PARIS, April 24, 2020 /PRNewswire/ -- Sanofi (NASDAQ: SNY; EURONEXT: SAN)
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Rapid and decisive response to COVID-19 global health crisis
Q1 2020 sales growth performance driven by Dupixent®
Q1 2020 business EPS(2) growth reflected underlying performance and COVID-19 impact
R&D advances and regulatory milestones
Full-year 2020 business EPS(2) guidance affirmed
Sanofi Chief Executive Officer, Paul Hudson, commented:
"I am proud of the way Sanofi employees responded to the immense challenges of the COVID-19 pandemic. They continue to put patients first while embracing and delivering on the new Company strategy. This is exemplified by the multi-pronged approach to fight COVID-19 with the accelerated development of vaccine candidates and therapeutics while sustaining the impressive growth of Dupixent®, the strength of the Vaccines business as well as driving efficiencies and cash flow. In R&D, we took actions to maintain clinical trial programs and to advance our pipeline of potentially transformative medicines. While the duration of the pandemic remains unknown at this point, I am confident Sanofi is well positioned to navigate these challenges and deliver on our commitment to patients."
IFRS net sales reported
IFRS net income reported
IFRS EPS reported
Free cash flow(4)
Business operating income
Business net income(2)
(1) Changes in net sales are expressed at constant exchange rates (CER) unless otherwise indicated (definition in Appendix 9); (2) In order to facilitate an understanding of operational performance, Sanofi comments on the business net income statement. Business net income is a non-GAAP financial measure (definition in Appendix 9). The consolidated income statement for Q1 2020 is provided in Appendix 3 and a reconciliation of reported IFRS net income to business net income is set forth in Appendix 4; (3) Base for business EPS growth is €5.97, reflecting 2 cents impact from IFRS 16 (Appendix 9); (4) Free cash flow is a non-GAAP financial measure (definition in Appendix 9).
Consult Appendix 7 for full overview of Sanofi's R&D pipeline
Regulatory updates since February 6, 2020 include the following:
At the end of April 2020, the R&D pipeline contained 87 projects, including 35 new molecular entities in clinical development (or that have been submitted to the regulatory authorities). 39 projects are in phase 3 or have been submitted to the regulatory authorities for approval.
2020 first-quarter financial results(6)
Business Net Income(6)
In the first quarter of 2020, Sanofi generated net sales of €8,973 million, an increase of 6.9% and 6.6% at CER. About half of sales growth at CER was due to the net impact of COVID-19.
First-quarter other revenues increased 6.5% (up 3.4% at CER) to €343 million, including the VaxServe sales contribution of non-Sanofi products (€286 million, up 14.9% at CER).
First-quarter Gross Profit increased 6.1% to €6,469 million (up 5.5% at CER). The gross margin ratio decreased 0.6 percentage points to 72.1% (71.9% at CER) versus the first quarter of 2019. The negative impact from net price adjustments of Plavix® and the Aprovel® family in China and U.S. Diabetes net price evolution more than offset the favorable impact from Specialty Care growth and industrial productivity. In the first quarter of 2020, the gross margin ratio of segments were 74.8% for Pharmaceuticals (down 1.1 percentage points), 64.6% for Vaccines (up 2.3 percentage points) and 67.9% for CHC (down 1.3 percentage points).
Research and Development (R&D) expenses decreased 3.2% to €1,340 million in the first quarter of 2020. At CER, R&D expenses decreased 4.3% reflecting smart spending initiatives as well as a decline in Diabetes R&D expenses. In the first quarter, the ratio of R&D to sales decreased 1.6 percentage points to 14.9% compared to the first quarter of 2019.
First-quarter selling general and administrative expenses (SG&A) decreased 1.4% to €2,342 million. At CER, SG&A expenses were down 2.1%, reflecting smart spending initiatives. In the first quarter, the ratio of SG&A to sales decreased 2.2 percentage points to 26.1% compared to the first quarter of 2019.
First-quarter operating expenses were €3,682 million, a decrease of 2.1% and 2.9% at CER.
First-quarter other current operating income net of expenses was -€247 million versus -€102 million in the first quarter of 2019. In the first quarter of 2020, this line included an expense of €243 million (versus a €75 million expense in the first quarter of 2019) corresponding to the share of profit to Regeneron of the monoclonal antibodies Alliance, reimbursement of development costs by Regeneron and the reimbursement of commercialization-related expenses incurred by Regeneron.
