sanofi research document by lazard
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Sanofi research document by lazardTRANSCRIPT
Dec Yr 1Q 2Q 3Q 4Q FY Rev 2012A €8.9 €9.1 €9.2 €8.7 €36.0 2013E - New €8.2A €8.1A €8.4 €8.3 €32.9 2013E - Old €8.2A €8.1A €8.8 €8.6 €33.7 2014E - New -- -- -- -- €33.6 2014E - Old -- -- -- -- €35.4
1Q 2Q 3Q 4Q FY EPS P/E€1.89 €1.48 €1.68 €1.19 €6.20 11.7x
€1.22A €1.11A €1.43 €1.27 €5.04 14.4x€1.22A €1.11A €1.61 €1.38 €5.32 NM
-- -- -- -- €5.62 12.9x-- -- -- -- €6.10 NM
Source: Company Information and Leerink Swann LLC ResearchRevenues in billions; total revenues.Business EPS: incl. options expense.
October 18, 2013
MARKET PERFORMfrom OUTPERFORM
Reason for report:
RATING CHANGE
Seamus Fernandez(617) [email protected]
Ario Arabi(617) [email protected]
SANOFILowering Rating to MP from OP on Muted Visibility for BroaderRecovery• Bottom Line: We are downgrading SNY from Outperform to MarketPerform and lowering our DCF-based price target to €80 from €83primarily on continued low visibility around the pace of recovery in thecompany's base business, and we do not expect the upcoming 3Q results(10/30) to improve this. For value investors, our forecasts don't includeSNY's €3B ownership interest in REGN (OP) or the prospects for anaccretive repurchase of L'Oreal's 9% stake in SNY. And although wecontinue to like the long-term opportunity for products such as alirocumab(PCSK9; LDL-lowering) and dupilumab (anti-IL-4 alpha; asthma & atopicdermatitis), we are skeptical that visibility on the base business, whichincludes substantial generic and tail product exposure, will improvematerially during the next 12 months. This makes it increasingly difficultfor us to recommend putting new money to work in SNY until consensusestimates better reflect this risk or substantial new pipeline opportunitiesemerge. Our new 3Q:13 through 2020 EPS estimates now reflect currentforeign exchange headwinds.
• Cutting our sales and EPS forecasts to better reflect business& Fx headwinds. We are reducing our sales and EPS forecasts byup to €2.1B and up to €0.48, respectively, reflecting the risk that thebase business (primarily other pharmaceutical/tail products, Plavix, andemerging markets) remains under pressure for the next 12 to 18 months.Fx headwinds further exacerbate the impact on sales and EPS, althoughthese headwinds should diminish substantially in 2H:14. Approximatelyhalf of our cuts came from Fx and half from lower growth forecasts.
• Pipeline is improving but an investment in SNY today is reallyfocused on the Lantus franchise. While we believe alirocumab &dupilumab have blockbuster potential, we are skeptical that today's payorenvironment will allow for faster-than-expected product launches. Webelieve that the PCSK9 market will look a lot more like the GLP-1 marketin size and utilization rather than statins or basal insulin. Similarly, we arebullish on prospects for dupilumab, but we believe the greenfield oppt'yin atopic dermatitis will take time to develop and potential competitionfrom respiratory biologics (anti-IL-13, anti-IL-5) may make for a crowdedmarket. Therefore, as we see it, today's investment in SNY is morefocused on the Lantus franchise's post-2016 growth, which given likelycompetition from biosimilars and NVO's Tresiba OUS, increases SNY'sreliance on the U.S. market where more competition is likely to erodeLantus share & increase managed care discounting as additional basalinsulins from LLY (OP, 2015/16) and NVO (2016/17) will likely enter themarket.
Key Stats: (PSE:SAN FP)
S&P 500 Health Care Index: 611.07Price(NYSE): $50.13Price(PSE): €72.70Price Target: €80.00 from €83.00Methodology: DCF out to 2020E52 Week High: €87.0352 Week Low: €65.89Shares Outstanding (mil): 1,323.2Market Capitalization (mil): €96,199.8Book Value/Share: €31.36Cash Per Share: €4.82Net Debt to Total Capital: 28%Dividend (ann): €2.77Dividend Yield: 3.8%Est LT EPS Growth: 6%P/E to LT EPS Growth (FY14): 2.16
Est LT EPS Growth: CAGR '13E-19E.
