Sanofi Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 1, 2024

There are 18 speakers on the call.

Operator

Good morning, good afternoon and good evening to everyone. Thank you for joining us to review Sanofi's 4th quarter and full year 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 call contains forward looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Disclosure.

Operator

I refer you to our Form 20 F document on file with the SEC and also our Document Dans registrement Universelle for a description of these risk factors. Results. With that, please advance to Slide 4. Our speakers on the call today are Paul Hudson, Chief Executive Officer Poumana Shrafian, Global Head of R and D Jean Matthijs de Chatillon, Chief Financial Officer and the Global Business Unit Heads, Brian Ford, Thomas Triomphe, Olivier Chamey and Julien van Langeval. The Q and A, you have 2 options to participate.

Operator

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 the screen. And with that, I'd like to turn the call over to Paul.

Speaker 1

Well, thank you, Eva, and thanks, everyone, for joining our call today. Before we discuss the Q4 highlights, I'm going to start by updating you on another announcement we made this morning. Francois Xavier Roger will join Sanofi, taking over the role of CFO effective April 1, 2024. I'm very pleased to welcome him at Sanofi. He's an accomplished and widely recognized finance executive with a proven track record in accelerated value creation.

Speaker 1

And a half

Speaker 2

years ago. In fact, some of

Speaker 1

you may have met him already before, either in his role at Nestle or in the past at Takeda. You'll take over a finance organization that has been significantly modernized under JB's leadership over the past 5 years. JB has been instrumental for the successful execution of the first chapter of our play to win strategy and creating the growth opportunities ahead of us. With JB at the helm of our finance team, We have consistently delivered healthy top line growth over the last years, a significant BOI margin improvement and €2,700,000,000 of cost efficiencies stand alone of our Consumer Health business, 2 critical projects that have delivered significant value for the company and shareholders. Many of you may not be aware about JB's long standing personal commitment to charity work.

Speaker 1

He's decided to devote the next stage of his career years of work. I would like to take the opportunity here to warmly thank him for his dedication and leadership. He's been a great partner to me and, dare I say it, a friend and to the rest of the Executive Committee. Thank you, JB. 2023 marked a pivotal year for Sanofi as we became a development driven tech powered biopharma company.

Speaker 1

Our core growth drivers The main driver remains Dupixent, which continued to deliver stellar performance in all approved indications and across geographies. Dupixent added €2,400,000,000 to the top line or €2,800,000,000 at constant exchange rate. 2023 also marks a very successful year for our vaccine business with the launch of BayFortis, a real moment for our strategy and execution. In General Medicines, our core assets kept growing. GBU sales were lower overall due to net price erosion, and we continue to actively manage our portfolio and divest nonstrategic products.

Speaker 1

Moving to Consumer Healthcare, the business delivered more than 6% growth, driven by Priority Brands and the recently acquired Cunol, which is an excellent strategic fit for our business. As you know, last quarter, we announced our intention to separate our CHC business following our earlier decision to create a stand alone unit to fully unlock its value. And 4.5%. This will also allow us to better focus time and resources as a pure play biopharma company. We're in the process of reviewing potential separation scenarios.

Speaker 1

I subject to market conditions. Of course, the separation could be achieved at the earliest Q4 2024. In a nutshell, the strong performance of Dupixent and our key launches more than offset the anticipated impact of the loss of exclusivity of Aubagio, Our last major LOE for the remainder of the decade. Excluding Abagio, the underlying sales growth of our business was 8 0.1% in 2023, a fabulous underlying growth trajectory. Moving now to Slide 7, which perfectly demonstrates Sealed generated sales of more than €700,000,000 in 2023, far exceeding our expectations.

Speaker 1

Bay Forward has faced an unprecedented demand. While While we've already been able to protect almost 2,000,000 babies, this first season clearly confirmed the importance of our all infant protection strategy. Ultuvia is capturing more than 50% of all switches in the United States hemophilia A market. And TZL created great excitement amongst conditions as the first and only therapy to delay the onset of Type 1 diabetes. These 3 transformational medicines joined a great number of Sanofi's new product launches since 2019.

Speaker 1

New products generated over €2,200,000,000 in 2023 across different fast growing therapeutic areas. These launches will add to our top line next to Dupixent for many years and again keeping in mind that we will not face major LOE for the rest of the decade. As remember from our R and D Day on December 7, we believe that we have everything it takes to become the leading immunology company. In addition to the recent pharma launches, we have a record number of medicines in our pipeline with potential blockbuster status, including 3 with the potential for over €5,000,000,000 in peak sales. We expect these launches to exceed €10,000,000,000 of sales by 2,030.

Speaker 1

At the same time, Dupixent will keep being a once in a career and a life changing medicine, continuing to deliver a low double digit sales growth CAGR until 2,030. And finally, Our growth driver vaccines will continue to power us forward with its leading positions in RSV, flu, pediatric combination vaccines and other franchises, bringing more than €10,000,000,000 in sales by 2,030. Moving to Slide 9. We're very excited about Dupixent's potential to become the 1st biologic to treat COPD. And with our partner, Regeneron, we're making rapid progress in submitting applications for approval in Europe, the U.

