Cisco Systems Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 27, 2023

There are 19 speakers on the call.

Operator

Thank you for joining us to review Sanofi's 3rd quarter 2023 results followed by a Q and 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 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'Angresistance Universelle, for a description of these risk factors. With this, please advance to Slide 4.

Operator

Our speakers on the call today are Paul Hudson, Chief Executive Officer Jean Baptiste Du Chatillon, Chief Financial Officer Niman Ashrafian, Global Head of R&D and Julian Angeval, Global Business Unit Head, Consumer Healthcare. The Global Business Unit Heads, Brian Ford, Thomas Triomphe, and Olivier Charmey will join for Q and A, to which you have 2 options to participate. Option 1, click the raise hand icon at the bottom of your screen or option 2, submit your question by clicking the Q and A icon at the bottom of screen. And with that, I'd like to turn the call over to Paul.

Speaker 1

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 and D efforts with a sharp focus on best in class or 1st in class medicines and vaccines. These efforts are reflected in our results.

Speaker 1

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 and D investment accordingly to ensure we fully capitalize on the growth opportunities ahead of us. Bhoomanesh Raffian, our new Head of R and 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.

Speaker 1

This milestone is a win win. It allows Sanofi to become a pure play biopharma 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 Anjvar later on the call.

Speaker 1

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 and expected benefits from accelerated investments in R and D. We will discuss these strategic announcements in more details 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. In vaccines, sales exceeded $3,000,000,000 in the quarter, supported by the unprecedented demand for Bay Fortis. We continue to lead the influenza vaccines market with our successful differentiation strategy around premium products such as Fluzone High Dose.

Speaker 1

General Medicine sales were lower due to price erosion in most markets, including in the U. S, and we continue to divest non strategic products. Our stand alone 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 Baggio generic entries. As a result of our continued strategic execution, almost 2 thirds of sales are now coming from Specialty Care and Vaccines.

Speaker 1

Moving to Slide 8 and the impressive uptake of our key launches. Altruvio is capturing 40% 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.

Speaker 1

During the quarter, Ultuvia was also approved in Japan and Taiwan. There is tremendous momentum for Pays Fortis, which we believe to be one of Fastest uptake 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 3 data from the PROTECT study was presented at ISPAD in Rotterdam, showing the potential to slow the progression of stage 3 type 1 diabetes.

Speaker 1

The full data set was also simultaneously published in the New England Journal of Medicine. We are hopeful to be able to expand tZeal's current label leading also to a significant upside of tZeal's commercial potential. As a result of the successful sales ramp up in the quarter, we're raising our sales expectations for these 3 innovative medicines to exceed €500,000,000 combined in the second half of twenty twenty three. With sales of more than €2,800,000,000 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.

Speaker 1

Total sales are now annualizing at more than €11,000,000,000 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 6 years since its initial launch in AD, Dupixent has set a very high bar for both efficacy and safety, including for patients as young as 6 months. We continue to build on this remarkable body of evidence with the recent inclusion of 5 year atopic dermatitis safety data in the U. S.

Speaker 1

And 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 2 inflammatory pathway with Dupixent. On Slide 10, we continue to drive growth with our differentiated flu vaccines to 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 remained 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 3 in Sanofi's history.

Speaker 1

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, building upon 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.

Speaker 1

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 XBEC. A large Phase III trial is already ongoing. E. Coli is a significant cause of sepsis mortality and antimicrobial resistance in older adults.

Speaker 1

As the number of cases is rising in an aging population, A novel XpEq 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.

Speaker 2

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, Sakhlizar, strong recovery of the booster vaccine franchise and by our 6 recent launches. R and D expenses grew 1.6% at constant exchange rate and benefited from a favorable comparison as we booked some provisions following the termination of Amselstron call last year.

Speaker 2

The BOI margin decreased 0.6 percentage points to 31.4 percent due to the significant impact from the Obraggio LOE, our last significant Elouit till 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 profit. EPS was up 4.9% during the 1st 9 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 Opagio sales are expected to be impacted by the entrance of generic players in Europe in Q4 on top of U.

Speaker 2

S. And Canada. Our expectations regarding the split of flu sales between Q3 and Q4 are now 70% on 30% compared to previously 2 thirds on 1 third. Total Gen Med 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 3 new launches combined to exceed €500,000,000 On the P and L, we expect the final COVID revenues of €400,000,000 in Q4 to be booked in the Vaccines other revenues line.

Speaker 2

OpEx should continue to grow at constant exchange rate, driven by investments behind our key launches, increase R and D spend as well as costs related to CHE stand alone. Unchanged are our expectations on capital gains on annual tax rate. In Q3, we recorded around €100,000,000 of capital gains. Based on the ongoing strong performance of Dupixent supported by the recent launches, more than offsetting the OpExo LOE of the pricing headwinds, Especially in Gen Med, 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.

Speaker 2

I now hand back the call to Paul.

Speaker 1

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 and D, we lead in innovation based on our commitment to 1st or best in class medicines, and we're building on our core key area of strength around an industry leading immunology pipeline.

Speaker 1

Our vaccines business has delivered the mid- to high single digit growth as per our guidance. And we have streamlined the Gen Med 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 and D and with the proposed separation of consumer healthcare, have an opportunity to take further steps toward becoming an R and D driven pure play by a pharma company. It's with great pleasure that I now hand over to Hooman, Head of R and D, who will share more insights into our R and D journey and our pipeline's potential.

Speaker 1

Huw 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. Hooman?

Speaker 3

Thank you, Paul. I'm thrilled to join Sanofi, and I'm looking forward to working closely with our teams, building on the significant progress that's been made over the last 4 years And actively reshaping the discovery and development portfolio. It's been just over 4 weeks that I've been working at Sanofi. I'd like to use this opportunity to share some of my early observations on both the organization and the rich and diverse pipeline using amatilumab, Recent differentiating data presented at EADV a couple of weeks ago as an illustration of how we are poised to embrace the next chapter of our accelerating growth journey. My focus as the new Head of R and D is to ensure that we continue developing breakthrough medicines and vaccines to improve people's lives, While sustaining growth in our key therapeutic areas, driving shareholder value.