Please refer to pages 8 - 12 for Important Disclosures, Price Charts and Analyst Certification.A description of the benchmarks is available by contacting the Leerink Swann Publishing Department.
INVESTMENT THESIS We are downgrading SNY from Outperform to Market Perform on continued low visibility
around the pace of recovery in the company's base business. For value investors, our valuation
does not include SNY's €3B ownership interest in REGN or prospects for an accretive repurchase
of L'Oreal's 9% stake in SNY. Although we continue to like the long-term opportunity for products
such as alirocumab (PCSK9; LDL-lowering) and dupilumab (anti-IL-4 alpha; asthma & atopic
dermatitis), we are skeptical that visibility on the base business, which includes substantial generic
and tail product exposure will improve materially during the next 12 months. This makes it
increasingly difficult for us to recommend putting new money to work in SNY until consensus
estimates better reflect this risk or substantial new pipeline opportunities emerge. Our DCF
analysis which forecasts sales and profits out to 2020 now results in a price target of €80 versus
€83 previously.
CHANGES TO OUR MODEL
EPS & Total Sales Forecasts (2012-20E) (€MM, except per share data)
Source: Company information, Leerink Swann Research estimates
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 6.14 5.04 5.62 6.23 6.58 6.80 7.08 7.35 7.70
Old 6.14 5.32 6.10 6.63 6.97 7.19 7.48 7.74 8.07
Difference - (0.28) (0.48) (0.40) (0.39) (0.39) (0.40) (0.38) (0.37)
*Rounding
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 34,947 32,586 33,238 34,700 35,614 36,519 37,621 38,826 40,229
Old 34,947 33,345 35,080 36,635 37,682 38,585 39,706 40,828 42,132
Difference - (759) (1,842) (1,934) (2,068) (2,066) (2,085) (2,002) (1,903)
Total Pro Forma EPS Forecasts 2012-2020E
Total Pro Forma Sales (ex other revenue) Forecasts 2012-2020E
2
SANOFI October 18, 2013
P&L Forecasts (2012-20E) (€MM)
Source: Company information, Leerink Swann Research estimates
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 11,075 10,535 10,459 10,488 10,579 10,847 11,171 11,522 11,927
Old 11,075 10,681 10,756 10,986 11,195 11,463 11,793 12,122 12,498
Difference - (145) (298) (499) (616) (616) (622) (599) (571)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 71.2% 68.8% 69.5% 70.7% 71.2% 71.2% 71.2% 71.2% 71.2%
Old 71.2% 69.0% 70.3% 70.9% 71.2% 71.1% 71.1% 71.1% 71.1%
Difference 0.0% -0.3% -0.8% -0.2% 0.1% 0.1% 0.1% 0.1% 0.1%
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 8,929 8,550 8,328 8,443 8,659 8,822 9,093 9,432 9,766
Old 8,929 8,739 8,780 8,904 9,153 9,312 9,588 9,906 10,212
Difference - (189) (452) (461) (494) (490) (495) (474) (447)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 4,905 4,640 4,522 4,717 4,836 4,965 5,114 5,279 5,476
Old 4,905 4,665 4,771 4,979 5,116 5,245 5,396 5,548 5,731
Difference - (25) (249) (262) (280) (280) (282) (270) (255)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 10,538 8,961 9,945 11,057 11,571 11,945 12,333 12,713 13,210
Old 10,538 9,381 10,787 11,770 12,248 12,625 13,019 13,372 13,840
Difference - (420) (843) (713) (677) (680) (686) (659) (630)
Pretax Income Forecasts Forecasts 2012-2020E
SG&A Forecasts 2012-2020E
R&D Forecasts Forecasts 2012-2020E
Cost of Sales Forecasts 2012-2020E
Gross Profit Margin Forecasts 2012-2020E
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 25.5% 24.5% 26.0% 27.0% 27.0% 27.5% 27.5% 27.5% 27.5%
Old 25.5% 24.0% 26.0% 27.0% 27.0% 27.5% 27.5% 27.5% 27.5%
Difference 0.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Tax Rate Forecasts 2012-2020E
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 8,101 6,670 7,374 8,117 8,507 8,730 9,011 9,287 9,647
Old 8,101 7,035 7,998 8,637 9,001 9,223 9,508 9,765 10,104
Difference - (364) (623) (521) (494) (493) (497) (478) (457)
Net Income Forecasts 2012-2020E
3
SANOFI October 18, 2013
Sales & Key Product Forecasts (2012-20E) (€MM)
Source: Company information, Leerink Swann Research estimates
Note: Our models present all figures in €MMs, except per share.
