Recruiting in China

* Sees FY earnings down 7-10 pct at constant currencies
* Says one office visited by authorities in China
* Says not aware of visit purpose
* Q2 business net income down 23.4 pct to 1.48 bln eur
* Shares down 6.2 percent (Adds details, CEO comments, background)

By Elena Berton

PARIS, Aug 1 (Reuters) - Sanofi SA cut its 2013 earnings forecast as it reported a steeper-than-expected drop in second-quarter profit, hit by the effect of patent losses, currency fluctuations and an inventory setback in Brazil.

The French company also said one of its 11 regional offices in China had been visited by the State Administration for Industry and Commerce (SAIC (NYSE: SAI - news) ) in Shenyang, but added it was not aware of the purpose of the visit from the agency.

A probe by Chinese authorities into the activities of GlaxoSmithKline (Other OTC: GLAXF - news) led to allegations of a wide-reaching bribery scandal last month and prompted speculation that other international companies could be drawn into the investigation.

"We are not really aware of the purpose of the visit, we are working with," Chief Executive Chris Viehbacher told reporters on Thursday. SAIC is one of China's anti-trust regulators in charge of market supervision, which also looks into low-level bribery cases.

Viehbacher added that the French group's local head office in Shanghai had not been contacted by Chinese authorities.
China's 21st Century Business Herald earlier reported Sanofi (NasdaqGM: GCVRZ - news) and U.S. drugmaker Eli Lilly & Co had confirmed visits to their offices by the Shenyang bureau of the SAIC.

Sanofi said in an emailed statement to Reuters that the agency visited its offices on July 29, but said the purpose of the visit was unclear.

Eli Lilly said in a statement to the newspaper that the visit was a routine inspection by the relevant government departments that occurred in early 2013, and was completely different to previous industry investigations led by the public security bureau.

"Regarding this inspection, we have fully cooperated," the U.S. group told the paper. Lilly representatives in China did not respond immediately to a request for comment from Reuters.

China remains a priority market for Western drug makers, which can command hefty price premiums for their medicines even though they are no longer protected by patents.

TOO EARLY

A promise this week by GlaxoSmithKline to make its drugs more affordable in China in the wake of the bribery scandal could be a lever for Chinese authorities to start redressing the balance.

Viehbacher said it was premature to say what repercussions the scandal would have on Sanofi's business in China.

"We are examining the issue closely and we are examining our business in China, but I think it's too early to draw any conclusions," he said.

Sanofi also predicted earnings this year would be between 7 and 10 percent lower than in 2012 at constant exchange rates, but said it continued to expect to return to growth in the second half of 2013.

Sanofi had previously forecast that annual profit would be flat to 5 percent lower at constant currencies.

Its shares were down 6.2 percent at 75.13 euros by 0758 GMT, the biggest losers in the CAC 40 (Paris: ^FCHI - news) index in Paris which was up 0.3 percent.

"Whilst this is disappointing, the one-time nature of most of the areas of weakness now creates even easier comparatives for the growth rebound expected in the second half of 2013 and beyond," analysts at brokerage Jefferies said in a note to clients.

The group's closely watched business net income, which excludes items such as amortisation and legal costs, declined 23.4 percent to 1.48 billion euros ($1.96 billion), below an average of 1.79 billion in a Thomson Reuters I/B/E/S poll of nine analysts.

Sales shrunk 9.8 percent to 8 billion as last year's patent expiry on anti-clotting drug Plavix, once the world's second-best selling prescription drug, sliced 481 million euros off revenue in the quarter.

The group's generics business in Brazil was hit by much higher-than-planned inventory levels during the second quarter, Sanofi said.

As a result, Sanofi had to adjust sales by 122 million euros and book an additional provision of 79 million to write off the inventory and other related costs. ($1 = 0.7531 euros) ($1 = 6.1289 Chinese yuan) (Additional reporting by Michael Martina in Beijing; Editing by Christian Plumb and David Holmes)