Speaker 3

I also want to continue to position the company and further focus it As a scientific and innovation leader, offering meaningful therapeutic and innovative options to patients globally, adding value to society. Our pipeline today is centered around 6 major therapeutic areas, benefiting from a broad range of proven mechanisms of action and technology platforms. We're building on an industry leading immunology pipeline with the ambition to be the leader for the next 25 years. But I'm equally excited about our presence in neurology, rare diseases and vaccines. This commitment is reachable thanks to our talented and dedicated International team, many of whom I've had the pleasure of meeting at various R and D sites and town halls globally during my first few weeks on the job.

Speaker 3

Sanofi is strongly deploying AI, data science and computational expertise throughout the R and D engine to further accelerate our efforts and deliver better and faster options to pension. As part of these efforts, leveraging my recent background, Tapping external innovation, especially for the early to mid stage assets, will be thoughtfully considered while ensuring strategic, scientific And financial rationale remains stacked up. As you'll see on Slide 19, as we transform and modernize the company for the long term, The teams also keep delivering clinical performance and creating value in the short term. We are extremely proud of the progress we've made in immunology with the success of Dupixent and the leadership we've built in Type 2 inflammatory disease. We are determined to expand our immunology portfolio beyond Type 2 and to drive innovation by deploying disruptive technologies for the development of 1st and best in class medicines.

Speaker 3

We continue to reinforce our development organization to drive these programs relentlessly through executional efficiency. And as you can see on Slide 20, I'm happy to share with you some of the recent positive data that were delivered at the time that I just arrived. Amlutelimab's positive Phase 2b data was recently presented at the EADB Congress, where the scientific community Has been impressed by both the strong efficacy and safety data. Amlalotilumab has a unique non depleting mechanism of action targeting OX40 ligand with the potential to restore immune homeostasis with a sustained effect and with infrequent dosing. In this Phase 2b study, amlutilumab showed statistically significant improvements in the primary endpoint of percentage change in eczema area and severity index, Otherwise known as EASI, score at weeks 1624, as well as clinically meaningful and nominally significant improvement across all Key secondary endpoints at week 16 and notably maintained at 24 weeks.

Speaker 3

As indicated in this slide, 45 percent of patients treated with amlutilumab 250 milligrams with a loading dose achieved IGA 0 stroke 1 at 24 weeks. These strong AFSCU results combined with a reassuring safety profile improve our confidence in amlutilumab's Potentially best in class profile for the treatment of AD provide a signal to pursue a differentiated dosing regimen that could be very meaningful to patients with moderate to severe atopic dermatitis. These data form the basis for our advancement into Phase III clinical development, which we expect to begin in the first half of twenty twenty four. Slide 21. As you can see, the company has made tremendous progress with its R and D transformation over the past few years.

Speaker 3

Clearly, we have now arrived to the point where our innovative pipeline requires increased funding to fully exploit the potential of these transformative assets and to make them available to patients as soon as possible. We look forward to sharing more of our excitement about the recent flow of positive pipeline environments at the upcoming R and D Day on December 7. And with that, back to you, Paul.

Speaker 1

Thank you, Huynh. As I mentioned earlier, I want to say a bit more about our intention to separate our Consumer Healthcare business. CEC was set up as a business unit in 2014, followed by the integration of the Boehringer Ingelheim brands. Until 2019, it remained fully integrated into the pharma organization. You could say lack prioritization, consumer centricity and kept performing below the market.

Speaker 1

Our decision to create unit 4 years ago enabled CEC to set the right priorities, accelerate growth. Today, we've completed a standalone setup around a highly competitive portfolio and built a future ready organization, consumer focused and brand led. As a logical next step to fully unlock the value of the CHC business, We believe that the intended separation would equip it best to pursue its own business strategy, resourcing and capital allocation for sustainable growth. We are reviewing potential separation scenarios and believe that the path most likely to maximize shareholder value would be through a capital markets transaction To create a publicly listed company and headquartered in Paris, subject to market conditions, the separation could be achieved at the earliest in quarter 4, 2024. We're very excited about this announcement and the future prospects of both Sanofi and CEC.

Speaker 1

With this, I hand the call over to Julie to add her perspective.

Speaker 4

Thank you, Paul. I'm very proud of what the team has achieved since we embarked on our stand alone journey, And today, we are ready for the next chapter. We are a global leading player with a strong focus on our 15 priority brands, all with global or local top three positions, of which most are holding number one positions in their respective markets. These 15 Biologie brands now represents 2 third of our business and have generated 85% of our growth in the past 3 years. Important to note is that we're successfully operating in the attractive €200,000,000,000 OTC and BMS Enjoys attractive margins and rather high predictability.

Speaker 4

We have built a pure play leader with over 90% of our revenues from OTC and VMS, fully leveraging our diversified footprint across categories and geographies. With our clear strategy and consumer focused brand led organization in place, We believe the intended separation comes at the right time to further increase our focus, agility and speed and effectively leverage our industry trends. With that, I hand the call over to Jean Baptiste for your financial update.

Speaker 2

Thank you, Julie. On Slide 26, let me remind you of our success in delivering on our financial objectives during the 1st chapter of plateauing, 10 consecutive quarters of growth, 540 basis BOI margin improvement on €2,700,000,000 of cost efficiencies, which we reinvested behind growth drivers on our pipeline. We also deployed cash in more than 25 value creating transactions securing access to external innovation in R and D. The digital transformation is a key area to enable further productivity, and we are today Employee insights from AI and predictive analytics across the organization. To date, Sanofi also benefits from a greatly improved cash flow generation.

Speaker 2

In December 2019, we outlined our capital allocation policy and have demonstrated discipline in executing on those priorities. Investment into organic growth Through our pipeline on growth drivers remains our number one priority, followed by M and A on business development focusing on bolt on value enhancing opportunities to drive leadership in core therapeutic areas. We continue to grow our dividend and expect to maintain that policy, including in 2024 and regardless of the proposed CHC separation. In summary, I'm confirming that our capital allocation policy remains unchanged. On Slide 28, as Paul already mentioned, given the potential we see in our pipeline, we plan to grow our R and D spend in 2024, up from around €6,800,000,000 expected in 'twenty three.

Speaker 2

The spending level is already higher compared to 5 point €5,000,000,000 in 2020 and is mainly driven by the investment in Vaccines, R and D and the mRNA Center of Excellence. In Pharma, we also benefited from reallocating investments, first from Cardiometabolic and lately from Oncology. We expect a further step up in R and D spend in 2024 as we start a number of exciting mid to late stage programs in immunology, MS on vaccines. In 2025, we expect to be able to reallocate spending from completed Phase III programs, such as Tolibrutinib on the COPD programs to new programs either internally derived or from Business Development. The simplification on streamlining of the Gen Med portfolio continue at pace.