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 7,057 6,732 7,251 7,899 8,021 8,231 8,544 8,943 9,450
Old 7,057 6,780 7,531 8,150 8,314 8,522 8,852 9,179 9,593
Difference - (48) (280) (251) (293) (292) (308) (236) (143)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 6,410 5,837 5,697 5,631 5,648 5,695 5,809 5,851 5,937
Old 6,410 5,853 5,705 5,639 5,659 5,695 5,803 5,819 5,910
Difference - (17) (8) (7) (10) 0 6 31 27
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 6,795 6,624 6,607 6,940 7,270 7,532 7,789 8,080 8,401
Old 6,795 6,941 7,366 7,752 8,128 8,415 8,689 9,003 9,333
Difference - (317) (759) (812) (858) (883) (901) (924) (932)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 3,757 3,092 3,074 3,061 3,046 3,122 3,211 3,371 3,534
Old 3,757 3,164 3,237 3,259 3,258 3,299 3,362 3,499 3,626
Difference - (73) (163) (198) (212) (177) (152) (129) (92)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 2,066 1,865 1,819 1,694 1,525 1,424 1,350 1,309 1,278
Old 2,066 1,926 2,011 1,942 1,803 1,685 1,594 1,545 1,506
Difference - (61) (192) (247) (278) (261) (244) (235) (228)
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 7,173 6,375 6,023 5,868 5,756 5,656 5,562 5,472 5,388
Old 7,173 6,543 6,396 6,267 6,193 6,104 6,022 5,944 5,872
Difference - (168) (373) (398) (437) (448) (460) (472) (484)
Total Plavix Forecasts 2012-2020E
Total Other Pharma Forecasts 2012-2020E
Total U.S Pharma Sales Forecasts (including GENZ) 2012-2020E
Total Western Europe Pharma Sales Forecasts 2012-2020E
Total EGM Pharma Sales Forecasts 2012-2020E
Total ROW Pharma Sales Forecasts 2012-2020E
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
New 4,960 5,591 6,195 6,829 6,814 6,820 6,771 6,754 6,794
Old 4,960 5,669 6,435 7,013 7,008 7,021 6,977 6,967 7,013
Difference - (78) (240) (184) (194) (201) (207) (213) (219)
Total Lantus (U100 + U300) Forecasts 2012-2020E
4
SANOFI October 18, 2013
Sanofi 2013 Guidance Progression
VALUATION SAN.FP trades at ~14.5x our trough ’13 EPS forecast of €5.04 and ~13x our ’14 EPS of €5.62.
This represents a discount to the S&P 500 and is in line with Leerink Swann's large-cap
pharmaceutical coverage universe on 2014E EPS excluding BMY. SAN.FP's relative P/E discount
to the S&P 500 and comparable P/E within Leerink Swann's pharmaceutical coverage universe
excluding BMY on 2013 EPS largely reflects near-term generic risks and impact on cash flow, in
our view. Our updated DCF analysis, which forecasts sales and free cash flow through 2020 and
applies a 0% terminal growth rate at a WACC of 8.25%, results in a price target for SAN.FP
shares of €80/share in 12 months.
RISKS TO VALUATION Risks to SNY include possible near-term risk to 2012-15 sales growth estimates that would result
from incremental GENZ manufacturing disruptions, pipeline approval delays, or a global recession
further impacting emerging market growth.
