French drugmaker Sanofi-Aventis beat forecasts for fourth-quarter profit and expects earnings to rise 2 to 5 percent this year as growth areas such as vaccines offset stronger competition from generic rivals.

But Sanofi's forecast for business earnings per share (EPS) at constant exchange rates excludes the possible 2010 launch of a generic version of bloodthinner Lovenox, a blockbuster that made 3.04 billion euros ($4.2 billion) last year.

Sanofi will take a hit this year from generic competition to blockbuster cancer drugs Eloxatin and Taxotere, as well as bloodthinners Plavix and maybe Lovenox.

Sanofi said fourth-quarter adjusted net profit excluding one-time items rose 10.4 percent to 1.8 billion euros, above a Reuters poll average forecast of 1.68 billion.

Sales rose 3.8 percent to 7.36 billion against expectations for 7.37 billion, bolstered by swine flu vaccines -- a one-off benefit that should last until the end of this quarter.

Sanofi beat its own EPS guidance of around 11 percent for the year with adjusted EPS excluding items up 13.1 percent. For this year's forecast, analyst guidance ranged from a dip of 1 percent to low single-digit earnings per share growth.

Sanofi's outlook follows a downbeat forecast from AstraZeneca -- the two firms are the most vulnerable to revenue being squeezed by generics -- while rival GlaxoSmithKline cut more costs and refocused research.

Sanofi, too, is reining in research and said spending on research and development fell 7 percent in the fourth quarter.

Sanofi shares trade at a discount to many of its rivals, reflecting its generic exposure, at 8.2 times expected 2010 earnings. That is above Astra at 7.2 but below 10 times for Glaxo, 11 for Novartis and 13 for Roche.

CHANGING TACK

In the past year Sanofi has been changing tack under CEO Chris Viehbacher, diversifying its business to expand in animal and consumer health, emerging markets and by striking drug development deals to bolster innovation in its pipeline.

There is a dynamic, Viehbacher said at a news conference. The growth platforms are already starting to offset patent expiries, they are like shock absorbers short term and growth pillars longer term.

In animal health, Sanofi said it was highly probable it would exercise its option to expand its Merial business to a joint venture with Merck's Intervet/Schering Plough and decision would be made in the coming weeks.

The pace of small to mid-sized acquisitions this year should continue at a similar pace as it did last year, when Sanofi did two to three deals a month, Viehbacher said.

Sanofi has already faced copy-cat competition to several of its drugs but in the fourth quarter the effect amplified.

U.S. sales of colon cancer drug Eloxatin eroded 97.4 percent following injectable generics from Teva and Hospira, while patients can buy cheaper Plavix copies in most major European markets, taking its sales down 11.6 percent.

Sanofi aims to use its over-the-counter business, which it recently expanded with the acquisition of Chattem in the United States, to sell its own generics.

On the bright side, sales of vaccines got a boost from H1N1 or swine flu shots contributing 362 million euros in the quarter which in October prompted Sanofi to raise its 2009 earnings forecast.

As part of its 2 billion euro savings target in 2013, Sanofi made 480 million euros in savings last year and for this year expected to generate more savings than the roughly 30 percent of the total it had initially planned.

Viehbacher said Sanofi's very significant change in culture meant that over 60 percent of its product pipeline consisted of biological-based products and that more than half of all products were from external partnerships.

Among its most promising new drugs is BSI-201 for its triple negative breast cancer candidate, which Viehbacher said could be filed for U.S. marketing approval at the end of this year or early next.

BSI-201 is in Phase III clinical trials but the FDA in December designated it a fast-track status, meaning the regulator will shorten the time to review.

($1=.7294 Euro)

(Editing by James Regan and Ben Hirschler)