Boston, MA 10/22/2013 (wallstreetpr) – Sanofi SA (ADR) (NYSE:SNY) has been hit hard due to loss of patent protection in nine drugs in the last three years. The company is expecting a better fourth quarter. Increased competition from generic drugs is forcing such companies to invest heavily in R&D to develop new molecules. This is a very long drawn out process as the molecule has to be developed, tested on animals and then Food and Drug Administration (FDA) has to grant its permission for clinical trials. The clinical trials may last for some years and if the results are not good enough for commercialization of the drug, the expenses have to be written off. Sanofi has faced several pipeline failures in its oncology drugs. Facing severe threat from generic erosion, it has tried to shore up its expansion in emerging markets. These markets now account for 32% of the company’s revenues. They have been underperforming since last four quarters. The company is also facing several issues in its operations in both China and India. The company has been mired in a corruption scandal in China with one of its office there under investigation. After an ugly spate in India over tax dues, the company is facing genericization with both the government and Indian courts taking a tough stand on pricing of drugs. The markets in Japan are also facing increased genericization on account of new policies announced by the government.
The company has seen some good news in the trials of a new cancer drug codenamed SAR566658. The drug is being developed to treat breast, ovarian, and other epithelial cancers. Sanofi also has a good presence in the diabetic treatment market. With one American being diagnosed with diabetes every 17 seconds, the market is expanding at a rapid pace. It was estimated that there are 330 million people suffering globally in 2011 and the figure is expected to reach 550 million by 2030. Many pharmaceutical companies are focusing their R&D activities on this area and competition is expected to heat up. Development of a new molecule by a competitor will see the company lose its market share also in this segment.
Analysts are worried about the long term prospects of Sanofi and have rated the stocks as “sell”.