The share of profit from associates was €131 million in the first quarter versus €71 million in the first quarter of 2019. The majority of the increase was due to discrete items in the equity accounting treatment of Sanofi's ownership in Regeneron, including adjustments related to IFRS versus U.S. GAAP and prior period true-up based on actual reported results.
In the first quarter, non-controlling interests were -€12 million versus -€10 million in prior period.
First-quarter business operating income (BOI) increased 15.8% to €2,659 million. At CER, BOI increased 15.9%. The ratio of BOI to net sales increased 2.2 percentage points to 29.6% versus the first quarter of 2019. Over the period, the BOI ratio of segments were 39.4% for Pharmaceuticals (up 2.5 percentage points), 26.8% for Vaccines (down 0.2 percentage points) and 37.1% for CHC (up 0.2 percentage points).
Net financial expenses were -€75 million in the first quarter versus -€54 million in the same period of 2019. The first quarter of 2019 included a €26 million financial gain in connection with contingent payments on future regulatory milestones.
First-quarter effective tax rate was stable at 22.0% versus the prior period. Sanofi continues to expect its effective tax rate to be around 22% in 2020.
First-quarter business net income(6) increased 15.9% to €2,042 million and increased 16.1% at CER. The ratio of business net income to net sales increased 1.8 percentage points to 22.8% versus the first quarter of 2019.
In the first quarter of 2020, business earnings per share(6) (EPS) increased 15.6% to €1.63 on both a reported basis and at CER, with roughly half of this growth due to the COVID-19 impact. The average number of shares outstanding was 1,251.3 million versus 1,245.8 million in the first quarter of 2019.
(6) See Appendix 3 for 2020 first-quarter consolidated income statement; see Appendix 9 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.
Reconciliation of IFRS net income reported to business net income (see Appendix 4)
In the first quarter of 2020, the IFRS net income was €1,683 million. The main items excluded from the business net income were:
In the first quarter of 2020, free cash flow(7) increased by 90.0% to €1,558 million, after net changes in working capital (-€414 million), capital expenditures (-€319 million) and other asset acquisitions1 (-€165 million) net of disposal proceeds1 (€448 million), and payments related to restructuring and similar items (-€277 million). Over the period, acquisitions2 were €2,245 million (related to Synthorx). As a consequence, net debt increased from €15,107 million at December 31, 2019, to €16,191 million at March 31, 2020 (amount net of €7,279 million cash and cash equivalents).
1Not exceeding €500 million per transaction.
2Amount of the transaction above €500 million per transaction.
(7) non-GAAP financial measure (definition in Appendix 9).
To access the full press release of the 2020 Q1 results, please click here.
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are statements that are not historical facts. These statements include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates", "plans" and similar expressions. Although Sanofi's management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Sanofi, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include among other things, the uncertainties inherent in research and development, future clinical data and analysis, including post marketing, decisions by regulatory authorities, such as the FDA or the EMA, regarding whether and when to approve any drug, device or biological application that may be filed for any such product candidates as well as their decisions regarding labelling and other matters that could affect the availability or commercial potential of such product candidates, the fact that product candidates if approved may not be commercially successful, the future approval and commercial success of therapeutic alternatives, Sanofi's ability to benefit from external growth opportunities, to complete related transactions and/or obtain regulatory clearances, risks associated with intellectual property and any related pending or future litigation and the ultimate outcome of such litigation, trends in exchange rates and prevailing interest rates, volatile economic and market conditions, cost containment initiatives and subsequent changes thereto, and the impact that COVID-19 will have on us, our customers, suppliers, vendors, and other business partners, and the financial condition of any one of them, as well as on our employees and on the global economy as a whole. Any material effect of COVID-19 on any of the foregoing could also adversely impact us. This situation is changing rapidly and additional impacts may arise of which we are not currently aware and may exacerbate other previously identified risks. The risks and uncertainties also include the uncertainties discussed or identified in the public filings with the SEC and the AMF made by Sanofi, including those listed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" in Sanofi's annual report on Form 20-F for the year ended December 31, 2019. Other than as required by applicable law, Sanofi does not undertake any obligation to update or revise any forward-looking information or statements.
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