Here is the entire article. Funny how folks write articles and don't even do proper research. I guess that its a pay per click.
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seekingalpha.com/article/2510405-sanofis-new-drug-is-potentially-a-game-changerSanofi's New Drug Is Potentially A Game ChangerSep. 21, 2014 4:48 PM ET | 10 comments | About: Sanofi (SNY)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
•Sanofi has developed a dengue vaccine which produced excellent results in clinical trials.
•The company’s top-selling drug, Lantus, is about to lose its patent and the drug’s biosimilars have received approval from regulatory authorities.
•Sanofi has developed an effective Lantus successor that is expected to absorb losses from Lantus’s patent expiry.
•The company offers a considerably better dividend yield than its industry peers and is currently trading at a discount.
Sanofi SA (NYSE:SNY) is all set to make dengue a vaccine-preventable disease after 20 years of research and industrial commitment. In clinical trials the company's experimental vaccine protected children from all four types of the mosquito-borne illness and considerably reduced the risk of infection by 60.8%. The vaccine also reduced the risk of hospitalization by 80.3% reflecting its strong efficacy.
Sanofi has not released a statement regarding submitting the vaccine for approval by regulatory authorities. But if the drug receives approval from FDA, it will significantly expand the company's customer base due to the high incidence of the disease worldwide especially and the competition-free environment. The company also intends to submit the trial results to authorities in countries where dengue is a public-health priority.
According to the World Health Organization, more than 40% of the world's population is now at a risk for dengue and it is projected that there will be 50 to 100 million dengue infections globally each year. Last year, 2.3 million cases of dengue were reported in the Americas out of which 37,687 cases were severe. The incidence of the disease is growing rapidly worldwide and explosive outbreaks are also occurring. Dengue causes an estimated 20,000 deaths every year and causes one hospitalization every minute worldwide.
This incidence rate shows that once Sanofi's drug receives approval it will surely attract many customers worldwide resulting in high revenue growth for the company. According to analysts at Citigroup, the vaccine might generate $1.2 billion by 2025 and this would partially offset the adverse effects of the company's recent patent losses. It is also anticipated that this vaccine will help the company to absorb the hit in its diabetes portfolio following the patent expiry of Lantus.
Diabetes Portfolio
Sanofi's biggest revenue driver, Lantus, is about to lose its patent protection and this will adversely impact its diabetes portfolio. The patent is going to expire in the U.S. in February 2015 and expire in Europe in May 2015 which will cause stress for the company since its biosimilar has already received approval in the U.S. and Europe. The launch of these biosimilars will badly affect Lantus's sales as 66.5% of the drug's total revenues come from the U.S. whereas approximately 14% of the revenues come from Western Europe.
Lantus is by far Sanofi's most influential drug. Lantus contributed approximately 19% to Sanofi's total revenue in the first half of 2014 and the drug's year-over-year revenues grew by 14.9%. Sanofi's total diabetes division experienced sales growth of 14.7% mainly due to Lantus. Thus the launch of Lantus's biosimilars will adversely affect Sanofi's top line growth due to the company's high dependency on this drug.
However, Sanofi has filed a lawsuit against the biosimilar, claiming patent infringement. Therefore the biosimilar cannot get final approval until the end of the 30-month period in mid-2016 unless the court finds in favor of the biosimilar. Lantus will continue generating revenues for Sanofi until the court gives its final verdict. If the decision comes in the favor of Sanofi then the biosimilar will not receive further approval from the FDA; but, if the court rejects Sanofi's appeal then the company will face several problems.
However, the legal proceedings will only postpone the marketing of the biosimilar in the U.S. while in Europe its marketing would start immediately after Lantus's patent expires.
To absorb the losses of Lantus's patent expiry Sanofi has developed an active replacement for the drug, Toujeo. In three clinical trials, Toujeo controlled diabetes better than Lantus making it a more effective successor. Patients who used Toujeo in trials had 31% fewer low blood-sugar incidents compared to those on Lantus. However, Toujeo requires a 10% to 20% higher dosage compared to Lantus making it relatively less attractive for patients.
A higher dosage requirement would also make Toujeo relatively expensive. To combat the threats from Lantus's patent expiry and from new drugs entering the market, Sanofi needs to set competitive pricing for Toujeo once it receives marketing approval from the FDA. The company should avoid price hikes like it did in the case of Lantus. Sanofi also needs to effectively promote the drug to convince physicians and patients. That is the only way that Toujeo will be able to make its place among the other rival drugs and offset the losses from Lantus's patent expiry.
Returns to Shareholders
Sanofi has quite a stable financial position as evident from its debt profile and liquidity position. In the first half of 2014 the company's free cash flow grew more than 33% which might result in higher cash returns for the investors. Currently, the company offers an attractive dividend yield of 3.42% compared to the average of 1.42% offered by its industry peers. Sanofi also distributes good returns to investors in the form of stock price appreciation.
Currently, the company's stock is trading at a significant discount to the industry based on the price multiples. It has a P/E of only 27.86 compared to the industry's P/E of 64.1. The company also has P/cash flow of only 15.46 compared to the industry average P/cash flow of 21.6 reflecting the stock's potential to grow in the future.
Final Thoughts
Sanofi's portfolio expansion through the development of new and effective drugs will help the company to add considerable growth to its top line. The development of the dengue drug and Toujeo are anticipated to offset the losses from Lantus's patent expiry. Toujeo will also strengthen the company's diabetes portfolio which is one of its highest revenue generating portfolios.
The company has a stable financial position and it will continue to distribute impressive returns to investors as it has a forward dividend yield of 3.60% compared to the current yield of 3.42%. Moreover, it will also give attractive returns in the form of stock price appreciation. Therefore, I would suggest investing in the stock.