Speaker 2

We reached the target number of around 100 Branded Product Families this year, earlier than initially guided at our Capital Markets Day in December 2019. More than €1,900,000,000 of cash proceeds were generated. Due to continued pricing headwinds across the portfolio of older products On increased competition in the EPARIN market, we will no longer aim to stabilize Gen Med sales in 2025 at the 2020 level, But instead, we'll continue to reduce the portfolio to around 85 branded product remedies, thus allowing for further efficiencies. On Slide 30, we are launching efficiency initiatives targeting up to €2,000,000,000 savings across Sanofi to free up operational resources on support the accelerated R and D investments. We will be prioritizing our oncology R and D program and focus on those with first our best in class potential, reallocating resources on growth drivers and strategic TAs.

Speaker 2

We will also leverage procurement to generate additional savings. Lastly, we will modernize the commercial delivery by optimizing our country setup, expanding the hub strategy to increase centralization while refocusing R and D on most critical sites and technology platforms. On Slide 31, we are providing a first outlook for 2024 and 2025. For 2024 and 2025, we expect continued sales growth supported by our leading franchise and launches For Dupixent, based on the strong double digit growth rate that we report again today, we expect sales to reach close to €13,000,000,000 in 2024. Vaccine sales are expected to grow mid- to high single digit in both years as per our prior guidance.

Speaker 2

On the P and L side, OpEx is expected to grow in 2024 due to a step up in R and D investments. Capital gains from product divestments are expected at a similar level as in 2023. Due to changes to global tax regulation, the company's Effective tax rate is expected to increase to 21%. Looking further out into 2025, We expect to see the full benefit from the reallocation of our planned efficiencies initiative on a relatively stable R and D expenses year on year as several large Phase III trials in MS on COPD will mature over the period. As a result, business EPS in 2024 is expected to decline low single digit at constant exchange rate or remain roughly stable excluding the impact of the expected followed by a strong business EPS rebound in 2025.

Speaker 2

So Paul, back to you to conclude.

Speaker 1

Thank you, JB. I want to conclude by stressing again the impressive progress we've made since the launch of our play to win strategy in 2019. We said we would deliver, and we did. Today, we are reconfirming our 2,030 goal to make Sanofi a modern science driven healthcare company, an industry leader in immunology and in vaccines with greater than €22,000,000,000 10,000,000,000 of sales by 2,030, respectfully. We are confident in our improved R and D productivity, Driving a pipeline made up of at least 70% biologics and the vast majority of products being best in class or first in class.

Speaker 1

This lays a promising foundation to bring 3 to 5 products to market with €2,000,000,000 to €5,000,000,000 peak sales potential each in the second half of the decade. We're in a unique position compared to our competitors with a portfolio uncompromised by a meaningful loss of exclusivity for the remainder of the decade. We're looking forward to the long term growth prospects opened by our decision to increase our R and D investments. With that, let's open up the call for Q and A.

Operator

As a reminder, we would like to ask you to limit your questions to 2 each. You have the 2 options to participate. Option 1, click the raise hand icon at the bottom of your screen. You will be notified when your line is open to ask your question. And at that time, please make sure you unmute your microphone.

Operator

Or option 2, submit your question by clicking the Q and A icon at the bottom of the screen and your question will be read out by our panelists.

Speaker 5

The first question will be from Luisa Hector from Berenberg. Luisa?

Speaker 6

Hi there. Thank you for taking my questions. So on the increased R and D investment, could you comment on Essentially, why now? So why has it now become clear that you need to make this step up in your R and D spend? And can you give us any sort of internal indicators, reasons why we should be Positive in this increased spend, just sort of help us understand that the transformation is happening and that these dollars will be Invested wisely.

Speaker 6

So that's first question on the R and D investment. And then maybe on Dupixent, just You've got your guidance there for SEK 13,000,000,000 for next year. So could you comment on how the Formula E negotiations have gone to date and your level of confidence in that CHF13 billion clearly depicts and performing very well. Thank you.

Speaker 1

Okay, Luisa. Thank you. JB, maybe you make a comment on the R and D investments first?

Speaker 2

Yes. I guess the question is why now? And it's quite clear for us. We were committed our 2025 BOI margin target since we announced it, and you have seen our journey towards it. As our successful readouts of the past few months continued to come in, We worked on various options on how to develop them without wanting to take investments off our launches and bearing in mind that the headwinds to Gen Med from Gen Med were not being reversed.

Speaker 2

So this option included R and D phasing, selection, potential partnering, But we discussed various strategic options. At our board meeting yesterday, we decided to take on the option to Accelerate and fund the full potential of our promising pipeline. We believe this is the best option for the long term value of Sanofi, our shareholders and also for the patients who we serve.

Speaker 1

And I'll come to you, Hooman, in a second. And of course, we come off the back of Happening in scoping what's happening in immunology and you know our probabilities of sex is higher, plus the importance to bring everything forward With some urgency is also there. So coupled with what JB said, I think the timing is good to say it now. Hooman, give us the confidence as well. Why do we believe we'll be more successful?

Speaker 3

Thanks, Paul. And thank you, Louisa, for your question. Coming into this with Relatively fresh eyes and an objective perspective on the portfolio. We've really had the opportunity to figure out how we were going to move forward and having evaluated especially our leading product, I personally felt With the support of the ex com and the broader group that it was important that we should double down on many assets which we really wholly owned and which could be transformational. Importantly, moving these assets forward in the service of patients and our shareholders across a broad front critically important at this point for many reasons, including the macro and some of the legislative changes that are coming in, in the future and have already come in.

Speaker 3

One thing I should reassure you to the second limb of your sentence was about, how you can be reassured that we're thinking about spending any every dollar wisely. Much of the expenditure will come through thoughtful reallocation towards the 1st and best in class assets. And we will ensure that every dollar is spent, both in the service of our shareholders and, importantly, in our patients, really very carefully. And you'll see that peppered throughout the conversation thus far.

