On April 26, 2019 Sanofi reported strong Q1 2019 business EPS growth of 9.4% at CER (Press release, Sanofi, APR 26, 2019, View Source [SID1234535417]).
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First-quarter sales(2) growth driven by Specialty Care, Vaccines and strong contribution from Emerging Markets
Net sales were €8,391 million, an increase of 6.2% on a reported basis, 4.2%(2) at CER and 3.8% at CER/CS(3). Sanofi Genzyme GBU sales were up 30.8% (16.0% at CER/CS(3)), driven by Dupixent and consolidation of Bioverativ. Vaccines sales up 20.1%, reflecting the recovery and growth of Pentaxim in China and Menactra strength in Emerging Markets. CHC sales up 0.6%, as Emerging Markets growth more than offset lower sales in mature markets and non-core divestments. Primary care GBU sales were down 17.0% (-11.8% at CER/CS) impacted by lower diabetes sales and divestiture of EU generics. Emerging Markets sales(4) grew strongly (up 13.6%) across all regions, primarily driven by China. Q1 2019 business EPS(1) growth reflected sales performance, favorable product mix and cost discipline
Q1 2019 business net income increased 10.5% to €1,765 million and 9.0% at CER. Business EPS(1) in the first quarter was up 9.4% at CER to €1.42. IFRS EPS was €0.91 (up 12.3%). Full-year 2019 business EPS(1) guidance confirmed
Sanofi continues to expect 2019 business EPS(1) to grow between 3% and 5% at CER(5) barring unforeseen major adverse events. Applying the average April 2019 exchange rates, the currency impact on 2019 business EPS is estimated to be around 2%. Key regulatory milestones achieved in R&D Dupixent approved in the U.S. for atopic dermatitis in adolescent patients. FDA granted Priority Review in the U.S. for Dupixent in adults with chronic rhinosinusitis with nasal polyps. CHMP recommended approval of Dupixent in EU for severe asthma in adults and adolescents. Praluent label extension approved by EMA to include reduction of the risk of cardiovascular events in eligible patients. Libtayo approved in Canada for cutaneous squamous cell carcinoma. CHMP recommended approval in EU and U.S. FDA issued a CRL(6).regarding ZynquistaTM for type 1 diabetic adult patients.
Sanofi Chief Executive Officer, Olivier Brandicourt, commented:
"I am pleased with the strong start in 2019 as we sustained our new growth phase and delivered business EPS growth of 9.4%. We executed on key launches in Specialty Care led by the impressive uptake of Dupixent in atopic dermatitis and asthma and also delivered strong growth in Vaccines. At the same time, our new GBU structure enabled us to optimize our growth opportunity in China & Emerging Markets and to adapt to the pressures in Primary Care. Based on our performance in the first quarter, we remain confident in the growth outlook for our business over the rest of the year despite challenging industry dynamics."
(1) In order to facilitate an understanding of operational performance, Sanofi comments on the business net income statement. Business net income is a non-GAAP financial measure (see Appendix 8 for definitions). The consolidated income statement for Q1 2019 is provided in Appendix 3 and a reconciliation of reported IFRS net income to business net income is set forth in Appendix 4; (2) Changes in net sales are expressed at constant exchange rates (CER) unless otherwise indicated (see Appendix 8); (3) Constant Structure: Adjusted for Bioverativ acquisition and divestment of European Generics business; (4) See definition page 8; (5) 2018 business EPS was €5.47; (6) Complete Response Letter.
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2019 first-quarter Sanofi sales
Unless otherwise indicated, all percentage changes in sales in this press release are stated at CER(7).
In the first quarter of 2019, Company sales were €8,391 million, up 6.2% on a reported basis. Exchange rate movements had a positive effect of 2.0 percentage points mainly driven by the U.S. dollar which largely offset the negative impact from the Argentine Peso, Turkish Lira, Brazilian Real and Russian Ruble. At CER, Company sales increased 4.2%.
