Sanofi (NASDAQ:SNY) Q3 2023 Earnings Call Transcript

Sanofi (NASDAQ:SNY) Q3 2023 Earnings Call Transcript October 27, 2023

Eva Schaefer-Jansen: [starts abruptly] You have joined the meeting as an attendee and will be muted throughout the meeting. This meeting is being recorded. 2023 results followed by a Q&A session. As usual, you can find the slides to this call on the investors page of our website at sanofi.com. Moving to slide 3, I would like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F document on file with the SEC and also our Document d’Enregistrement Universel for a description of these risk factors. With this, please advance to slide 4. Our speakers on the call today are Paul Hudson, Chief Executive Officer, Jean-Baptiste de Chatillon, Chief Financial Officer, Houman Ashrafian, Global Head of R&D, and Julie Van Angeval, Global Business Unit Head, Consumer Health Care.

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The Global Business Unit Heads Brian Ford, Thomas Triomphe, and Olivier Charmeil will join for Q&A to which you have two options to participate. [Operator instructions]. And with that, I’d like to turn the call over to Paul.

Paul Hudson: Well, thank you, Eva, and thanks to everyone for joining our call today. Before we discuss this quarter’s highlights, I want to start by updating you on other announcements we made this morning. We’ve reached an exciting moment in the transformation of our Company here at Sanofi. Our play to win strategy is working and we’ve made significant progress over the past years to transform our R&D efforts with a sharp focus on best in class or first in class medicines and vaccines. These efforts are reflected in our results. We’re driving solid performance, seeing strong market demand for our recent launches, and advancing our innovative pipeline. Sanofi has delivered an unprecedented cadence of positive news and data readouts this year.

We see significant growth potential in our pipeline on increasing our R&D investment accordingly to ensure we fully capitalize on the growth opportunities ahead of us. Houman Ashrafian, our new Head of R&D, will share his vision and first impressions in a few minutes. This morning, we’re also announcing an important next step in our journey, our intention to separate the Sanofi consumer healthcare business at the earliest in Q4 2024, through the creation of a publicly listed entity headquartered here in Paris. This milestone is a win-win. It allows Sanofi to become a pure play by a pharma Company. We’ll be more agile, more focused on our key areas of strength. At the same time, it allows Sanofi CHC to be in a better position to pursue its own business strategy, resourcing and capital allocation.

You’ll hear more from Julie van Ongevalle later on the call. We’re excited by these new developments that will unlock value, coupled with the current strong business momentum with increasing sales from our growth drivers in specialty care and vaccines. No meaningful LOEs until the end of the decade. Unexpected benefits from accelerated investments in R&D. We will discuss these strategic announcements in more detail later on the call, but let me now turn to a brief review of the quarter three results that exemplify our successful strategy execution towards sustainable growth from innovative medicines. We delivered another quarter of double digit growth in specialty care, mainly driven by the outstanding success of Dupixent and our performance in rare diseases.

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Q&A Session

In vaccines, sales exceeded $3 billion in the quarter, supported by the unprecedented demand for Beyfortus. We continue to lead the influenza vaccines market with our successful differentiation strategy around premium products such as Fluzone High Dose. General medicine sales were lower due to price erosion in most markets, including in the US, and we continue to divest non-strategic products. Our standalone consumer healthcare business continued its positive performance of past quarters. In summary, the underlying strength of our growth drivers more than offset the expected impact from our Basio generic entries. As a result of our continued strategic execution, almost two-thirds of sales are now coming from specialty care and vaccines. Moving to slide eight and the impressive uptake of our key launches, ALTUVIIIO is capturing 40% of all the switches in the U.S hemophilia A market at the end of Q3.

And the number of total patients more than doubled versus Q2. During the quarter, ALTUVIIIO was also approved in Japan and Taiwan. There is tremendous momentum for Beyfortus, which we believe to be one of the fastest up-take of any pediatric immunization ever. And it has resulted in unprecedented demand across the launch regions. Our teams are working around the clock in contact with all the stakeholders to secure supply to protect all infants against RSV. For Tzield, we’re making steady progress around patient screening and enrollment in our support program. This month, phase three data from the PROTECT study was presented at ISPAD in Rotterdam, showing the potential to slow the progression of stage three Type 1 diabetes. The full data set was also simultaneously published in the New England Journal of Medicine.

We are hopeful to be able to expand Tzield’s current label leading also to a significant upside of Tzield’s commercial potential. As a result of the successful sales ramp-up in the quarter, we’re raising our sales expectations for these three innovative medicines to exceed EUR 500 million combined in the second half of 2023. With sales of more than EUR 2.8 billion in Q3, Dupixent reported another quarter of impressive growth. The strong brand performance continues to be fueled by demand across all geographies, newly approved indications and demographics. Total sales are now annualizing at more than EUR 11 billion, and we remain very excited about the growth outlook for this unique medicine. As many as 750,000 patients are now benefiting from access to therapy with Dupixent.

