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Slightly downbeat article in the WSJ re Accomplia.

Sanofi Gets a Lift From Obesity Pill --- Investors Bid Up Shares On High Hopes for Drug; Beware the `Miracle Cure'
By Jeanne Whalen
27 December 2005
The Wall Street Journal

Sanofi-Aventis SA is confident that its new drug, Accomplia, will help treat obesity. But there is a danger that some investors are viewing it more as a "miracle cure."

Shares in the French pharmaceuticals company are up nearly 30% so far this year, closing Friday in Paris at 75.95 euros ($90.18). By comparison, the Amex Pharmaceutical Index, which includes Sanofi's main global rivals, has risen less than 4%. In 4 p.m. composite trading on the New York Stock Exchange, Sanofi's American depositary receipts rose 12 cents to $45.22 each, giving the company a market value of $120 billion.

In part, Sanofi's rise is based on shareholders' happiness with how Chief Executive Jean-Francois Dehecq has executed Sanofi's 2004 purchase of Aventis and the costs he has squeezed out of the combined company. But it also reflects high expectations for Accomplia, which the company hopes will receive Food and Drug Administration approval in the U.S. early next year.

The treatment switches off a brain receptor involved in food cravings, and some analysts have predicted Accomplia sales could reach $3.5 billion if the drug is approved. That would bring it close to Sanofi's current biggest drug, the stroke medication Plavix, which had global sales of 4.1 billion euros ($4.9 billion) last year. Sanofi co-markets Plavix and splits the profit with Bristol-Myers Squibb Co.

Some investors say it isn't wise to pin big hopes on Accomplia, noting that the two other prescription weight-loss pills on the market haven't lived up to expectations.

Roche Holding AG launched Xenical in 1998 and saw sales soar to nearly a billion Swiss francs, or roughly $762 million, in 1999. But as patients realized Xenical wasn't a cure-all, sales stalled for two years and then started falling rapidly, to 593 million Swiss francs last year. The drug's side effects also hurt sales.

Similarly, the diet pill Meridia from Abbott Laboratories hasn't met analysts' initial sales predictions, in part because the drug can cause high blood pressure and an increased heart rate in some patients. Meridia had global sales of $300 million last year.

John Sherman, a pharmaceutical analyst at investment management firm T. Rowe Price & Associates -- which held 456,000 Sanofi shares, or a 0.03% stake, as of Sept. 30, according to Thomson Financial ShareWatch -- says he is still "somewhat cautious" about Accomplia. "People are looking for the miracle drug and they find it actually doesn't work miracles," Mr. Sherman says, adding that his firm has a "neutral" outlook on Sanofi stock.

Sanofi has told investors it aims to build the drug's sales slowly and maintain them by focusing on obese patients with heart disease and diabetes rather than people who merely wish to lose weight. "They are trying to be more medical than cosmetic," says Denise Anderson, a pharmaceutical analyst with Kepler Equities in Zurich who rates the stock "reduce." A Kepler official said the brokerage firm doesn't own Sanofi shares.

There is still a lot riding on Accomplia's success. Investors have been well-rewarded by Mr. Dehecq's success in delivering the 1.6 billion euros in cost cutting he promised at the time of the Aventis acquisition, and sales in the third quarter grew 12% from a year earlier. But, looking ahead, two of Sanofi's biggest products, Plavix and Lovenox for blood clots, could face generic competition.

That, too, could weigh on a share price that reached a 52-week high of 74.10 euros in June, climbing from 59.10 euros when the merger took legal effect at the end of December 2004.

A U.S. court hearing on a generic company's petition to copy Plavix is now scheduled for April. Lovenox's patent already has expired, but Sanofi has managed to remain the sole producer because the FDA and other regulators haven't yet established rules for approving generic copies of biotech drugs, which are considered harder to duplicate than chemical-based pills. Several generics companies are pushing hard for the right to copy Lovenox. Together, Plavix and Lovenox accounted for 14% of Sanofi's revenue of 25.4 billion euros in 2004.

There are questions about the strength of Sanofi's pipeline of drugs in development. Some investors don't see much of an interest beyond Accomplia and Dromedone, a cardiovascular drug also awaiting FDA approval. The company is testing two drugs for depression, one for Alzheimer's and another for multiple sclerosis, in late-stage trials, as well as compounds for cancer and thrombosis. Sanofi also is attempting to invent a vaccine to prevent human cases of bird flu.

"Beyond Accomplia, it looks rather weak or average," says Markus Manns, a fund manager at Union Investment Group of Germany. "There are a couple of drugs but nothing to point to that would be . . . the next blockbuster." Union owned 11.1 million shares, or 0.79% of Sanofi, as of Sept. 30, according to Thomson Financial ShareWatch. Mr. Manns says he has a "neutral" outlook on the stock.