Global Business Units
The table below presents sales by Global Business Unit (GBU). Please note that Emerging Markets sales for Specialty Care and Primary Care are included in the China & Emerging Markets GBU.
a) Does not include China & Emerging Markets sales – see definition page 8; (b) Includes Emerging Markets sales for Primary Care and Specialty Care; (c)+16.0% at CS; (d)-11.8% at CS; (e)+3.8% at CS.
Pharmaceuticals
First-quarter Pharmaceutical sales were up 3.1% to €6,262 million mainly driven by the Immunology and Rare Blood Disorder franchises which were partially offset by Diabetes and Established Rx Products including the disposal of the European generics business.
(7) See Appendix 8 for definitions of financial indicators.
Dupixent (collaboration with Regeneron) generated sales of €329 million in the first quarter (up 186.9%). In the U.S., Dupixent sales of €266 million (up 157.9%) were driven by continued growth in adult atopic dermatitis and by the asthma launch. Market access for Dupixent in asthma reached 90% of commercial lives within the first 5 months of launch. Dupixent became commercially available for adolescent atopic dermatitis in mid-March in the U.S. In April, Dupixent was launched in asthma in Japan. First-quarter sales in Europe were €36 million versus €10 million in the first quarter of 2018.
Kevzara (collaboration with Regeneron) sales were €30 million in the first quarter versus €10 million in the first quarter of 2018, of which €18 million was in the U.S. (versus €8 million in the first quarter of 2018).
First-quarter Multiple Sclerosis (MS) sales were up 5.9% to €529 million, as double-digit Aubagio sales growth was partially offset by the decline in Lemtrada sales.
First-quarter Aubagio sales increased 11.9% to €437 million, driven by the U.S. (up 12.2% to €309 million) and Emerging Markets (up 41.7% to €16 million). In Europe, sales of the product increased 3.2% to €98 million.
In the first quarter, Lemtrada sales decreased 15.2% to €92 million due to lower U.S. sales (down 21.3% to €41 million) and European sales (down 12.8% to €41 million), reflecting increased competition.
First-quarter Oncology sales increased 7.8% to €399 million driven by China as well as Jevtana performance.
Jevtana sales were up 8.1% to €111 million in the first quarter supported by growth in all regions. In the first quarter, Thymoglobulin sales increased 11.4% (to €81 million) driven by the U.S. (up 10.8% to €44 million) and China.
In the first quarter, sales of Eloxatin (up 20.5% to €54 million) and Taxotere (up 7.0% to €47 million) were driven by the strong performance in China.
Libtayo (cemiplimab-rwlc, collaboration with Regeneron) was approved in the U.S. in September 2018, for the treatment of patients with metastatic cutaneous squamous cell carcinoma (CSCC) or locally advanced CSCC who are not candidates for curative surgery or curative radiation. U.S. Libtayo sales are consolidated by Regeneron. Libtayo was approved in Brazil at the end of March and in Canada in April.
In the first quarter, Rare Disease sales increased 10.1% to €766 million, driven by Gaucher therapies (Cerezyme and Cerdelga), Myozyme/Lumizyme and Aldurazyme. In the U.S. and Europe, first-quarter Rare Disease sales grew 4.5% (to €277 million) and 3.7% (to €255 million), respectively. Emerging Markets sales were up 37.2% to €153 million reflecting strong performance supported by favorable timing of orders.
First-quarter Gaucher (Cerezyme and Cerdelga) sales were up 10.0% to €224 million, supported by the increased penetration of Cerdelga in Europe and the sustained growth of Cerezyme in Emerging Markets. First-quarter Cerezyme sales increased 6.3% to €176 million and Cerdelga sales increased 27.8% to €48 million.
First-quarter Pompe (Myozyme/Lumizyme) sales grew 10.7% to €220 million, supported by positive trends in naïve patient accruals. Over the period, Myozyme/Lumizyme sales increased 14.1% to €79 million in the U.S. and 1.1% to €94 million in Europe, respectively. In Emerging Markets, sales grew 38.5% to €32 million driven by Latin America.