Speaker 1

Yes. And of course, at R and D Day, we can really put our cards on the table. I think Yes,

Speaker 3

Paul, thanks for pointing to that. I invite you all at this point to our December 7th R and D Day, and we look forward to sharing the details with you in greater detail

Speaker 1

Yes. And I think before I come, I'll throw it to Brian on Dupixent in a second. But also, I think it might be worth recognizing, although you know it, We have a new head of R and D that has a more unique profile, both, if you like, skilled in science, but also in capital allocation given his background. It's unique, and I think that's already putting being put to work for us because there's a great awareness for how we spend and how we create a return, Firstly, for patients and investors, Brian, dollars 13,000,000,000 and how confident are you in what's the formal status?

Speaker 7

Thank you, Louisa, so much for the question. We've always had very good formulary status. And we've worked very closely from the very beginning with a strategy with the payers. And as we said before, today even we have more than 70% of our coverage is actually commercial coverage. And so we feel very good about the negotiations going into 2024.

Speaker 7

But I would start by saying actually as we talk about the confidence, not only with the payers, but the confidence we have in $13,000,000,000 it begins with the profile. We've got a profile that is quite unique targeting IL-four, IL-thirteen. We have 5 indications now in atopic dermatitis. We have 5 years' worth of Data now in our label, both in EU and in the U. S.

Speaker 7

We're down to the age of 6 months of age for young babies. So we have Quite an incredible profile and you look at the growth that we continue to generate year on year, it's quite impressive. And so, it'd be hard not to be confident in a brand like this. And so I think as we shared with you before, we shared with you I think back in 2019 the waypoint of $10,000,000,000 first. We went back it wasn't that long ago in 20 The beginning of 2022, just over a year ago, we gave a new waypoint of a little bit greater than $13,000,000,000 And now here we are talking about Get reaching close to $13,000,000,000 next year.

Speaker 7

It's quite impressive. So we feel very confident, I think, in the continued growth of this brand and a leading profile across all the indications that we compete in.

Speaker 1

Thank you, Brian. Maybe just add then finally to that, that with our delivery on Bay Fortis And Altuveo, the great work that's been done to prepare ourselves for TZIELD and the delivery on Dupixent. There's a sort of operational alpha about this company, and it makes you feel very confident about money well spent bringing great medicines through Can get launched really well in this company, and I think it's important not to lose sight of that. Next question?

Speaker 5

Yes. Next question is from Emily Fields from Barclays. Emily?

Speaker 8

Hi. Thank you for taking my questions. Maybe just, to piggyback on one of the last answers, you talked about doubling down on some of the programs that you're advancing. I was just wondering if we could get some more granularity on that because I think at half year results, We talked about amlutelimab and frixelimab going into Phase 3. So are these studies going to be larger than initially planned?

Speaker 8

And then second question, just on GenMed, If you could provide some color, I know you gave a number of products that you're targeting for 2025, just maybe more on the sales expectation and just the impact of That sales expectation to overall BOI margin, are those higher margin products that are coming off just so we can think about the moving parts Getting to 2025 BOI margin. Thank you.

Speaker 1

Okay. Maybe just a quick response from me. We'll go through this at R and D Day. I understand that why you asked the question, going more broadly with amlutelumab, Potentially going more broadly with the bilzabrutinib, potentially, when we look at the oral small molecule TNF, We have only shared one piece of data, I think, in psoriasis from recollection with an intent to go to a couple of indications. When you look at the IRA, you look at a small margin, you go, you know what, if we like the data, we're going to have to run parallel studies to bring this thing through to fully prosecute it.

Speaker 1

They're the sort of things that we're starting to say to ourselves that Frexelimab beyond MS, these are the things we'll talk with you about at R and D Day in December. But these are not inexpensive things to do, But are too good opportunities to miss, particularly with our ability to deliver and to launch. So again, December 7, we have a few hours on this, and it'll be up to us to demonstrate that to you, but I think you'll see it. I think when you may be asking the question, okay, why now, what's different? It's urgency, it's confidence, it's breadth and it's a sheer intent to go all in to create massive future value.

Speaker 1

And we can perhaps do it in an optimized fashion. It just is not worth it at this point. The big the win is too big over the longer term. I think Olivier, there was a question around Gen Med.

Speaker 9

Yes. So thank you, Emily, for your question. So we are going to continue to simplify our portfolio. We are a little bit in advance versus our plan. We are now aiming at 85 product For 20 25, when initially, we were aiming at 100 in 2025, coming more than 350.

Speaker 9

It's very much directed by profile and gross margin. We want to focus our resource on the drivers that are going to drive Profitability and brands that are going to drive growth. What does it lead to in terms of sales profile? As Jean Baptiste mentioned, we are no longer aiming to maintain Genmab sales in 2025 at the level of 2020, but we remain very, very committed to our guidance in terms of BOI margin between $220,000,000 $225,000,000 and we are well on track here. Due to, of course, the pressure we put on OpEx, the efforts that are done by our colleagues from Manufacturing to improve the cost of goods.

Speaker 9

Thank you.

Speaker 5

Next question is from Peter Welford from Jefferies. Peter?

Speaker 10

Hi. Yes. Thanks for taking my questions. First question, I guess, it's coming back to a point you've, to some extent, already covered. But I guess just curious why the decision now to get to talk about 2024, 2025 EPS and highlight the increasing R and D.

Speaker 10

I guess, we would never in the side world of known the increasing R and D plans until potentially the 7th December R and D Day. So I should just outline why disclose that The spending sort of now, but then give the details in the 7th December. What was the urgency, I guess, in this sort of 6 week, if you like, preview rather than necessarily giving us all the information together then at the Capital Markets event. And then just secondly, if I can just come back to GenMed. Obviously, you've done the TZeal deal.

Speaker 10

I mean, you've actually upgraded the sales outlook for that portfolio of newly launched brands. We've also seen Resinoroc launch as well. Can we just ask a bit with regards to the change in the product families? And I appreciate that, obviously, you're pruning the portfolio. Equally, obviously, there's a lot of growth assets within that.

Speaker 10

So can you just perhaps give us some sort of clarity in terms of what sort of growth we should profile or I think we should be looking for, for that business? Appreciate it no longer stabilizing. Is this a business where you think the current trend is going to continue? Or is it likely to accelerate given the commentary in the outlook section about more aggressive pricing dynamics that you're seeing for that business. Thank you.

Speaker 1

Okay. Peter, thank you very much. Jean Baptiste, A little comment on 24, perhaps even a comment on 25 and a little bit around why not wait until R and D date?

