PARIS, July 29, 2020 /PRNewswire/ -- Sanofi (NASDAQ: SNY; EURONEXT: SAN)
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Q2 2020 sales results reflect the strong performance of Dupixent® more than offset by COVID-19 related negative effects on Vaccines, General Medicines and CHC
Q2 2020 business EPS(1) benefits from share revaluation gain and effective cost management
R&D transformation, milestones and regulatory achievements
Full-year 2020 business EPS(1) guidance revised upward
Sanofi Chief Executive Officer, Paul Hudson, commented:
"I'm proud of what the team delivered in the second quarter. Even with some headwinds from the COVID-19 pandemic, we achieved business EPS growth supported by continued outstanding sales from Dupixent®, a focus on efficiency and smart spending, and the commitment of our people to patients and our strategic priorities. We also met important regulatory milestones, forged new R&D alliances, and accelerated our efforts to develop potential COVID-19 vaccines. With four new appointments, the management team at Sanofi is now complete and together we are focused on delivering our full-year 2020 guidance."
IFRS net sales reported
IFRS net income reported
IFRS EPS reported
Free cash flow(5)
Business operating income
Business net income(1)
(1) 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 Appendix10). The consolidated income statement for Q2 2020 is provided in Appendix 3 and a reconciliation of reported IFRS net income to business net income is set forth in Appendix 4; (2) Changes in net sales are expressed at constant exchange rates (CER) unless otherwise indicated (definition in Appendix 10); (3) Including around €110M related to COVID-19; (4) 2019 restated business EPS was €5.64, reflecting the discontinuation of equity method accounting for Regeneron investment; (5) Free cash flow is a non-GAAP financial measure (definition in Appendix 10).
Consult Appendix 7 for full overview of Sanofi's R&D pipeline
Regulatory updates since April 24, 2020 include the following:
(7) updates since April 24
(8) DNL 788
2020 second-quarter and first-half financial results(9)
Business Net Income(9)
In the second quarter of 2020, Sanofi generated net sales of €8,207 million, a decrease of 4.9% and 3.4% at CER. First-half Sanofi sales were €17,180 million, an increase of 0.9% and 1.6% at CER.
Second-quarter other revenues decreased 34.4% (down 35.5% at CER) to €231 million, reflecting lower VaxServe sales of non-Sanofi products (€185 million, down 39.4% at CER). First-half other revenues decreased 14.8% (down 16.9% at CER) to €574 million, including lower VaxServe sales of non-Sanofi products (€471 million, down 15.3% at CER).
Second-quarter Gross Profit decreased 7.0% to €5,778 million (down 6.0% at CER). The gross margin ratio decreased 1.6 percentage points to 70.4% (70.0% at CER) versus the prior year. The negative impact from net price adjustments of Plavix® and the Aprovel® family in China, U.S. Diabetes net price evolution and Vaccines more than offset the favorable effect from Specialty Care growth and industrial productivity. In the first half, the gross margin ratio decreased 1.0 percentage point to 71.3% (71.0% at CER) versus the prior year.
Research and Development (R&D) expenses decreased 14.8% to €1,352 million in the second quarter. At CER, R&D expenses decreased 15.1% reflecting a decline in Diabetes R&D expenses. In the second quarter, the ratio of R&D to sales decreased 1.9 percentage points to 16.5% compared to the prior year. First-half R&D expenses decreased 9.4% to €2,692 million (down 10.1% at CER). In the first half, the ratio of R&D to sales decreased 1.8 percentage points to 15.7% compared to the prior year.
Second-quarter selling general and administrative expenses (SG&A) decreased 7.9% to €2,265 million. At CER, SG&A expenses were down 7.1%, reflecting smart spending initiatives and the impact of the COVID-19 pandemic. In the second quarter, the ratio of SG&A to sales decreased 0.9 percentage point to 27.6% compared to the prior year. First-half SG&A expenses decreased 4.7% to €4,607 million (down 4.6% at CER). In the first half of 2020, the ratio of SG&A to sales was 1.6 percentage points lower at 26.8% compared to the prior year.
Second-quarter operating expenses were €3,617 million, a decrease of 10.6% and 10.2% at CER. First-half operating expenses were €7,299 million, a decrease of 6.5% and 6.7% at CER.