First-quarter Fabry (Fabrazyme) sales grew 5.9% to €185 million. First-quarter sales in the U.S. and Europe increased 1.2% (to €94 million) and 7.1% (to €45 million), respectively. In Emerging Markets, sales of the product grew 16.7% to €18 million.
Rare Blood Disorder franchise
Net sales (€ million) Q1 2019 Change
at CER
Eloctate 174 +274.4%
Alprolix 95 +319.0%
Cablivi 5 -
Total Rare Blood Disorder 274 +296.9%
Bioverativ was consolidated in Sanofi’s Financial Statements from March 9, 2018. First-quarter sales of the Rare Blood Disorder franchise were €274 million (up 1.2% at CS(8)), including non-U.S. sales of €67 million with Japan as the primary contributor.
Eloctate sales were €174 million in the first quarter, down 4.2% at CS(9). In the U.S., sales of the product decreased 7.3% at CS(9), as share gains in the factor replacement category were more than offset by the overall increased competitive environment. In Emerging Markets, first-quarter Eloctate sales were €4 million reflecting the launch in Taiwan. In the rest of the world, Eloctate sales decreased 3.2% at CS(9) to €33 million, impacted by a decline in sales in Canada following the previously-announced tender loss.
Alprolix sales were €95 million in the first quarter up 6.0% at CS(9), of which €70 million were generated in the U.S. up 6.6% at CS(9). In the rest of the world, Alprolix sales were €25 million, an increase of 4.5% at CS(9) as launch in Australia and growth in Japan was partly offset by a decline in sales in Canada following the previously-announced tender loss.
Cablivi (caplacizumab-yhdp) for the treatment of adults with acquired thrombotic thrombocytopenic purpura (aTTP), generated sales of €5 million in Germany and France in the first quarter. Cablivi was recently launched in Denmark and Austria. Cablivi was launched in the U.S. on April 2, 2019.
(8) Growth comparing first-quarter 2019 sales versus full first-quarter 2018 sales at CER. Including Cablivi sales in 2019. Unaudited data.
(9) Growth comparing first-quarter 2019 sales versus full first-quarter 2018 sales at CER. Unaudited data.
Primary Care franchises
Cardiovascular franchise
Net sales (€ million) Q1 2019 Change
at CER
Praluent 56 +10.2%
Multaq 79 -7.6%
Total cardiovascular franchise 135 -0.8%
First-quarter Praluent (collaboration with Regeneron) sales increased 10.2% to €56 million driven by growth in Europe (up 52.6% to €29 million). In the U.S., sales decreased 26.9% to €20 million, impacted by significantly higher rebates. Continued pressure on average U.S. net pricing for Praluent is expected as a result of negotiations to further improve patient access and affordability throughout 2019.
First-quarter global Diabetes sales decreased 6.9% to €1,294 million, due to lower glargine (Lantus and Toujeo) sales in the U.S. First-quarter U.S. Diabetes sales were down 22.8% to €445 million, reflecting the increased contribution to the coverage gap related to Part D and a continued decline in average U.S. glargine net prices. First-quarter sales in Emerging Markets increased 15.3% to €445 million. First-quarter sales in Europe decreased 5.6% to €305 million, despite Toujeo growth (up 19.4%).
In the first quarter, Lantus sales were €774 million, down 17.2%. In the U.S., Lantus sales decreased 36.6% to €284 million, mainly reflecting lower average net price and the increased contribution to the coverage gap related to Part D. In Europe, first-quarter Lantus sales were €152 million, down 16.0% due to branded and biosimilar competition and patients switching to Toujeo. In Emerging Markets, first-quarter Lantus sales were up 14.9% to €281 million.
First-quarter Toujeo sales were €211 million, up 5.6%. In the U.S., first-quarter Toujeo sales were €69 million, down 24.7% mainly reflecting lower average net price and the increased contribution to the coverage gap related to Part D. In Europe and Emerging Markets, first-quarter Toujeo sales were €80 million (up 19.4%) and €44 million (up 64.3%), respectively.
First-quarter Apidra sales decreased 2.2% to €89 million. Lower sales in the U.S. (down 42.9% to €13 million) offset growth in Emerging Markets (up 33.3% to €34 million).