Speaker 2

Yes. Well, that's a good question. But I think I tried to answer it just before, is that once you've made a decision Governance and we had our Board meeting yesterday, we had different options, but we opted for this doubling down in R and D and Science. So it's good practice to communicate without deferring. Then on 2025, It's there are pull and pushes, as I said, and it's difficult to understand why the R and D would plateau in 2025 versus 2024.

Speaker 2

But you have to keep in mind that reallocation exercise we are doing now with human, with at great speed, I must say, But it will still deliver the bulk of it in 'twenty five, not in 'twenty four. So that will come to give more leeway to the development of our I and I pipeline and vaccine pipeline. You have also to think that So studies on COPD and tolebrutinib will be dwindling and these costs will disappear, giving more room also to embark suspend for our I and I pipeline or basing pipeline, as I said. So this is one point. On COGS on Dupi, remember that we will have the full impact of the improvement of COGS in 2025.

Speaker 2

And globally, the other elements of our saving plan will also mainly deliver in 2025. So that's why we are concluding That we will have a strong rebound in 2025.

Speaker 1

Thank you, JB. Okay. To Gen Med, I'll throw it to you, Olivier, for a second. But just the general context, I think you know this, I think you said it. We have pricing headwinds that are Simply too strong to be offset by volume, even though our volume performance is pretty phenomenal.

Speaker 1

And that's an industry phenomenon, by the That's not as a post pandemic sort of fiscal deficit attention. I think we've coped very well, but it won't offset. For TZIELD And Resorock and the sort of growth profile of the segment at the core, if you like, of Gen Med, Olivier?

Speaker 9

So, thank you for your question, Peter. On the our growth is going to be continued to be driven by the growth of We are very happy with the performance of Resurox. We are well ahead of our plan. We will see in cash that it will continue and I will talk more about extension of indication during the R and A meeting in December. We continue to be happy very strong growth in the international region, including China by of Toujeo.

Speaker 9

And of course, Palluent is doing extremely well in Europe, We're in a very growing market, and we are able, in some countries, to continue to grow our market share. Just to give a little bit of color, I'm just back from Ispad. I've met a lot of key opinion leaders on TESOL that was with Paul. And we are really happy. We are in line with what we had initially planned in the U.

Speaker 9

S. And we knew that it would be a slow ramp up. We know that feedback from key opinion leaders on the product is extremely high. We are working through a very focused approach on a limited number of centers. It's about screening.

Speaker 9

It's about ways of working. It's about getting organized. We now have a little bit more than 110 patient, and we have done a lot of progress since we took over Prevention Bio in terms of making much shorter the period of time between when patients enter into the funnel and when they get infused. So everything that we see and the action plans that we have put in place Makes us comfortable that Tizil will be a multi billion asset.

Speaker 1

Question?

Speaker 5

Next question is from Graham Parry from Bofar. Graham?

Speaker 11

Great. Thanks for taking my questions. So 1st was just, I think, clearly, the series of announcements this morning caught the market off guidance, see that the share price reaction. And I think what would help is if you can help people With narrowing of the scenarios for the 25 earnings recovery. So you said flat absolute R and D, Glad you even actually fall just based on the savings you're talking about.

Speaker 11

And as your cost savings come through as well. And given that you have this big step up into 2024, that's clearly going to see earnings down. But is it fair to assume therefore that the cut to earnings And people will be putting through their models is going to be less in 2025 and 2024 because you've got revenue growth in these other savings coming through. And then secondly, just what sort of aspirational growth are you targeting post 2025 to these investments again? I think that some sort of communication of greater to the end of the decade would be helpful for investors as well.

Speaker 11

And then lastly, on Tuma, clearly the argument for value creation here would be that peers and consumer trade are much higher multiples in Sanofi. But that rationale goes out of the window if you sell it for cash and then reallocate that capital into another deal. So perhaps some comfort for investors here would be What the preference on options is, is a spin off preferred here? Or if not, what are the return hurdles for a transaction on the other side? Would it be EPS accretion?

Speaker 11

Would it be NPV positivity? Just help us with understanding that as well. Thank you.

Speaker 1

Okay, JB. This looks like a few for you and I from Graham Parry. So why don't we Start with a little bit of 24 and the shape.

Speaker 2

Well, I think Graham is hitting a very important point is that something we have not Reminded enough is that we enjoy an incredible and pretty unique growth profile of our top line and that's for the years to come. What we are doing today is having in mind that we want to deliver for 'twenty six onwards 3 to 5 launches of assets with 2 to 5,000,000,000 pixels potential. And that's Very important today to remind us this player, value creation to a greater value creation in the midterm. The top line growth is untouched in the years to come, and I think it's pretty easy to read and will even be bolstered with success like the one you see on Bay Fortress. You want to add something like that or should I say something about CHE?

Speaker 1

Yes, 25, a little bit more color on 25.

Speaker 2

Well, I think I give the that was a missing piece. That was that we will be growing in 2025. So the strong rebound, fueled by flat R and D, savings, reallocation, improvement on COGS, Deep transformation of the company, a second step in this transformation. All of this is really leading to a strong rebound as soon as with a growth profile, which is untouched. CHC, I think it's really Too early to be more precise.

Speaker 2

We said we had a preferred route. But whatever the route we take, we'll keep in mind the best interest of investors.

Speaker 1

Thank you. Okay, next question.

Speaker 5

Sorry, next question is from Tim Anderson from Wolfe.

Speaker 12

Thank you. I just want Again, stay on the guidance. How much of the pressure to earnings in 2024 and 2025 From below the line items versus on the revenue side, you're talking about Gen Med guidance no longer being the same as what it was. That would suggest there's some portion of revenue shortfall on the top, on the revenue side that drives the earnings reductions you're Suggesting the Street build in for 202425. So can you kind of apportion the lowering to revenue reduction versus things that are below the line?

Speaker 12

And then on the below the line stuff, it's something that's not just R and D, it's not just tax, but it's also stepped up Promo of certain brands, and I'm wondering if you have specifics to share there.

Speaker 1

Okay, JBing. On the pressure on earnings from below the line?

Speaker 2

I think below the line is everything which is below the top line. Yes. If I understood well. Okay, okay, got it. Yes, well, yes, because top line is pretty clear, you're right, on it's growing steadily.

