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Zantac Recall Weighs on Sanofi's Earnings — Update

By Denise Roland 

Sanofi SA swung to a loss in the fourth quarter as the recall of heartburn drug Zantac over cancer concerns offset strong sales of newer treatments.

The French health-care giant on Thursday posted a net loss of EUR10 million ($11 million) for the last three months of 2019, compared with a profit of EUR254 million a year earlier. That was partly driven by a EUR169 million write-down related to Zantac, which it voluntarily recalled in the U.S. and Canada amid concerns it -- and other products containing the same active ingredient -- could contain small amounts of probable human carcinogen NDMA.

Sanofi is currently testing the raw material in Zantac, as well as the finished product, for the presence of NDMA. It didn't say when the product might go back on sale.

The company also wrote down the value of hemophilia treatment Eloctate by EUR1.2 billion. Sales of the drug -- acquired as part of its $11.5 billion purchase of BioVerativ in early 2018 -- have been lower than expected amid tough competition from a rival treatment made by Roche Holding AG.

The accounting charges weighed on an otherwise upbeat quarter. Strong sales of eczema treatment Dupixent and flu vaccines helped drive a 6.8% rise in quarterly revenue to EUR9.6 billion, despite a sharp fall in sales of diabetes and heart drugs.

Business net income, a measure stripping out one-time items that is watched closely by analysts, increased 23% to EUR1.7 billion in the quarter.

The results illustrate the rationale of new Chief Executive Paul Hudson's strategy to mothball the company's research efforts in heart and diabetes drugs in favor of specialty diseases such as cancer, multiple sclerosis and immunological ailments including eczema and asthma.

Sanofi for years counted Lantus -- the world's bestselling insulin -- as its star product. But with insulin prices coming under pressure in the U.S. and new competitors entering the market, that franchise has been shrinking for some years.

The company's exit from heart drugs reflects its struggle to sell cholesterol-lowering drug Praluent amid resistance from insurers to switch patients from low-cost statins.

The move mirrors one being taken across the industry. Drugs for specialty diseases require smaller, shorter clinical trials and can command higher prices than those for heart disease and diabetes.

Sanofi believes that Dupixent, which can also be used to treat severe asthma, will be its new star treatment. The company has said it thinks it could eventually rake in sales of EUR10 billion a year, a sum that would make it one of the world's bestselling drugs. Dupixent generated EUR2.1 billion last year.

Sanofi also sells vaccines and nonprescription treatments for common ailments like colds and indigestion, making it one of the more diversified companies in the industry. Mr. Hudson plans to separate the nonprescription medicines business into a stand-alone unit, a move that could pave the way for a spinoff or sale.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

February 06, 2020 05:37 ET (10:37 GMT)

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