5
Key Line Items February 2013 May 2013 July 2013 Sales
Residual impact from the loss of Plavix and Avapro exclusivity in the US is anticipated to impact business net
income in 1H13 by 800M Euros at CER
Residual impact from the loss of Plavix and Avapro exclusivity in the US is anticipated to impact business net income in 1H13 by 800M Euros at CER
No update
Gross margin Similar to 2012 as % of total product
sales Similar to 2012 as % of total product
sales Similar to 2012 as % of total product
sales excluding 130 bp impact of Brazilian generics
Tax rate
26-27% 26-27% 24%
Business EPS
Flat to ~5% from 2012 at CER (6.20) which suggests 5.75
Flat to ~5% from 2012 at CER (6.20) which suggests 5.75
Given the impact of Brazil and the year- to-date performance, 2013 business EPS is expected to be 7% to 10% lower than 2012 at CER, barring major unforeseen adverse events.
Dividend Payout Ratio Targeted 50% payout ratio view to be a
floor Source: Company information, Leerink Swann LLC estimates.
5
SANOFI October 18, 2013
SNY Annual Product Summary
(figures in €m, except per share data) CAGR CAGR
2012 1Q13 2Q13 3Q13E 4Q13E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 13E-17E 13E-19E
Actonel (risedronate; osteoporosis) 134 28 24 24 22 97 88 27 27 27 27 27 27 -27% -19%
Allegra (fexofenadine; allergic rhinitis) 553 169 79 73 88 409 371 364 361 356 351 346 341 -3% -3%
Amaryl (glimepiride; sulfonylurea - diabetes) 421 94 99 91 89 373 362 368 379 387 395 400 405 1% 1%
Apidra (fast insulin analog; diabetes) 230 66 68 68 74 276 318 362 396 425 450 477 500 11% 10%
Aprovel/Avapro (irbesartan; AII-hypertension) 1,151 241 238 207 174 859 754 700 655 606 562 522 492 -8% -8%
Copaxone (glatiamer acetate; multiple sclerosis) 24 - - - - - - - - - - - - nm na
Depakine (valproate; epilepsy) 410 106 103 103 101 413 421 441 455 450 445 441 436 2% 1%
Eloxatin (oxaliplatin; colorectal cancer) 956 59 60 48 45 211 169 160 157 155 152 150 147 -8% -6%
Insuman (human insulin; diabetes) 135 33 32 33 35 133 134 140 147 151 155 157 160 3% 3%
Lantus (insulin glargine; diabetes) 4,960 1,338 1,409 1,388 1,456 5,591 6,195 6,714 6,524 6,370 6,096 5,854 5,644 3% 1%
Lovenox (enoxaparin; LMWH - thrombosis) 1,893 428 436 391 396 1,651 1,542 1,506 1,440 1,395 1,350 1,311 1,272 -4% -4%
Multaq (dronederone; Anti-Arrhythmics; AF) 255 62 69 61 59 251 242 238 237 77 44 36 34 -26% -28%
Nasacort (triamcinolone; allergies) 71 12 - - - 12 - - - - - - - -100% -100%
Plavix (clopidogrel; atherothrombosis) 2,066 450 493 451 471 1,865 1,819 1,694 1,525 1,424 1,350 1,309 1,278 -7% -6%
Ambien/Stillnox/Myslee (zolpidem; insomnia) 497 101 92 90 85 368 310 283 263 254 248 237 215 -9% -7%
Taxotere (docetaxel; breast, NSCLC, prost. cancer) 563 108 114 85 90 397 313 270 247 232 223 216 209 -13% -10%
Tritace/Delix (ramipril; hypertension) 345 78 80 76 76 310 297 293 290 286 283 280 277 -2% -2%
Xatral/Uroxatral (alfuzosin; prostatic hyperplasia) 130 26 25 22 20 93 84 81 79 77 76 74 73 -5% -4%
GENZ 1,785 473 492 512 526 2,003 2,207 2,421 2,582 2,706 2,809 2,899 2,983 8% 6%
Consumer Health Care 3,008 811 729 701 705 2,946 3,074 3,257 3,395 3,466 3,562 3,661 3,763 4% 4%