Amaryl sales were €90 million, up 7.2% in the first quarter, of which €79 million were generated in Emerging Markets (up 8.3%).
Admelog (insulin lispro injection) 100 Units/mL generated sales of €66 million in the first quarter of which €63 million were in the U.S. (versus €6 million in the first quarter of 2018) mainly due to access in Managed Medicaid.
First-quarter Soliqua 100/33 (insulin glargine 100 Units/mL & lixisenatide 33 mcg/mL injection) and Suliqua(TM) sales were €22 million (versus €9 million in the first quarter of 2018). In February, the FDA approved the expanded use of Soliqua 100/33 which can now also be prescribed for adults with type 2 diabetes uncontrolled on oral antidiabetic medicines.
Total Established Rx Products 2,506 -9.3%
In the first quarter, Established Rx Products sales decreased 9.3% to €2,506 million, primarily reflecting the divestment of the European generics business Zentiva at the end of the third quarter of 2018. Excluding the generics divestment, Established Rx Products sales decreased 3.8% in the first quarter.
First-quarter Lovenox sales decreased 11.8% to €343 million, reflecting lower European sales (down 21.3% to €192 million) due to biosimilar competition in several countries. In Emerging Markets, Lovenox sales grew 10.4% to €125 million.
In the first quarter, Plavix sales increased 2.6% to €404 million, of which €323 million (up 7.1%) were generated in Emerging Markets. In the first quarter, Aprovel/Avapro sales increased 15.1% to €201 million, of which €146 million (up 18.0%) were generated in Emerging Markets. In the first quarter, Plavix and Avapro sales benefited from continued demand in China ahead of the implementation of the volume based procurement program in key cities at the end of the first quarter which is expected to result in lower growth rates for Plavix and Avapro for full-year 2019. First-quarter Plavix and Avapro sales in China were €256 million (up 9.1%) and €101 million (up 22.0%), respectively.
First-quarter Renvela/Renagel (sevelamer) sales decreased 25.7% to €79 million due to generic competition in the U.S. (down 44.3% to €37 million).
In the first quarter, Generics sales decreased 33.8% to €282 million, reflecting the divestment of the European generics business Zentiva at the end of the third quarter of 2018. At CS, first-quarter Generics sales increased 3.6%. In Emerging Markets, Generics sales decreased 0.6% to €167 million.
Consumer Healthcare
In the first quarter, Consumer Healthcare (CHC) sales increased 0.6% to €1,256 million, impacted by non-core brand divestments in Europe and Canada in the course of 2018.
In Europe, first-quarter CHC sales were down 3.9% to €366 million due to a weak cough & cold season and non-core brand divestments in the second quarter of 2018.
In the U.S., first-quarter CHC sales decreased 2.1% to €304 million. This decline mainly reflected the slow start to the allergy season (the Allergy, Cough & Cold category sales decreased 6.7%).
In Emerging Markets, first-quarter CHC sales recorded a strong performance, up 8.1% to €423 million, mainly driven by Latin America, significant volume growth in Russia as well as a solid performance of Essentiale in China.
First-quarter Vaccines sales were €873 million, up 20.1% driven by the performance of Polio/Pertussis/Hib vaccines in Emerging Markets and Japan. In Emerging Markets, first-quarter Vaccines sales increased 48.3% and benefited from Pentaxim in China and Menactra performance. In Europe, first-quarter Vaccines sales were up 5.8% to €146 million. In the U.S., first-quarter Vaccines sales were €272 million (down 3.1%) due to lower Pentacel sales reflecting CDC inventory fluctuation.
In the first quarter, Polio/Pertussis/Hib (PPH) vaccines sales increased 26.1% to €486 million, driven by recovery and strong demand for Pentaxim in China, good performance in Emerging Markets and favorable sales phasing in Japan. In the U.S., PPH vaccines sales decreased 23.4% to €92 million due to lower sales of Pentacel reflecting CDC inventory fluctuation.
First-quarter Travel and other endemic vaccines sales increased 13.7% to €119 million, driven by Rabies vaccines sales in U.S. and Europe.
