European drugmakers lifted by weak euro

Sanofi and Bayer reported strong first-quarter results and raised guidance for the full year on Thursday, in a sign that eurozone drugmakers are benefiting from the strength of the dollar against the euro.

The currency tailwinds for two of Europe's biggest drug companies were in contrast to the pressure on US rivals such as Pfizer and Johnson & Johnson, which recently cut their sales and earnings outlook because of the strong dollar.

Transatlantic currency fluctuations have an especially heavy impact in pharmaceuticals because the US is such a disproportionately big consumer of prescription drugs.

The US accounted for 37 per cent of global pharmaceuticals spending in 2013, compared with 24 per cent for Europe, according to the IMS Institute for Healthcare Informatics.

This has allowed Sanofi and Bayer, the biggest drugmakers of France and Germany respectively, to benefit from the conversion of US sales into their local currency during this year's appreciation of the dollar against the euro.

But analysts said there was also underlying strength in Thursday's results from the European pharmaceuticals sector, including forecast-beating growth and increased guidance from Novo Nordisk, the Danish insulin-maker.

This underscored the sense of cautious optimism surrounding the industry as new medicines arrive to replace those lost in a wave of patent expiries over the past decade.

Sanofi, in particular, is poised for a several launches including a more advanced insulin for diabetics, a new anti-cholesterol treatment for heart disease and the world's first vaccine for dengue fever.

Olivier Brandicourt, who took over as Sanofi chief executive this month following the firing of Chris Viehbacher, said the "good start to 2015" provided a solid foundation for new products to drive growth.

Strong results from Novo Nordisk were overshadowed by the unexpected departure of Kare Schultz, the chief operating officer who had been widely tipped to succeed Lars Rebien Sorensen as chief executive.

Mr Sorensen, who has overseen the company's rise into one of Europe's biggest and best-performing drugmakers since taking charge in 2000, said the board had asked him to stay until the end of his contract in 2019.

He acknowledged it was "no secret" that Mr Schultz had been "looking forward to assuming my position". The delayed succession plan together with the elimination of the COO position as part of a management reorganisation had prompted Mr Schultz's decision to leave, he added.

Novo Nordisk increased sales by 24 per cent to DKr25.2bn, up 24 per cent from the first quarter last year or 9 per cent when adjusted for currency movements. This showed how the Danish diabetes specialist is continuing to benefit from soaring rates of the disease in developed and emerging markets.

Operating profit rose by almost three-quarters to DKr13.9bn ($3.8bn), although growth was trimmed to 17 per cent when excluding currency factors and a windfall from the partial divestment of Novo's IT services division, NNIT.

Bayer's sales of €12.1bn were up almost 15 per cent from last year but underlying growth was just 2.7 per cent when currency movements were stripped away. Earnings before interest, tax, depreciation, amortisation and special items rose almost 10 per cent to €3bn, with about €50m of this attributable to currency effects.

Consumer healthcare was among Bayer's strongest sources of growth after its $14bn acquisition of over-the-counter medicines from Merck of the US last year.

Sanofi sales were €8.8bn, up 12.3 per cent or 2.4 per cent on an underlying basis, with its Genzyme biotech unit, animal health and emerging markets driving growth. Operating profit was up nearly 12 per cent at €2.4bn.

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