Sanofi's Balancing Act

Balance is de rigueur around the world -- the Japanese have the concept of "wa," the Chinese have "feng shui," and in America we have "less filling, tastes great." French pharmaceutical giant Sanofi-Aventis (NYSE: SNY  ) also subscribes to this notion, much to the benefit of its shareholders; it is one of the few pharmaceutical stocks to beat the S&P over the past year.

Sanofi reported that sales climbed more than 8% for the fourth quarter. In an odd quirk, Sanofi reported only top-line results -- the rest of the income statement won't be forthcoming until March.

With respect to the aforementioned balance, Sanofi reported $4.8 billion in pharmaceutical sales, but no drug accounted for more than 13% of that total. Better still, the company had 12 separate compounds that tallied more than $100 million in fourth-quarter sales. Overall, Sanofi's top 15 prescription drugs grew by 15.5% for the quarter, and only two drugs posted declines. With such a balanced roster of drugs, Sanofi shouldn't be susceptible to the risks of generics competition or dramatic profit declines because of a drug withdrawal.

There is much to like about Sanofi-Aventis. In additional to solid franchises in "cash cow" niches such as insulin and vaccines, the company has a solid presence in cardiology, oncology, antibiotics, and CNS (central nervous system) medicines -- nearly all of the pharmaceutical "hot spots." The pipeline is no less attractive, with drugs such as Accomplia and Dronedarone nearing approval. Accomplia, a drug that appears effective for treating both obesity and nicotine addiction, could be a major blockbuster, while Dronedarone represents a promising option for a pharmacologically hard-to-treat disease (atrial fibrillation).

With operating margins second only to Merck (NYSE: MRK  ) and a return on assets second to no one in the large-cap pharmaceutical space, Sanofi is clearly a candidate for "best of breed." Trading at less than 18 times trailing earnings with an EV/FCF of about 24, Sanofi-Aventis is a good option for Fools who want a strong growth stock in the pharmaceutical space but don't want to take on the risks of turnarounds or litigation.

Fool contributor Stephen Simpson holds a CFA. He has no ownership interest in any stocks mentioned.