First-quarter Menactra sales increased 21.3% to €112 million, driven mainly by continued sales expansion in the Middle East. In the U.S., first-quarter Menactra sales were €74 million (up 1.5%).
First-quarter Adult Booster vaccines sales increased 5.4% to €100 million.
World excluding U.S., Canada, Western & Eastern Europe (except Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico
Russia, Ukraine, Georgia, Belarus, Armenia and Turkey
Western Europe + Eastern Europe except Eurasia
Japan, South Korea, Canada, Australia, New Zealand, Puerto Rico
First-quarter sales in the U.S. were up 7.1% to €2,550 million. This mainly reflected the strong performance of Dupixent, together with the consolidation of Eloctate and Alprolix sales, which were partly offset by lower sales of the Diabetes franchise (down 22.8%).
First-quarter sales in Emerging Markets increased 13.6% to €2,730 million, mainly driven by Vaccines (up 48.3%), Diabetes (up 15.3%), Rare Disease (up 37.2%), and CHC (up 8.1%). In Asia, sales increased to €1,206 million (up 17.8%) in the first quarter, reflecting strong growth in China (up 22.3% to €798 million). In addition to the recovery and growth in Pentaxim, sales in China benefited from continued demand for Plavix and Avapro ahead of implementation of the volume based procurement program in key cities at the end of the first quarter which is expected to result in lower growth rates for Plavix and Avapro for full-year 2019. In Latin America, first-quarter sales increased 4.6% to €615 million. First-quarter sales in Brazil decreased 4.7% to €268 million. In Africa and the Middle East region, first-quarter sales increased 12.0% to €556 million driven by strong performance of the Vaccines and Rare Disease franchises. First-quarter sales in the Eurasia region increased 22.1% to €312 million, driven by growth in Turkey and Russia (€166 million, up 27.3%).
First-quarter sales in Europe were €2,187 million, down 9.4%, reflecting the divestment of the European Generics business. At CS, first-quarter sales were down 3.1% impacted by the decline of Lovenox.
Sales in Japan increased 12.6% to €532 million in the first quarter, driven by Dupixent and favorable sales phasing of Vaccines (up 90.3%), together with the consolidation of Eloctate and Alprolix sales.
R&D update
Consult Appendix 6 for full overview of Sanofi’s R&D pipeline
Regulatory update
Regulatory updates since February 7, 2019 include the following:
In March, the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for ZynquistaTM (sotagliflozin, developed by Sanofi and Lexicon), a dual SGLT1 and SGLT2 inhibitor, recommending its approval in the European Union for the treatment of adults with type 1 diabetes. In March, the U.S. Food and Drug Administration (FDA) issued a Complete Response Letter regarding the New Drug Application for Zynquista(TM) for the treatment of adults with type 1 diabetes in combination with insulin.
In March, Praluent (collaboration with Regeneron) was approved in the European Union to reduce the risk of cardiovascular events in patients with established cardiovascular disease
In March, the U.S. FDA approved Dupixent (collaboration with Regeneron) for adolescent patients 12 to 17 years of age with moderate-to-severe atopic dermatitis whose disease is not adequately controlled with topical prescription therapies, or when those therapies are not advisable.
In March, the U.S. FDA accepted for Priority Review the supplemental Biologics License Application (sBLA) for Dupixent as an add-on maintenance treatment for adults with inadequately-controlled severe chronic rhinosinusitis with nasal polyps (CRSwNP). The target action date for the FDA decision is June 26, 2019.
In March, the European Medicines Agency’s CHMP adopted a positive opinion for Dupixent, recommending its approval in the European Union for use in adults and adolescents (12 years and older) as add-on maintenance treatment for severe asthma with type 2 inflammation characterized by raised blood eosinophils and/or raised FeNO who are inadequately controlled with high dose inhaled corticosteroid plus another medicinal product for maintenance treatment.
In the first quarter, the U.S. FDA accepted for review a supplemental Biologic License Application (sBLA) for Fluzone HD QIV.