Speaker 2

So I tried to give a view that this step up so main difference is really R and D. Of course, it's altered by So shape of the decrease in Gen Med. But mainly, it's really this decision Of going all in developing the pipeline. And you've seen that we've not been shy or mainly, we went Just recently, you've seen 2 BD deals appearing, the one on TLA-one, which is a great complement to our immunology story and also in vaccine, the colleague Paul just presented. There are big potential.

Speaker 2

So is this endeavor to look for 3,000,000,000 to 5,000,000,000 peak sales? That's where we are. It's R and D, the main driver of the change.

Operator

And on tax regulation changes?

Speaker 2

Well, tax regulation changes, thank you, Eva. It's Pillar 2. As you know, we have a tax setup, which had Really improved a lot in the past 5 years, very steadily, decreasing the effective tax rate. While this with this minimum 15% Taxation, some of the players, and we are one of them, are hit by this change in regulation. Yes, that's the way it is.

Speaker 1

Thank you. Next question?

Speaker 5

Next question from Peter Verdult from Citi.

Speaker 13

Peter? Yes, thanks. Pete Bedell, Citi. I wanted to talk more about the pipeline, but I'll probably have to wait for December given Today's share price reactions, so apologies, team. It's 2 on financial and commercial.

Speaker 13

Just again, just to go back to the guidance. I know Sanofi doesn't guide on revenues, but in your prepared remarks, you did call out revenue growth expectations in 2024. Can I push my luck and explore your comfort or the upside potential to where market expectations are currently, which is around mid single digit growth in 2024? And then secondly, Paul Jordon or JB, Bay Fortis in September at the launch, the message was capacities are great. The demand has been phenomenal.

Speaker 13

Shortages are now being reported. So I just want to gauge how quickly you can ramp Further near term given the annual benchmarks you were using are clearly sort of undercooking what's happening in reality. Thank you.

Speaker 1

Thank you, Pete. Look forward to your questions in R and D Day. JB, I'm not sure there's much to add, frankly, on beyond 2024 on revenue growth.

Speaker 2

No, we're not guiding, but Our confidence, I see you can feel it through the team. We are a growing story and Growth story, I know that will happen. No, I don't think we can be much more precise at that stage. But I think maybe on the Fortis.

Speaker 1

So, Thomas, maybe give you a little bit of time to talk about the incredible launch.

Speaker 14

Thank you very much, Pete. Great question. Yes, absolutely. We are very happy about the launch of our Befortus, extremely excited by the reception of the product by the whole community, be it the providers, the payers, the public or private stakeholders have all played their part to make sure that there could be an What does it mean concretely? It means that it's the unprecedented level of demand for any pediatric launch over the past 20 years.

Speaker 14

So what does that mean? That means that all in fund protection strategy works, and that's what people want, which is not the same that some other product can provide. It also means that it fits exactly what we have said in terms of the ability to be at the right path to make sure that it's accessible for everybody. Now we are working for 2020 with the different stakeholders to make sure that the best use doses that are provided to market Are you then that the maximum number of BBs is protected. And as you pointed out, this unprecedented level of demand has created a challenge to be able to cope So right now, we're working with CDC and with the different countries like France and Spain to make sure that all the disease get allocated and used as fast as possible.

Speaker 14

And of course, we are working with our partner AstraZeneca to make sure that we can extend the industrial network, identify further solutions to meet this exceptional demand, not just now but for the future.

Speaker 2

Thank you.

Speaker 1

Thank you, Tom. Yes, I mean, incredible launch and We've prepared well. We developed the market, prepared well. The appetite is phenomenal, and we'll keep bringing more doses online. That's the plan.

Speaker 1

Okay, next question.

Speaker 5

Next question from David Risinger from Leerink. David?

Speaker 15

Yes. Thanks very much. I have, 2 questions, please. 1 on revenue and 1 on biopharma margins. So 1st, could you please frame late decade revenue growth prospects from the 2025 base?

Speaker 15

Should we be anticipating low single digit revenue growth or mid single digit And then second, excluding consumer, in light of the company's biopharma operating margin as it Stands today and also 2025 prospects. Has management and the board reconsidered Operating its biopharma business in such a wide range of therapeutic areas, products, Pipeline candidates and geographies and concentrating in more profitable biopharma franchises like, biopharma peers. Thanks very much.

Speaker 1

Okay. I mean, in terms of revenue growth, I can hear excitement, but there's nothing for us to share on that at all, certainly not this stage. And then discussions around, if I've interpreted this correctly, around just focusing further by geography and TA? And I think being a well,

Speaker 15

sorry to yes, to step back, sorry, to clarify. The company's bio Farm operating margin is at the bottom end of peers globally. And so it seems like, you know, that's a business mix issue. And the company has a very wide range of, you know, activities In various therapeutic areas, various drugs, a wide range of pipeline candidates, A wide range of geographies. I'm just wondering if greater concentration would enhance shareholder value in the biopharma business.

Speaker 1

David, thank you for the clarification. Then just a quick comment on this. We are focusing to be a pure play biopharma. The first thing we did, as you'll appreciate, is we doubled down on the R and D in the areas where we're already deployed. So the marginal cost to launch incremental vaccines, incremental beyond amlutelimab incremental biologics, Of course, Dupix is kept separate.

Speaker 1

We have a moment to be able to have a low marginal cost to launch these assets over the future. That is how we intend to play. And so we've made sure in R and D that we're laddering up behind infrastructure that we already have or can develop better efficiently. In the business itself, and I think Olivier touched a little bit on this, he's got the launches and the core assets. And then If you like, the legacy portfolio, because we have a wide portfolio, if you like, given the history of the company, between divestments And moving to digital and putting on carryover, we're making sure that we're actually focusing our efforts on where the growth opportunities are.

Speaker 1

So we may look wide, But in terms of if you follow the dollar against where the opportunities are, it's a much narrower list. I understand it's hard for you to see from where you are. It's one of the incredible things that the Gen Med team have done of more than or close to 9,000 people have left Gen Med over the past 2 or 3 years as we've got in pursuit of making sure that we are laser guided on the growth opportunities. So that's a continuous process. We like that because that

Speaker 5

Yes. Next question is from Gareth Stephen Jen from Exane BNP. Gary?

Speaker 1

We lost Gary.

Speaker 5

With the phone, so maybe Okay. Let's go to the next for now. Next question is from Florent Cespedes from Societe Generale. Florent?

Speaker 16

Good afternoon. Can you hear me?

Speaker 2

Yes, we got you. Good.