Generics 1,844 423 300 337 317 1,377 1,394 1,473 1,546 1,617 1,675 1,738 1,807 4% 4%
Other Pharma 7,173 1,612 1,658 1,520 1,584 6,375 6,023 5,868 5,756 5,656 5,562 5,472 5,388 -3% -3%
Total In-Line Portfolio 28,604 6,718 6,600 6,280 6,414 26,012 26,118 26,662 26,462 26,118 25,815 25,609 25,452 0% 0%
Lixisenatide (AVE0010, GLP-1 agonist; diabetes) - - 1 5 9 15 45 100 160 225 280 350 405 na 69%
Zaltrap (aflibercept; VEGF-trap; cancer) 25 11 14 30 55 110 205 300 400 490 550 520 550 45% 30%
BSI-201 (PARP inhibitor; lung cancer) - - - - - - - - - - - - - na na
Jevtana (cabazitaxel; Prostate cancer) 235 52 54 65 79 250 280 300 310 330 340 360 370 7% 6%
otamixaban (XRP0673; ACS) - - - - - - - - - - - - - na na
Aubagio (HMR 1726; multiple sclerosis) 7 20 33 44 48 145 225 320 415 510 605 700 775 37% na
Lemtrada (alemtuzumab, multiple sclerosis) - - - - 5 5 25 80 185 290 375 450 500 na 112%
Auvi-Q (epinephrine device; allergies) - 6 9 35 5 55 125 200 250 300 325 340 350 na 35%
eliglustat (oral Gaucher treatment) - - - - - - 20 50 90 155 240 310 380 na na
U300 glargine (new Lantus formulation, diabetes) - - - - - - - 115 290 450 675 900 1,150 na na
Kynamro (apoB antisense, HoFH) - 1 3 5 6 15 40 60 80 105 130 155 160 na 48%
SAR302503 (JAK2 inhibitor, MF) - - - - - - 15 75 125 180 215 230 240 na na
SAR236553 (Anti-PCSK-9 mAb, LDL) - - - - - - - - 110 230 435 680 1,000 na na
sarilumab (Anti-IL-6R mAb, RA) - - - - - - - - 50 125 250 420 575 na na
Dupilumab (Anti-IL-4α mAb, respiratory/skin) - - - - - - - - - 50 115 265 500
Other pipeline (PD2034, PI3K inhib, MM-121) - - - - - - - - - 105 240 355 485 na na
Pipeline Subtotal 267 90 114 184 207 595 980 1,600 2,465 3,545 4,775 6,035 7,440 56% 47%
Total Global Pharma Sales 28,871 6,808 6,714 6,464 6,621 26,607 27,098 28,262 28,927 29,663 30,590 31,644 32,892 3% 3%
% Growth 4% -7% -11% -8% -5% -8% 2% 4% 2% 3% 3% 3% 4%
Polio / Pertussis / Hib Vaccines 1,184 270 293 290 347 1,200 1,240 1,284 1,306 1,325 1,332 1,338 1,344 3% 2%
Adult Booster Vaccines 496 85 124 134 118 461 461 472 481 488 495 502 509 1% 1%
Influenza Vaccines 884 119 53 567 178 916 943 978 995 1,008 1,021 1,034 1,047 2% 2%
Travel and Other Endemics Vaccines 364 74 98 77 99 348 351 368 386 396 406 417 428 3% 3%
Meningitis / Pneumonia Vaccines 650 80 123 232 219 654 676 694 709 708 706 690 676 2% 1%
Shantha - - - - - - 50 80 115 135 150 150 150 na na
Other Vaccines 319 69 69 118 143 399 484 554 607 642 679 719 761 13% 10%
Total Vaccines 3,897 697 760 1,417 1,104 3,979 4,204 4,429 4,599 4,703 4,789 4,850 4,915 4% 3%
Total Animal Health Sales 2,179 554 529 449 468 2,000 1,936 2,009 2,088 2,153 2,243 2,332 2,422 2% 3%
Total Global Sales 34,947 8,059 8,003 8,331 8,192 32,586 33,238 34,700 35,614 36,519 37,621 38,826 40,229 3% 3%
% Growth 5% -5% -10% -8% -4% -7% 2% 4% 3% 3% 3% 3% 4%
Other Revenues 1,010 98 83 83 91 355 330 330 330 330 330 330 330 -2% -1%
Total Revenue 35,957 8,157 8,086 8,414 8,283 32,941 33,568 35,030 35,944 36,849 37,951 39,156 40,559 3% 3%
% Growth 3% -9% -11% -9% -4% -8% 2% 4% 3% 3% 3% 3% 4%
Source: Company information, Leerink Swann Research estimates.