At the end of April 2019, the R&D pipeline contained 84 projects including 32 new molecular entities in clinical development. 35 projects are in phase 3 or have been submitted to the regulatory authorities for approval.
Portfolio update
Phase 3:
In February, positive results from two phase 3 trials evaluating Dupixent in patients with recurring severe CRSwNP were presented at the 2019 Annual Meeting of the American Academy of Allergy, Asthma & Immunology.
Phase 2:
A phase 2b/3 study evaluating Dupixent in Chronic Obstructive Pulmonary Disease (COPD) is in the process of being initiated.
A phase 2b study evaluating SAR442168, a BTK inhibitor (collaboration with Principia), in multiple sclerosis was initiated.
A phase 2 study evaluating isatuximab in combination with chemotherapy in pediatric patients with relapsed refractory acute lymphoblastic leukemia or acute myeloid leukemia was initiated.
Phase 1:
SAR441169, a RORC (ROR gamma T) antagonist entered phase 1 for the treatment of psoriasis.
Collaboration
In April, Sanofi and Alnylam agreed to conclude the research and option phase of the companies’ 2014 RNAi therapeutics alliance in rare genetic diseases. The material collaboration terms for patisiran, vutrisiran (ALN-TTRsc02) and fitusiran, as previously announced, will continue unchanged. As part of this agreement, Alnylam will advance an additional investigational asset in an undisclosed rare genetic disease through the end of IND-enabling studies. Sanofi will be responsible for any potential further development or commercialization of such asset. In addition, Alnylam and Sanofi have agreed to amend certain terms of the companies’ equity agreement, with Sanofi obtaining a release of its lock-up of Alnylam stock holdings, subject to certain trading restrictions, among other provisions.
2019 first-quarter financial results(10)
Business Net Income(10)
In the first quarter of 2019, Sanofi generated net sales of €8,391 million, an increase of 6.2% (up 4.2% at CER).
First-quarter other revenues increased 41.2% (up 31.6% at CER) to €322 million, reflecting the VaxServe sales contribution of non-Sanofi products (€241 million, up 32.0% at CER) and the royalties received from Swedish Orphan Biovitrum AB.
First-quarter Gross Profit increased 8.7% to €6,097 million (up 6.3% at CER). The gross margin ratio was 72.7% (72.4% at CER) versus 71.0% in the first quarter of 2018 and benefited from the strong performance of Vaccines and Pharmaceuticals in China, the growth in Specialty Care including the contribution from Bioverativ as well as the end of royalty payments to Bristol-Myers Squibb on Plavix and Avapro sales(11). These positive drivers more than offset the negative impact from U.S. Diabetes net price evolution and Established Rx Products decrease in mature markets. In the first quarter of 2019, the gross margin ratio of segments was 76.0% for Pharmaceuticals (up 1.7 percentage points), 68.5% for CHC (up 0.7 percentage points) and 62.2% for Vaccines (up 5.1 percentage points). In 2019, Sanofi expects its gross margin ratio to be around 70% at CER.
Research and Development (R&D) expenses increased 8.2% to €1,385 million in the first quarter of 2019. At CER, R&D expenses increased 4.9%, mainly reflecting the acquisitions of Bioverativ and Ablynx together with investments in diabetes, rare blood disorder and immunology programs. Excluding the impact of acquisitions and Generics in Europe(12), R&D expenses would have risen by 1.9% at CER in the quarter.
First-quarter selling general and administrative expenses (SG&A) increased 3.0% to €2,380 million. At CER, SG&A expenses were up 0.6% mainly reflecting consolidation of Bioverativ and Ablynx. Excluding the impact of acquisitions and Generics in Europe(12), SG&A expenses were stable at CER, reflecting investments in Specialty Care offset by cost efficiency measures notably in Primary Care. In the first quarter, the ratio of SG&A to sales decreased 0.8 percentage points to 28.4% compared to the first quarter of 2018.
First-quarter operating expenses were €3,765 million, an increase of 4.9% and 2.1% at CER. Excluding the impact of acquisitions and Generics in Europe(12), operating expenses would have risen by 0.7% at CER in the first quarter of 2019.