Speaker 16

Thank you very much for taking my questions. First question on 2025 onwards, how confident are you to resume sustainable growth beyond 2025? In other words, any risk to see another massive increase of the R and D And also could you give us a little bit color on the operating profit margin Profile, we understand that you no longer anticipate the target of 32% in 2025, but Do you envisage to see some margin improvement in 2025 versus 2024 or even 20 23. My second question for Julie, could you please remind us where do you stand regarding the Eric's to OTC switch, the 2 projects on Time Influence, Sialis. If you will be ready to, let's say, Next year or in 2025.

Speaker 16

Where are the clinical trials ongoing, please?

Speaker 12

Thank you.

Speaker 1

JP, A question about 2025 and then also onwards. Do you think we'll improve our operating efficiency? I think that's

Speaker 2

the question in 2025 beyond. Yes, I think you have seen in our deck, on our presentation that we have released 3 buckets, And it's a second major step in the simplification and restructuring of the company to make it leaner. We have things where we were late on developing like Core process modeling through hubs. We have set up a specific position in our ex com to develop this at speed, and that will bring a new wave of efficiency. We have also decided to significantly Restructure our commercial operations in country to avoid duplication and be much more efficient.

Speaker 2

So those steps are very meaningful, Florent. And they will, of course, participate not just on improving short term profitability, but they will stay with us for the long term to be a more efficient company.

Speaker 1

Thank you, Julie. On the switches?

Speaker 4

So thank you Florent for your question. On the switches, first maybe on Cialis, I mean, the update remains consistent with what I shared previously. The necessary studies are underway and we plan to discuss them with the FDA when they're complete and the data has been analyzed. For Tamiflu, we had several engagements with The FDA where they provided important feedback on the required studies and the overall program. And we're working collaboratively to incorporate that

Speaker 1

I think that there's Still a great path forward for both. Perhaps Cialis, we're a bit more I couldn't be more transparent about because we can see it clearly after the latest conversations. And the market opportunity for both is significant. So as and when we get the updates, we'll share. But I think also they're very important value created moments in the future of So I think perhaps that's why you asked it, but that's still very real.

Speaker 1

Okay, next question.

Speaker 8

Thank you.

Speaker 5

Next question is from Simon Baker from Redburn. Simon?

Speaker 17

Thank you for taking my questions. 2, if I may, which revisit some earlier topics. On the issue of 2024 And the reduced expectations versus what we were looking for. You said that R and D was the major element, but I wonder If you could quantify or give us some idea of the split between the three areas of developing the pipeline, Commercialization and the Gen Med pricing headwinds. And within that R and D piece, are we really looking purely at Increased spend on D, or are you convinced that you have the right research infrastructure for continued innovation within R and D.

Speaker 17

And then secondly, on consumer, going back to Florent's question. In the past, some people have speculated The timing of those RX OTC switches would impact the timing of the consumer spin. Is that true? Has that changed? And if there is a question of capturing the upside from those switches, Does that impact the pathway that you will take for the divestment of the consumer business?

Speaker 17

So potentially, would you consider keeping a stake beyond an initial spin. Thanks so much.

Speaker 1

And Simon, JB, the relative weight of the components on the 24 Performance of R and D, commercial investments, Gen Med, pricing and perhaps even tax, which wasn't mentioned.

Speaker 2

Well, tax is 200 bps, so that's well publicized. I would say, on a repeat, the bulk of it is a pipeline. Of course, we have also some other topics around GenMed around as a stand alone cost of consumer health backing our launches, which are successful. So all of this play a part. But remember, top line growth is untouched, Strong rebound from 25% onwards.

Speaker 2

On the D versus R, I would say that that's an important point. And of course, it's maybe more an answer for women. But from a quantitative from a financial point of view, In terms of risk appraisal, you've noticed that the bulk of our I and I pipeline is in its D phase. We are going to double down on investing in a pretty high POS portfolio versus just increasing massively just the R. So that's an important thing to keep in mind when you look at our risk profile.

Speaker 2

Regarding the switches, it's not so much a binary piece, but we'll keep in mind everything you've said today. And it's interesting feedback, but it's early to say which route we would take.

Speaker 17

Thanks so much.

Speaker 1

Thank you, Herman. Did you have an answer?

Speaker 3

Yes. Quickly, Simon, thank you for the question. There's no doubt that we're going to double down on D internally. We're excited about D, including molecules like amlutelimab and small molecule TNF that Paul has already referred to. I just want to double underline that actually we have huge confidence in our early pipeline, both internally, but also our external BD activity that will feed the pipeline.

Speaker 3

You'll have seen today at 7 a. M. EST announcement from Chimera, one of our partners, The CHIIMA 474 molecule has just gone into Phase 2 VIRAC4 inhibition for hidrad and nivo separativa. So the short answer to your question is, While we are confident about our late stage development pipeline, we remain excited about our own internal and partnered activity, but we will be mindful Through the reallocation of spending every dollar wisely, and that's the opportunity I've had when I started this. Thank you.

Speaker 1

Yes, thank you. I think, yes, with the ramp forward they've just announced today, cameras. That's great news. That's another shot on goal we've got as we go into humans in HS. Okay.

Speaker 1

Any other questions?

Speaker 5

Yes. Next question is from Seamus Fernandez from Guggenheim. Seamus?

Speaker 18

Thanks for the questions. So just 2 quick ones. Should we basically signal today's announcements suggesting that you have enough in house, and that you're really investing on the internal side of the business going forward, You know, via the recently acquired pipeline, Or do you have further interest in going externally for deals? We've seen a lot of speculation that Sanofi has been extremely active in potential business development. And I guess the concern here is that that could also contribute meaningfully to R and D spend should you move towards especially high cost I and I acquisitions that are potentially dilutive to the business.

Speaker 18

So should we be thinking about that as R and D oriented deals or Potentially accretive deals if that's where Sanofi is playing. And then the second question is just really, I think there's This assumption that you've basically kind of taken the consensus number, for earnings down 13% to 15% in 2025. So I think a lot of the questions that folks are fielding right now are trying to get a sense of the magnitude of that earnings rebound And, you know, just how deep the BOI change is actually going. So if there's any color that you can offer on that. You know, removing 32% doesn't necessarily mean that we're also guaranteeing about 31% or hopeful to achieve better than 30%.

Speaker 18

So any help there would be fantastic. Thanks.