6
SANOFI October 18, 2013
-
SNY Annual P&L Summary (Adj. Basis)
(figures in €m, except per share data) CAGR CAGR
2012 1Q13 2Q13 3Q13E 4Q13E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 13E-17E 13E-19E
Total Global Sales 34,947 8,059 8,003 8,331 8,192 32,586 33,238 34,700 35,614 36,519 37,621 38,826 40,229 3% 3%
% Growth 5% -5% -10% -8% -4% -7% 2% 4% 3% 3% 3% 3% 4%
Other Revenues 1,010 98 83 83 91 355 330 330 330 330 330 330 330 -2% -1%
Total Revenue 35,957 8,157 8,086 8,414 8,283 32,941 33,568 35,030 35,944 36,849 37,951 39,156 40,559 3% 3%
% Growth 3% -9% -11% -9% -4% -8% 2% 4% 3% 3% 3% 3% 4%
COGS 11,075 2,536 2,672 2,712 2,615 10,535 10,459 10,488 10,579 10,847 11,171 11,522 11,927 1% 2%
% of net sales (ex. Other revenue) 31.7% 31.5% 33.4% 32.6% 31.9% 32.3% 31.5% 30.2% 29.7% 29.7% 29.7% 29.7% 29.6%
Gross Margin - Total Group 24,882 5,621 5,414 5,702 5,668 22,405 23,110 24,543 25,366 26,002 26,780 27,634 28,632 4% 4%
% of net sales (GM/Total Global Sales; as reported) 71.2% 69.7% 67.6% 68.4% 69.2% 68.8% 69.5% 70.7% 71.2% 71.2% 71.2% 71.2% 71.2%
% of total sales (GM/Total Revenue) 69.2% 68.9% 67.0% 67.8% 68.4% 68.0% 68.8% 70.1% 70.6% 70.6% 70.6% 70.6% 70.6%
R&D 4,905 1,155 1,186 1,040 1,259 4,640 4,522 4,717 4,836 4,965 5,114 5,279 5,476 2% 2%
% of net sales (ex. Other revenue) 14.0% 14.3% 14.8% 12.5% 15.4% 14.2% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6%
SG&A 8,929 2,129 2,309 2,034 2,078 8,550 8,328 8,443 8,659 8,822 9,093 9,432 9,766 1% 2%
% of net sales (ex. Other revenue) 25.6% 26.4% 28.9% 24.4% 25.4% 26.2% 25.1% 24.3% 24.3% 24.2% 24.2% 24.3% 24.3% na na Other current operating (income)/expense 134 (30) (100) (60) (60) (250) (190) (140) (140) (140) (140) (140) (140) -13% -9%
Other current operating expense - - (5) - - (5) - - - - - - - na -100%
Net animal health (income)/expense 3 - 1 (5) (11) (15) (15) (15) (15) (15) (15) (15) (15) 0% 0%
Other 11 - (36) - - (36) - - - - - - - na -100%
Other operating (income)/expense, net 148 (30) (140) (65) (71) (306) (205) (155) (155) (155) (155) (155) (155) -16% -11%
Share of profit/loss of associates (BMY, SPMSD) 424 18 3 4 4 30 45 75 90 100 100 100 100 35% 22%
Share of profit/loss Merial - - - - - - - - - - - - - na na
Minority interest (172) (41) (45) (20) (19) (125) (30) (30) (30) (30) (30) (30) (30) -30% -21%
Business Operating Income - Current 11,448 2,344 2,017 2,677 2,387 9,426 10,480 11,582 12,086 12,440 12,798 13,148 13,615 7% 6%
% of net sales (ex. Other revenue) 32.8% 29.1% 25.2% 32.1% 29.1% 28.9% 31.5% 33.4% 33.9% 34.1% 34.0% 33.9% 33.8% na na
Financial expenses 751 175 154 160 161 650 650 650 650 650 650 650 650 0% 0%
Financial (income) (93) (35) (17) (20) (18) (90) (130) (170) (195) (225) (255) (285) (315) 26% 21%
Total Net Financial (Income)/Expense 658 140 137 140 143 560 520 480 455 425 395 365 335 -7% -7%
Exceptional items - - - - - - - - -
Share of profit/loss of associates (424) (18) (3) (4) (4) (30) (45) (75) (90) (100) (100) (100) (100) 35% 22%
Share of profit/loss Merial - - - - - - - - - - - - -
Minority interest 172 41 45 20 19 125 30 30 30 30 30 30 30 -30% -21%