During more than six years since its initial launch in A.D., Dupixent has set a very high bar for both efficacy and safety, including for patients as young as six months. We continue to build on this remarkable body of evidence with the recent inclusion of five-year atopic dermatitis safety data in the U.S. and the EU labels. And we are persistent in our ambition to lead with science to address larger patient populations through label expansion into new indications based on our deep understanding of the type two inflammatory pathway with Dupixent. On slide 10, we continue to drive growth with our differentiated flu vaccines that now make up more than 70% of the total flu sales. As highlighted during our Q2 call, the flu vaccines market is increasingly competitive, especially for standard dose flu vaccines, coupled with vaccination rates that remain below the pre-pandemic level.

Despite these unfavorable market dynamics, we expect to deliver flu sales in 2023 at a level that will be among the top three in Sanofi’s history. We remain confident in future sales dynamics driven by the demand for vaccines that offer protection against the severe consequences of flu. Moving to slide 11, we continue to leverage external innovation in building up our leadership in immunology. Earlier this month, we announced a major collaboration with Teva on a novel anti-TL1A therapy with a differentiated target profile. Phase 2B is currently ongoing, and while time will tell if we deliver on the target product profile, we believe this molecule has the potential to be best-in-class treatment to address unmet medical need in the large market of inflammatory bowel diseases.

Similarly, in vaccines, we entered into an agreement with Janssen Pharmaceuticals earlier this month to develop and commercialize a potential first-in-class candidate against extra-intestinal pathogenic E. coli, also known as ExPEC. A large phase-3 trial is already ongoing. E. coli is a significant cause of sepsis, mortality, and antimicrobial resistance in older adults. As the number of cases is rising in an aging population, a novel ExPEC vaccine represents an excellent strategic fit with our portfolio of marketed products and pipeline candidates. We aim to leverage our expertise in vaccines to make this solution available to protect a broad population of seniors above 60 in the future, comparable to the protection of adults against shingles or PCV, for example, today.

I now hand over to Jean-Baptiste for a brief look at the Q3 financials.

Jean-Baptiste de Chatillon: Yes. Thank you, Paul. Moving to Slide 13 and looking at our year-to-date performance. Sales grew 3.9%, driven by the strong performance of Dupixent Sarclisa, strong recovery of the booster vaccine franchise and by our six recent launches. R&D expenses grew 1.6% at constant exchange rate and benefited from a favorable comparison, as we booked some provisions following the termination of Amcenestrant program last year. The BOI margin decreased 0.6 percentage points to 31.4% due to the significant impact from the [ph] OVIGO LOE our last significant LOE until the end of the decade. We are also annualizing the Libtayo agreement, including a faster repayment of the antibody alliance development balance now at 20% of the Regeneron project.

EPS was up 4.9% during the first nine months, helped also by the financial income due to higher interest rates on investments. On Slide 14, we are providing an updated H2 business outlook. We expect Dupixent to continue to grow driven by demand, while OVIGO sales are expected to be impacted by the entrance of generic players in Europe in Q4 on top of U.S. and Canada. Our expectations regarding the split of flu sales between Q3 and Q4 are now 70% on 30% compared to previously 2/3 and 1/3. Total net sales are expected to decline in the mid-single-digit range. Importantly, as mentioned by Paul earlier, we have raised our expectation for sales from our three new launches combined to exceed EUR 500 million. On the P&L, we expect the final COVID revenues of EUR 400 million in Q4 to be booked in the Vaccines other revenues line.

OpEx should continue to grow at constant exchange rate driven by investments behind our key launches, increased R&D spend as well as costs related to CHG stand-alone. Unchanged are our expectations on capital gains on annual tax rate. In Q3, we recorded around EUR 100 million of capital gains. Based on the ongoing strong performance of the [ph] OVIGO LOE supported by the recent launches, more than offsetting the [ph] OVIGO LOE pricing headwinds especially in Genmab, we are reaffirming our full year 2023 guidance with EPS to grow mid-single digit at constant exchange rate. On a reported basis, we continue to experience headwinds from currency approximately minus 6% to minus 7% for the full year based on October average exchange rates. I now hand back the call to Paul.

Paul Hudson: Well, thank you, JB. Now let’s turn to our next chapter of Play-to-Win. Since we outlined our Play to Win strategy in late 2019, we have delivered everything we said we would do. With Dupixent, we created a mega brand. In R&D, we lead in innovation based on our commitment to first — best-in-class medicines, and we’re building on our core key areas of strength around an industry-leading immunology pipeline. Our Vaccines business has delivered the mid- to high single-digit growth as per our guidance. And we have streamlined the Genmab portfolio, adjusted the geographic setup and go-to-market model. And we transformed the CHC business with the consumer at the center. Following this tremendous progress, we have now reached a point where we must accelerate our investments in R&D and with the proposed separation of Consumer Healthcare have an opportunity to take further steps towards becoming an R&D-driven pure play by a pharma Company.

It’s with great pleasure that I now hand over to Houman, Head of R&D, who will share more insights into our R&D journey and our pipeline’s potential. Houman and I have been working closely together and the team and I value the unique and certainly fresh perspective he is already bringing to the Company. Houman?