Speaker 1

Okay. Well, I think firstly, on the question on the R and D spend, I think you sort of say, is it internal programs? Or We made provision, if you like, for to do M and A. I think it's just worth clarifying for everybody that we have Significantly increasing confidence in our own pipeline. We don't carry placeholders for, just in case.

Speaker 1

We are very, very comfortable that we have a lot in our own pipeline that can deliver transformational value creation in the company, period. But that said, we have to work very hard, like we did with the recent Teva deal on the Tier 1A or the E. Coli deal with Janssen that we have to where we want to tuck something in, we have to make a little space for that to get it done. That's discipline. So I think it's also worth being clear because we haven't given a number for 25, yes, we've increased some flexibility for us.

Speaker 1

But, it would be a mistake for people to think that we're not maintaining or increasing discipline. The discipline And to continue to improve the operational efficiency of the company is an absolute priority. But what we didn't do was dimensionalize it because we want to get on with the work and create the value. So and I think you'll see that reveal itself over time, but today is not the day for that. So JB, is there anything to add

Speaker 2

on the No, I think it's important to Repeated, we are keeping intact our capital allocation, of course, progressive dividend and so on and so forth, but on the organic growth. But I think we've demonstrated On the last 2 years, that if we are looking at something opportunistic, it will not be highly dilutive, and it has to be Very well priced on value generated for shareholders as of day 1. So that's pretty clear. On the margin, I think it's with a low decline a slow decline a small decline, sorry, in 2024 with on a flattish without effective tax rate impact. It gives a very clear view what is that from that base, 2025 will be a meaningful on a very strong rebound.

Speaker 1

Yes. And that strong rebound, I know everybody is You know, would like to see us put a number on it and dimensionalize it. And it's already been mentioned on the call, the 32%, We've earned the right for some flexibility, but it doesn't change our desire to run a more profitable, more valuable company. That simply You know, it's freestyle. I just want to correct any misunderstanding about that because that is just simply not the case.

Speaker 1

If anything, for our leaders in the company, There is an acute awareness of our ability to demonstrate year on year and a more interesting compelling operational story. So that is simply not going away. I recognize in your world, you can't put that in a model. But you have to understand in my world, I need to create the most value for shareholders and patients I possibly can. And that's why we find ourselves Probably saying the same thing without being able to give you a number to reassure you, but you we have to know that we're betting on ourselves in this moment.

Speaker 1

We have A lot of confidence in that. I think maybe we go to the last question.

Speaker 5

Last question from Richard Vosser from JPMorgan.

Speaker 11

Hi, thanks for taking my questions. 2, please. Just on the €500,000,000 target, maybe you could give us a little bit of color on the breakdown between BayerFortis, Altibio and TZIELD, clearly mostly BayerFortis, But some idea there. And then just on Bear Fortis, I think in the past, you've talked about a 3 year ramp to peak sales. Is that still intact with the supply?

Speaker 11

Or can we accelerate it if you can get CDMOs to make more of the product. Just some thoughts there. Thanks very much.

Speaker 1

So, So yes, we moved the number of on sales from 400 to 500. I think you've seen the

Operator

Greater. Greater.

Speaker 1

Oh, greater than. Thank you, Eva. Great, Sudan. You can't see this, but this is why she sits next to me to remind me of the things that I miss. Greater than 500,000,000 and I think I'm glad you reminded me of that.

Speaker 1

You've seen the 3 You've seen the individual asset sales in Q3, and you can see the weight of them. And this is the magic about these three assets. The Fortis number You know, it could be very significant, but you go all the way through to tZield, which at some point over the next Year, 2 years, 3 years when screening and everything is done will start to become a big deal for this company. So their trajectories, I think you alluded to in the same part of the question, Are not the same shape. So we've not said how we mix it up, but we just want you to know.

Speaker 1

I said a bit earlier on about how good we are operationally. Look, we're doing that. That's H2 new sales of greater than 500. This company knows how to launch. I think there was some question mark about Other than Dupixent, where there was some rust on the launch machine.

Speaker 1

There is no rust on the launch machine, just to be clear. So we know exactly where we stand. Tom, I think the second half was really around as time To the ramp to peak and because vaccines is very specific as well. And will you be impacted by this unprecedented demand?

Speaker 14

No, great question, Richard. And you're rightfully pointing out to the fact that we said roughly 3 years or slightly more is about the The pixels ramp up for vaccines with the rate uptake. I totally keep that in line. I think we are on a 3 year trajectory For pixels, so that's definitely confirmed. What's new with this level of unprecedented demand and our launching capabilities Is that maybe the way we are looking at pixels in the past is now to be updated.

Speaker 14

So definitely 3 years in terms of ramp up, But maybe with a bigger potential in terms of big sales.

Speaker 1

Yes, it's interesting you say that because I think what we've learned, Of course, you'd rather have perfect supply. But what we learned from all the dialogue is the number of parents and even pediatricians recommending or choosing Is more than you could possibly have expected, which tells us that the total is going to be very significant indeed. And the shape may have A little bit of give and take in it, but we'll get to a very different number than we imagined at the beginning. I think that's fair, right? Listen, by way of just closing this out for us, I think it's very important to be clear, and I said this to the Board just A day or 2 ago, that we have reached the point where we believe we can create more value by taking this approach.

Speaker 1

And we understand there's some short term disappointment you want to be able to model, you want to have certainty. The price for certainty for us is not maximizing the long term value of the company. So we take it and we carry it. And I have to look at that and I look at the share price reaction. And whilst disappointing on the day, I have to fully understand our work Is to get it done, to get to R and D Day, to show you why we're excited, to show you why we bet.

Speaker 1

Because if you asked me would I take this situation back in 'nineteen when JB And I were rolling the strategy out. The answer is we would, but we've come a long way, but we still have a long way to go. And so while we have a lot to prove and we'll take it now. We have cost discipline. We believe in the long term sales growth potential.

Speaker 1

And those two things together with an improving probability of Success in R and D and operational alpha on launches means that we can really do something very special here. So I accept The people have said it's a lot of news, a lot to take in, but doubling down to become a pure play biopharma and respectfully Exiting consumer, separating rather at some point is an important part of the sort of Obsessive focus on creating value in pharma, that's where we are. It's the first time this company will be able to be in that situation. So Look, we take it what it is today, and we'll show you why it was the right decision. So thank you, everybody, for joining the call.

Speaker 1

Thank you.

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Earnings Conference Call
Cisco Systems Q3 2023
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