Second-quarter other current operating income net of expenses was -€8 million versus -€91 million in the prior year. In 2020, this line included an expense of €239 million (versus a €159 million expense in the second 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. Other current operating income net of expenses included a gain of €157 million related to a revaluation of retained Regeneron shares in support of the ongoing collaboration with Regeneron. First-half other current operating income net of expenses was -€255 million versus -€193 million in the first half of 2019.
The share of profit from associates was €2 million in the second quarter versus €7 million in the second quarter of 2019. Following the sale of its Regeneron stake at the end of May 2020, Sanofi restated its previously reported non-GAAP indicator (Business Net Income) and excluded the effect of equity method of accounting for Regeneron investment in 2019 and Q1 2020. The Q2 2020 business P&L does not include any effect of the equity method of accounting for Regeneron investment in this line. In the first half, the share of profits from associates was €11 million versus €10 million for the same period of 2019.
In the second quarter and the first half of 2020, non-controlling interests were -€9 million and -€21 million versus -€5 million and -€15 million for the same period of 2019, respectively.
Second-quarter business operating income (BOI) increased 3.3% to €2,146 million. At CER, BOI increased 5.3%. The ratio of BOI to net sales increased 2 percentage points to 26.1% versus the second quarter of 2019. Over the period, the BOI ratio of segments were 37.4% for Pharmaceuticals (up 6.4 percentage points), 19.0% for Vaccines (down 7.6 percentage points) and 29.8% for CHC (down 10.6 percentage points). First-half business operating income was €4,683 million, up 8.8% (up 9.8% at CER) and included €990 million of saving initiatives (including around €110 million of savings related to COVID-19). In the first half, operational excellence and deprioritized businesses generated savings of €320 million and €300 million, respectively while smart spending initiatives realized €370 million. In the first half of 2020, the ratio of business operating income to net sales increased 2 percentage points to 27.3%.
Net financial expenses were -€92 million in the second quarter versus -€96 million in the same period of 2019. First-half net financial expenses were -€167 million versus -€150 million in the first half of 2019.
Second-quarter and first-half 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.
Second-quarter business net income(9) increased 3.6% to €1,601 million and increased 5.6% at CER. The ratio of business net income to net sales increased 1.6 percentage points to 19.5% versus the second quarter of 2019. First-half 2020 business net income(9) increased 8.7% to €3,521 million and increased 9.8% at CER. The ratio of business net income to net sales increased 1.5 percentage points to 20.5% versus the first half of 2019.
(9) See Appendix 3 for 2020 second-quarter consolidated income statement; see Appendix 10 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.
In the second quarter of 2020, business earnings per share(9) (EPS) increased 3.2% to €1.28 on a reported basis and 4.8% at CER. Excluding the gain on the revaluation of the retained Regeneron shares, business EPS was €1.18, down 2.4% at CER. The average number of shares outstanding was 1,252.2 million versus 1,248.5 million in the second quarter of 2019.
In the first half of 2020, business earnings per share(9) was €2.81, up 8.1% on a reported basis and up 9.2% at CER. The average number of shares outstanding was 1,251.7 million in the first half of 2020 versus 1,247.2 million in the first half 2019.
Reconciliation of IFRS net income reported to business net income (see Appendix 4)
In the first half of 2020, the IFRS net income was €9,281 million. The main items excluded from the business net income were:
In the first half of 2020, free cash flow(10) increased by 69.6% to €3,568 million, after net changes in working capital
(-€306 million), capital expenditures (-€534 million) and other asset acquisitions1 (-€334 million), disposal proceeds1 (€682 million), and payments related to restructuring and similar items (-€458 million). Over the period, acquisitions2 were €2,245 million (related to Synthorx) and proceeds from disposals2 net of tax were €10,512 million (related to sales of Regeneron shares). As a consequence, net debt decreased from €15,107 million at December 31, 2019, to €7,680 million at June 30, 2020 (amount net of €15,969 million cash and cash equivalents).
1 Not exceeding €500 million per transaction.
2 Amount of the transaction above €500 million per transaction.
(10) non-GAAP financial measure (definition in Appendix 10).
To access the full press release of the 2020 Q2 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.