, as reported by Astellas, are expected to range between $1.425 and $1.525 billion in 2016. Sanofi has been rebuffed by Mediviation with Medivation rejecting Sanofi's $9.4 billion acquisition proposal. This week Sanofi filed definitive consent solicitation materials with the US Securities and Exchange Commission (SEC) seeking to remove and replace each member of Medivation's Board of Directors with eight independent candidates. Sanofi also reported the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) in connection with Sanofi's intent to acquire Medivation. Medivation responded by filing with the SEC a consent revocation statement providing its stockholders the ability to submit consents or consent revocations by August 2, 2016. Medivation also mailed a letter to its stockholder to urge them to reject Sanofi's offer. This process began when Sanofi privately approached Medivation expressing its interest in negotiating a transaction in late March and early April and submitted a private proposal in mid-April. In late April, Sanofi made the proposal public following Medivation's rejection of the proposal.

Simplifying the organization
Another key move by Brandicourt was to reorganize the company into five global business unites that parallel an aligned R&D organization and which is supported by centralized global functions. Table II outlines the composition of the five business units, which took effect January 1, 2016. Reshaping the company's plant network was also identified as the second element in the company's interest to simplify its organization, including adopting a more focused approach in emerging markets and continued investment in biologics. To compensate for the loss of revenue in its diabetes franchise, the company is aiming to generate EUR 1.5 billion ($1.68 billion) in cost savings by 2018. Two-thirds of the cost savings are expected to come from simplification of the organization worldwide and a from a more focused portfolio. Of this two-thirds, half is expected to come from improvements in gross margin and the other half from selling, general, and administrative expenses. The remaining third of the cost savings is expected to come from investment prioritization.

Table II: Sanofi's Five Global Business Units
Business unit Description
General Medicines & Emerging Markets Consists of Sanofi's established prescription products, generics, consumer healthcare, and all pharmaceutical businesses in emerging markets
Sanofi Genzyme Sanofi's medicines in rare diseases, multiple sclerosis, oncology, and immunology
Diabetes and Cardiovascular Sanofi's medicines in diabetes care and cardiovascular medicines
Sanofi Pasteur Vaccines
Merial Animal health products


Source: Sanofi, company information

 

As part of that simplification, the company is using a share services model consisting of one Sanofi Business Services Organization that consolidates core process delivery activities of some support functions (human resources and finance), some expertise functions (procurement, real estate, and facility management) and institutes standardization and consolidation to create an end-to-end process across the enterprise. Sanofi is also globalizing its information technology function to drive synergies, simply business applications, and leverage a cloud strategy

In 2015, Sanofi also said it will explore strategic options for its animal health and European generics businesses. In animal health, Sanofi says that Merial has successfully returned to strong growth and is one of the most profitable companies in its sector.