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Ahead of the Bell: Sanofi falls after detailing future

November 9, 2015

Sanofi shares slipped in premarket trading Monday on the first trading day after the French drugmaker said it does not expect meaningful earnings growth over the next two years as its leaders explore a possible sale of some businesses and seek to cut costs.

The drugmaker said the cost of launching new drugs, challenges to its key diabetes business and the phasing in of cost savings will hit its bottom line in 2016 and 2017. Sanofi also said it will consider “strategic options” for its animal health and European generics business.

The company will continue to focus on diabetes and cardiovascular drugs, vaccines and rare disease treatments. It also plans to build its presence in multiple sclerosis, oncology, immunology and consumer health care.

Bernstein analyst Dr. Tim Anderson dropped his rating on the drugmaker to “market-perform” from “outperform” and lowered his earnings expectation and price target as well.

“What became apparent to us is that the next couple of years will be challenging,” Anderson wrote in a Monday morning research note.

Anderson noted that Sanofi shares remain cheap compared to its competitors, but he called the company’s growth profile “uninspiring” and questioned why it would want to sell its animal health and generics business while also exploring some acquisitions.

“It is not clear to us whether swapping out one business for another of similar size would lead to much of a net change,” he wrote.

U.S.-traded shares of Sanofi were down $1, or 2.2 percent, to $45.60 in premarket trading Monday. The stock had climbed about 2 percent so far this year, as of Friday’s close.

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