Speaker 1

S. And also China. And let's certainly not forget itsupekimab, our anti IL-thirty three monoclonal antibody, which holds additional potential for COPD. Recent Phase II results of this asset were highly encouraging and the 2 large Phase III trials are now nearing completion of enrollment. Pivotal results are expected in 2025.

Speaker 1

Together, Dupixent and tepagumab have the potential to address a large COPD population with limited overlap. We believe that these two medicines combined to have a peak sales potential of greater than €5,000,000,000 in COPD. Let me now share with you some of our key priorities for the year. Number 1 is to keeping laser focused on the best in class launches. We're working closely with our partner AstraZeneca and regulatory authorities to increase supply of Bay Fortis for 20242025 to meet this tremendous demand.

Speaker 1

For ALTUVIO, we continue to patient share in the U. S. Hemophilia A market and drive geographic expansion after a very promising start in Japan. And for tZYLD, we will increase our efforts around the patient screening and enrollment in our support programs. And of course, the launch preparations for Dupixent and COPD are well underway.

Speaker 1

Number 2, we keep moving swiftly on our pipeline priorities. We expect tolibrutinib Phase III data for both relapsing remitting and secondary progressive MS around midyear. We will initiate the planned trials for many of our promising immunology, neurology and vaccine assets. Finally, on cost reallocation, we announced a few months ago a new set of efficiency initiatives across the biopharma business that will free up operational resources year to support the accelerated R and D investments and unlock value creation opportunities. We continue to target savings of up €2,000,000,000 from 'twenty four to the end of 'twenty five to fund innovation and growth.

Speaker 1

To sum it up, 2024 is a year of investment in science, including a lock off pipeline and position us for a strong EPS rebound in 2025. Let me conclude by highlighting some of our commitments to the fight against climate change. We're making clear progress on our trajectory to reach carbon neutrality by 2,030, exemplified by our leveraging renewable electricity and expanding our eco car fleets. As a reminder, our ambitions in 2,030 and 2,045 are vetted by the SBTI, the Science Based Targets initiatives. We attended COP28 Dubai last December in a push to elevate the need for stronger collaboration across health care systems.

Speaker 1

We are active contributors to the Sustainable Markets Initiative, and I have the privilege to lead the Patient Care Pathways Working Group, where we focus RFS on how to reduce carbon emissions from health systems while improving health outcomes for patients. Well, I now hand it over to Hooman, Head of R and D, who will share more insights into our R and D priorities and milestones for this year. Umer?

Speaker 3

Thank you, Paul. As we discussed with you in December at our R and D Day, full year. Sanofi delivered an unprecedented cadence of positive news and important data readout we announced last year across major projects with blockbuster potential. Quarter. By increasing our investments in R and D, we intend to fully capitalize growth opportunities ahead of us by prioritizing pipeline assets with meaningful growth potential and extending the opportunity to successfully launched medicines.

Speaker 3

This year, we look forward to several important regulatory milestones and readouts from our pipeline. And 2nd. As already mentioned by Paul, we expect regulatory milestones for Dupixent in COPD and pivotal readouts for talabrutinib and relapsing MS and secondary progressive MS as well as riluzabrutinib in ITB. For amlutilabrutinib, we're excited to learn the outcome of important Phase 2 results asthma later this year. Separately, we're preparing to submit the recent positive Phase 2 results of sarcluza in first line transplant ineligible 4 myeloma patients' FDA approval and expect the pivotal data for subcutaneous administration before year end, Which would bring additional upside for Sanofi in this large market seeking convenient treatment options.

Speaker 3

As you will recall from R and D Day, We highlighted our ambition to increase the number of Phase 3 projects by 50% across immunology, urology and vaccines over the next 2 years. A significant number of these pivotal trials have already started to dose their first patients, including the first amlutelimab Phase 3 trial in AD and Phase 3 trials of brexelumab in both relapsing amides and secondary progress events. We are progressing well and are evolving to the right pace as we to have more than 35 projects in Phase 3 by 2025. Turning to Phase 2, we are fortunate to have and initiate a significant number of projects presented at the R and D Day. One example is frexelimab in Type 1 diabetes, where we started 4th.

Speaker 3

We're sticking to our strategy of combining strong innovative science with opportunities to address patients' major unmet needs. You can also see the proof points of our progress in R and D productivity by our moving major assets such as the oral TNFr1 signaling inhibitor and LUN2MIG into mid stage. They both fit our portfolio by providing promising solutions for multiple indications. We believe the increased R and D investment in pivotal Phase 3 programs and key Phase 2 trials will offer long term returns and benefit of patients and shareholders. This is the essence of the play to win strategy.

Speaker 3

Quarter. Moving on Slide 16, we provided a granular and concrete sense of areas that we are changing in Sanofi R and D, recent investor events in New York. 1st, we talked about peak investment. Through dispassionate data driven evaluation of our pipeline, we're investing in only our winning late stage assets to underwrite the long term growth of Sanofi. Accordingly, we'll drive our late stage opportunities by launching multiple Phase III trials in parallel.