First-quarter other current operating income net of expenses was -€102 million versus -€31 million in the first quarter of 2018. This line included the share of profit/loss to Regeneron of the monoclonal antibodies Alliance net of associated marketing expenses incurred by Regeneron. In the first quarter of 2019, this line also included a legal contingency provision of €56 million.
The share of profits from associates was €71 million in the first quarter, down 4.1%. This line included the contribution of the share of profits in Regeneron.
In the first quarter, non-controlling interests were -€10 million versus -€30 million and reflected the restructuring of the Alliance with Bristol-Myers Squibb related to Plavix and Avapro.
First-quarter business operating income increased 12.6% to €2,291 million. At CER, business operating income increased 11.3%. The ratio of business operating income to net sales increased 1.5 percentage points to 27.3% versus the first quarter of 2018. Over the period, the business operating income ratio of segments was 38.2% for Pharmaceuticals (up 0.7 percentage points), 34.9% for CHC (up 0.7 percentage points) and 27.1% for Vaccines (up 9.1 percentage points).
Net financial expenses were -€45 million in the first quarter versus €2 million in the same period of 2018. Net financial expenses included a gain of €76 million in the first quarter of 2018. In the first quarter of 2019, net financial expenses included the cost associated with the Bioverativ and Ablynx acquisitions. A €26 million financial gain was also recognized in connection with contingent payments on future regulatory milestones.
The first-quarter effective tax rate was stable at 22%. Sanofi expects its effective tax rate to be around 22% in 2019.
First-quarter business net income(10) increased 10.5% to €1,765 million and 9.0% at CER. The ratio of business net income to net sales was 21.0%, up 0.8 percentage points compared with the first quarter of 2018.
(10) See Appendix 3 for 2019 first-quarter consolidated income statement; see Appendix 8 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.
(11) Excluding the U.S. and Puerto Rico
(12) Excluding Bioverativ and Ablynx acquisitions and European Generics business
In the first quarter of 2019, business earnings per share(10) (EPS) increased 10.9% to €1.42 and 9.4% at CER. The average number of shares outstanding was 1,245.8 million in the first quarter of 2019 versus 1,248.2 million in the first quarter of 2018.
Reconciliation of IFRS net income reported to business net income (see Appendix 4)
In Q1 2019, the IFRS net income was €1,137 million. The main items excluded from the business net income were:
An amortization charge of €557 million related to fair value remeasurement on intangible assets of acquired companies (primarily Genzyme: €186 million, Bioverativ: €135 million, Boehringer Ingelheim CHC business: €61 million, Aventis: €54 million) and to acquired intangible assets (licenses/products: €30 million). These items have no cash impact on the Company.
An income of €60 million mainly reflecting a contingent price adjustment on the disposal of the joint venture Sanofi Pasteur MSD investment.
Restructuring costs and similar items of €321 million mainly related to streamlining initiatives in Europe.
A charge of €4 million related to the effects of IFRS 16 on Lease accounting(11).
A €227 million tax effect arising from the items listed above, mainly comprising €138 million of deferred taxes generated by amortization and impairments of intangible assets, and €95 million associated with restructuring costs and similar items. (see Appendix 4).
An income of €25 million net of tax related to restructuring costs of associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures.
Capital Allocation
In the first quarter of 2019, net cash generated by operating activities increased 49.0% to €1,234 million after capital expenditures of €381 million and an increase in working capital of €651 million. In the first quarter of 2019, restructuring costs and similar items were €491 million and disposals net of acquisitions and partnerships were €74 million. As a consequence, net debt decreased from €17,628 million at December 31, 2018, to €16,767 million at March 31, 2019 (amount net of €9,095 million in cash and cash equivalents).
(10) See Appendix 3 for 2019 first-quarter consolidated income statement; see Appendix 8 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.
(11) Impact of new lease standard IFRS 16, is effective January 1, 2019 using the modified retrospective transition method (no restatement of prior periods), since Business Net Income remains reported as previously under IAS 17 and related interpretations for comparison purposes.