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Sanofi's $1B Multaq Heart-Drug Mess Is Getting Worse -- Quickly

The scale of Sanofi-Aventis (SNY)'s Multaq mess is starting to become apparent: The heart drug, hailed by the company as a €1 billion-plus blockbuster prior to its launch, may miss Wall Street sales estimates by as much as €1.3 billion, according to analysts at Jefferies International. When investors wake up and downgrade their expectations for the atrial fibrillation drug, Sanofi's stock may suffer, they say.

Those downgrades could be spectacular. This time last year, Morgan Stanley estimated the drug could reach €3 billion in revenues. Jefferies currently estimates it will net only €117 million in 2010, and will never gain more than €300 million in any foreseeable year.

Authorities in France yesterday gave the drug a rating that indicates they believe it is no better than current treatments and will only reimburse it at a 35 percent rate. Sanofi may choose not to sell the drug there, Bloomberg says.

France is the second major European country to shrug at Multaq. Last year, the U.K.'s National Institute for Health and Clinical Excellence gave a preliminary thumbs down to Multaq:

"The manufacturer's own data indicated that dronedarone was the least effective of currently used anti-arrhythmic drugs for controlling atrial fibrillation," NICE Chief Executive Officer Andrew Dillon said in the statement. "The drug is much more expensive than existing treatments and the evidence suggests that on balance it offers little additional health benefit."
In the U.K., Sanofi is trying to sell the drug for £2.25 pounds per day, compared to 5 pence a day a generic competitor, amiodarone. Jefferies concludes:
Our benchmarking exercise versus prior launches continues to indicate that Multaq will likely not reach blockbuster status and may potentially fall well short of consensus expectations by 2013E. If the launch continues on this trend (and we see no reason why it should improve) then we estimate that consensus estimates for Multaq could be overstated by as much as €800m to €1.3bn in the period 2013E-14E.
We remain concerned that consensus estimates have not yet been adjusted for a below-par launch and see near-term revisions as a downside risk to the shares.
According to this guy at Seeking Alpha, Morgan Stanley still estimates Multaq sales at €2.5 billion; Nomura estimates only €739 million. It's not entirely clear how these numbers were generated: Jefferies noted in October that sales for the entire class of drugs in the U.S. totalled only $324 million annually (U.S. sales commonly make up half of worldwide sales).

The honeymoon period is over. With three quarters of sales, we should be past the initial "stocking" period in which hospitals stock up on the new drug and then use up their inventory before buying more. Up next: Sanofi's Q1 2010 conference call. Will management have any new guidance about the Multaq launch?

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