Pretax Income 10,538 2,227 1,922 2,553 2,259 8,961 9,945 11,057 11,571 11,945 12,333 12,713 13,210 7% 6%
% of net sales (ex. Other revenue) 30.2% 27.6% 24.0% 30.6% 27.6% 27.5% 29.9% 31.9% 32.5% 32.7% 32.8% 32.7% 32.8%
Tax (Benefit)/Expense 2,689 591 405 638 561 2,195 2,586 2,985 3,124 3,285 3,392 3,496 3,633 11% 8%
% tax rate 25.5% 26.5% 21.1% 25.0% 24.8% 24.5% 26.0% 27.0% 27.0% 27.5% 27.5% 27.5% 27.5%
Business Net Income 8,101 1,613 1,475 1,899 1,683 6,670 7,374 8,117 8,507 8,730 9,011 9,287 9,647 7% 6%
% of net sales (ex. Other revenue) 23.2% 20.0% 18.4% 22.8% 20.5% 20.5% 22.2% 23.4% 23.9% 23.9% 24.0% 23.9% 24.0%
Business EPS € 6.14 € 1.22 € 1.11 € 1.43 € 1.27 € 5.04 € 5.62 € 6.23 € 6.58 € 6.80 € 7.08 € 7.35 € 7.70 8% 6%
% growth -7% -34% -24% -14% 9% -18% 11% 11% 6% 3% 4% 4% 5%
Avg. Exch Rate (€/US$) 1.29 1.32 1.32 1.37 1.37 1.34 1.37 1.37 1.37 1.37 1.37 1.37 1.37
Shares Outstanding (in MMs) 1,320 1,322 1,326 1,324 1,321 1,323 1,313 1,303 1,293 1,283 1,273 1,263 1,253 -1% -1%
% growth
Source: Company information, Leerink Swann Research estimates.
Note: Each SNY ADR represents one-half of one share.
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Disclosures AppendixAnalyst CertificationI, Seamus Fernandez, certify that the views expressed in this report accurately reflect my views and that no part of mycompensation was, is, or will be directly related to the specific recommendation or views contained in this report.
ValuationSAN.FP trades at ~14.5x our trough ’13 EPS forecast of €5.04 and ~13x our ’14 EPS of €5.62. This represents adiscount to the S&P 500 and is in line with Leerink Swann's large-cap pharmaceutical coverage universe on 2014EEPS excluding BMY. SAN.FP's relative P/E discount to the S&P 500 and comparable P/E within Leerink Swann'spharmaceutical coverage universe excluding BMY on 2013 EPS largely reflects near-term generic risks and impact oncash flow, in our view. Our updated DCF analysis, which forecasts sales and free cash flow through 2020 and appliesa 0% terminal growth rate at a WACC of 8.25%, results in a price target for SAN.FP shares of €80/share in 12 months.
Risks to ValuationRisks to SNY include possible near-term risk to 2012-15 sales growth estimates that would result from incrementalGENZ manufacturing disruptions, pipeline approval delays, or a global recession further impacting emerging marketgrowth.
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Distribution of Ratings/Investment Banking Services (IB) as of 09/30/13IB Serv./Past 12
Mos.Rating Count Percent Count PercentBUY [OP] 111 64.90 27 24.00HOLD [MP] 60 35.10 0 0.00SELL [UP] 0 0.00 0 0.00
Explanation of RatingsOutperform (Buy): We expect this stock to outperform its benchmark over the next 12 months.
Market Perform (Hold/Neutral): We expect this stock to perform in line with its benchmark over the next 12months.
Underperform (Sell): We expect this stock to underperform its benchmark over the next 12 months.The degreeof outperformance or underperformance required to warrant an Outperform or an Underperform rating shouldbe commensurate with the risk profile of the company.
