| |
Strong Q4 for Solvay in Profit Terms Despite Minimal 2007 Sales Growth
15 Feb 08
A devastating 12 months for Solvay have given the Belgian firm renewed purpose with regard to R&D strategy for the year ahead.
Global Insight Perspective | | Significance | Solvay's pharmaceutical sales started to decline in 2007, although operating profit managed to remain strong, particularly during the fourth quarter (Q4). | Implications | Generic competition, currency fluctuations and the loss of marketing rights to gastric ulcer drug Pantoloc (pantoprazole) all contributed to Solvay's losses over 2007. Meanwhile the failure of bifeprunox and Pulzium to secure marketing approval has delayed the group's hopes for a recovery. | Outlook | Solvay's narrower focus on R&D and cost-containment work will see the group through a challenging period, but what is really needed is a regulatory approval, particularly for Simcor or SLV348. |
Belgian pharmaceutical and chemicals company Solvay has closed the books on a muted 2007, characterised by adverse currency effects and struggling pharmaceutical sales affected by the loss of marketing rights for a key gastrointestinal product. Group sales increased by just 1.8% year-on-year (y/y) to reach 9.6 billion euro (US$14 billion), of which 2.6 billion euro was derived from pharmaceutical turnover. Pharma-based sales saw a 0.4% y/y slowdown over the full year and a 1.5% y/y contracting to 656 million euro during the fourth quarter (Q4). Operating costs were controlled across the board, with minimal growth. R&D spending actually contracted over the full year and fourth quarter, compared with 2006. This allowed Solvay to generate a strong operating profit, up 8.7% y/y to 1.3 billion euro over the year as a whole and rising by 20.9% y/y to 289 million euro during October-December. The Belgian firm attributed this positive fourth-quarter performance partly to "the more aggressive management of inventories by distributors and especially sustained R&D efforts." Solvay: Full-year and Q4 2007 Financial Results (mil. euro) | | | Q4 2007 | % Change, Y/Y | FY 2007 | % Change, Y/Y | Net Sales | 2,366 | 0.7 | 9,572 | 1.8 | Pharmaceuticals | 656 | -1.5 | 2,591 | -0.4 | Cost of Sales | 1,557 | 1.8 | 6,242 | 1.9 | Commercial and Administrative Costs | 391 | -8.5 | 1,523 | -2.3 | Research and Development Costs | 129 | -15.1 | 556 | -1.2 | Group Operating Profit* | 289 | 20.9 | 1,251 | 8.7 | Pharmaceutical R&D as % of Sales | 14% | - | 16% | - | Operating Margin | 12.2 | 2.0 pp higher | 13.1 | 0.9 pp higher | Operating profit calculated by Global Insight as net sales minus cost of sales, commercial and administrative costs and R&D costs. Reflects operating profit for entire Solvay group, not just Pharmaceuticals unit.
Source: Solvay.
|
Despite its strong earnings, Solvay's pharmaceutical sales were in a decidedly sorrier state at the close of 2007 than they had been just 12 months previously (see Belgium: 16 February 2007: Strong Year for Solvay Marred by Q4 Stumble as Loss of Pantoloc Marketing Rights Hits GI Sales). The loss of Canadian marketing rights to gastric ulcer treatment Pantoloc (pantoprazole) in mid 2006 has seen Solvay's revenue earned from the drug decline from 166 million euro in 2005 to 70 million euro in 2006 to zero in 2007. The resulting hole in Solvay's gastroenterology portfolio has proved difficult to plug, with the franchise's yearly sales suffering by 21% y/y. Solvay's top-selling Fenofibrate franchise saw 11% y/y growth on a comparable basis last year (5% y/y on a reported basis), making 433 million euro in sales, while influenza vaccine Influvac's 8% y/y rise to 127 million euro, and Androgel's 22% y/y increase to 308 million euro also played key roles in redressing the sales balance. Sales of Solvay Pharmaceutical Products, 2007 (mil. euro) | | | 2007 Sales | % Change, Y/Y (reported) | % Change, Y/Y (CER) | Cardiometabolic | 728 | 6 | 10 | Fenofibrate | 433 | 5 | 11 | Teveten | 106 | 12 | 12 | Physiotens | 49 | -2 | -2 | Neuroscience | 439 | 2 | 5 | Serc | 150 | 3 | 3 | Marinol | 105 | -1 | 8 | Luvox | 83 | 2 | 6 | Influenza Vaccines | 159 | 7 | 7 | Influvac | 127 | 8 | 8 | Pancreatic Enzymes (Creon) | 198 | 4 | 7 | Gastroenterology | 233 | -21 | -21 | Duphalac | 99 | 16 | 16 | Duspatal | 63 | 7 | 7 | Pantoloc | - | - | - | Men's and Women's Health | 627 | 5 | 11 | Androgel | 308 | 12 | 22 | Duphaston | 90 | 22 | 22 | Prometrium | 80 | 5 | 14 | Total Pharmaceutical Sales | 2,591 | 0 | 3 | Source: Solvay.
|
Outlook and Implications Solvay remains tight-lipped regarding its financial expectations for 2008, but what it will say is that an increasingly targeted approach to R&D and continued work toward its INSPIRE cost-containment programme are the two most important pillars of its strategy for future growth. Solvay's total R&D budget for 2008 has been set at 578 million euro, of which 75% or 433.5 million euro will be directed at the group's Pharmaceuticals division. Here, the development focus is split into four areas; namely, cardiometabolic drugs, neurology treatments, 'flu vaccines and pancreatic enzymes. Its biggest in-house hopes remain with next-generation fenofibrate molecule SLV348, which was filed with the U.S. FDA by co-developer Abbott Laboratories (U.S.) during the fourth quarter. Schizophrenia treatment bifeprunox is also on the company list of blockbuster hopefuls, although an FDA action letter received last August has guaranteed delays before a possible regulatory approval (see Belgium: 13 August 2007: FDA Action Letter Dashes U.S. Approval Hopes for Solvay and Wyeth's Bifeprunox). Finally there is pardoprunox, also known as SLV308, which Solvay is currently developing as an orally administered treatment for Parkinson's disease. The group's earlier hope of a speedy approval for atrial fibrillation drug Pulzium (tedisamil) was dashed at the end of last year, when the FDA rejected Solvay's application (see Belgium: 17 December 2007: FDA Panel Rejects Pulzium as Solvay Signs CNS Alliance with Pharming). Away from Solvay's own drugs, the group's best hope for new revenue lies with Abbott's cholesterol drug Simcor, which Solvay will co-promote if the FDA chooses to approve the drug for marketing (see Belgium: 22 October 2007: Solvay to Co-Market Abbott's Simcor in U.S.).
|
|
|