For the purposes of these definitions the relevant benchmark will be the S&P 600® Health Care Index forissuers with a market capitalization of less than $2 billion and the S&P 500® Health Care Index for issuers witha market capitalization over $2 billion.
Important DisclosuresThis information (including, but not limited to, prices, quotes and statistics) has been obtained from sourcesthat we believe reliable, but we do not represent that it is accurate or complete and it should not be relied uponas such. All information is subject to change without notice. This is provided for information purposes onlyand should not be regarded as an offer to sell or as a solicitation of an offer to buy any product to which thisinformation relates. The Firm, its officers, directors, employees, proprietary accounts and affiliates may have aposition, long or short, in the securities referred to in this report, and/or other related securities, and from timeto time may increase or decrease the position or express a view that is contrary to that contained in this report.The Firm's salespeople, traders and other professionals may provide oral or written market commentary ortrading strategies that are contrary to opinions expressed in this report. The Firm's asset management groupand proprietary accounts may make investment decisions that are inconsistent with the opinions expressed inthis report. The past performance of securities does not guarantee or predict future performance. Transactionstrategies described herein may not be suitable for all investors. Additional information is available uponrequest by contacting the Publishing Department at One Federal Street, 37th Floor, Boston, MA 02110.
Like all Firm employees, analysts receive compensation that is impacted by, among other factors, overallfirm profitability, which includes revenues from, among other business units, the Private Client Division,Institutional Equities, and Investment Banking. Analysts, however, are not compensated for a specificinvestment banking services transaction.
Leerink Swann Consulting LLC, an affiliate of Leerink Swann LLC, is a provider of evidence-based strategyand consulting to the healthcare industry.
Leerink Swann LLC makes a market in Regeneron Pharmaceuticals, Inc.
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Leerink Swann LLC is willing to sell to, or buy from, clients the common stock of Sanofi, Bristol-Myers Squibband Eli Lilly & Company on a principal basis.In the past 12 months, an affiliate of the Firm, Leerink Swann Consulting LLC, has received compensation forproviding non-securities services to: Bristol-Myers Squibb.
©2013 Leerink Swann LLC. All rights reserved. This document may not be reproduced or circulated withoutour written authority.
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Leerink Swann LLC Equity Research
Director of Equity Research John L. Sullivan, CFA (617) 918-4875 [email protected]
Associate Director of Research Alice C. Avanian, CFA (617) 918-4544 [email protected]
Healthcare Strategy John L. Sullivan, CFA (617) 918-4875 [email protected]
Alice C. Avanian, CFA (617) 918-4544 [email protected]
Biotechnology Howard Liang, Ph.D. (617) 918-4857 [email protected]
Joseph P. Schwartz (617) 918-4575 [email protected]
Marko Kozul, M.D. (415) 905-7221 [email protected]
Michael Schmidt, Ph.D. (617) 918-4588 [email protected]
Irene Lau (415) 905-7256 [email protected]
Gena Wang, Ph.D., CFA (212) 277-6073 [email protected]
Paul Matteis (617) 918-4585 [email protected]
Life Science Tools Dan Leonard (212) 277-6116 [email protected]
and Diagnostics Justin Bowers, CFA (212) 277-6066 [email protected]
Pharmaceuticals/Major Seamus Fernandez (617) 918-4011 [email protected]
Ario Arabi (617) 918-4568 [email protected]
Specialty Pharmaceuticals,
Generics
Jason M. Gerberry, JD
Christopher W. Kuehnle, JD
(617) 918-4549
(617) 918-4851
Medical Devices, Cardiology & Danielle Antalffy (212) 277-6044 [email protected]
Orthopedics Richard Newitter (212) 277-6088 [email protected]
Robert Marcus, CFA (212) 277-6084 [email protected]
Ravi Misra (212) 277-6049 [email protected]
Healthcare Technology David Larsen, CFA (617) 918-4502 [email protected]
& Distribution Christopher Abbott (617) 918-4010 [email protected]
Sr. Editor/Supervisory Analyst Mary Ellen Eagan, CFA (617) 918-4837 [email protected]
Supervisory Analysts Robert Egan [email protected]
Amy N. Sonne [email protected]
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