Speaker 3

We need to increase investment in these long term opportunities for us to drive real growth and value for our shareholders. And we will do that in a disciplined way. The second theme was that we must earn the right to do that. We're going to deliver portfolio focus across our breadth of platform sites and TAs. We continue to have the right to win in oncology, but in a focused way.

Speaker 3

And we are uniquely positioned to win in Immunology and Information. We have deep provenance in immunology and it's a self fulfilling prophecy that leads to developing better immunology drugs and also Finally, pipeline sustainability. Although we've made good progress to improve our R and D productivity with a focus on greater quality, We now have to step it up by leveraging both in house research and external innovation. Slide 17 As a great example of external innovation, let me take just one minute to talk about our recently announced acquisition of Inhibrix. It fits perfectly with our rare diseases portfolio overlapping with our immune mediated respiratory franchise.

Speaker 3

As underlined at R and D Day, We continue to drive our successful REB franchise and keep our eyes open for immune mediated disease in the periphery of what we do. When it closes, This deal will add INHIBRACE-one hundred and one to our portfolio, a recumbent human alpha-one antitrypsin Fc fusion protein for the treatment of alpha-one antitrypsin deficiency, an inherited rare disease of the lungs and liver causing progressive tissue deterioration. Phase 1 trial showed strong data with a best in class profile, thanks to sustaining normal AAT levels and aiming for a better compliance As across our other rare disease therapies, we're committed to patients with AATD. The next readout is expected in 2025 for a potential launch in 2027 with a potentially rapid approval following FPL Fast Track designation granted last May. Blockbuster potential behind this asset is predicated on use by both existing patients and by the anticipated use by increased number of de novo patients that could benefit from the treatment.

Speaker 4

And 4.

Speaker 3

With great pleasure, I now hand over to the GBU heads to go through the respective business performance.

Speaker 5

Over to you, Brian. Thank you so much, Iman. Now taking a closer look at Specialty Care where we once again delivered double digit growth in the quarter supported by outstanding performance of Dupixent. As Paul mentioned earlier, strong demand for this exceptional medicine across all approved indications in geographies continues to be a core driver of Specialty Care. Our rare disease business was another important contributor in the quarter.

Speaker 5

Strong growth across Pompe, Gaucher and Fabry products highlights our unique expertise in identifying patients and our ability to drive demand through new patient approvals. The rollout of Nexviozyme is the new standard of care in Pompe and Zympozyme in ASMD continue to be successful in global In rare blood disease, we're very pleased with the continued strong uptake of ALTUVIO, another exciting launch in specialty care. And I'm going to update you a little bit on the insights of the brand's recent performance in just a minute. Now we believe the continued double digit growth in Specialty Care is particularly impressive It begins to backdrop of generic competition for Abagio, Sanofi's last meaningful LOE for the rest of the decade. Generic versions of Abagio have now entered all key markets, including Europe, in September.

Speaker 5

With almost €1,000,000,000 in sales in 2023, We continue to navigate the impact of generic erosion into 2024, including a particularly high base comparison for Abagio in the Q1. Now moving to my next slide, Dupixent sales reached almost €3,000,000,000 in the 4th quarter alone. Year. As highlighted on the slide, full year sales were up 34%, driven by continuous robust growth in both U. S.

Speaker 5

And ex U. S. Geographies. Almost 7 years into the initial U. S.

Speaker 5

Launch in atopic dermatitis, we have achieved and maintained leadership positions in NBRx's across all five approved indications and we are confident to deliver around €13,000,000,000 in sales in 2024 as previously guided. We remain very excited about the outlook for the brand's outstanding commercial success and expect COPD to become another important growth pillar over time. And as Paul discussed earlier, significant regulatory progress has been achieved with COPD across key markets and we plan for a launch in the U. S. Later this year.

Speaker 5

Now Now as a quick reminder on the left hand side of the chart, you will notice similar to what we have seen in previous years and is as common for Specialty Biologics. Q1 growth usually reflects the impact of higher seasonal patient co pay assistance program utilization associated with the annual resetting of insurance deductibles at the beginning of the year. Quarter. We expect a similar effect to weigh on the reported sales in the Q1 of 2024. Now turning to my next slide, we saw percent growth in the Q4.

Speaker 5

Altuveo has become a top choice for switches in the hemophilia A market, now capturing more than 50% of all switches,

Speaker 4

Q1 results, including an estimated

Speaker 5

10% from non factor HEMLIBRA. In addition to the gains in the number of U. S. Patients, We also saw a geographic expansion with our promising launch in Japan late last year. And launch to date, we have seen a broad uptake in the U.

Speaker 5

S. And many HCPs have even stated that their intent is to increase their depth of prescribing, which provides us with another encouraging indicator for the launch progress into 2024. And with that, I'll pass over to Thomas.

Speaker 2

Thank you, Brian. Growing 21% year on year, our Q4 vaccine sales reached €2,000,000,000 Driven by the strong uptake of BayFortis, an impressive launch I will further elaborate on in my next slide. Full year. In Flu, Sanofi continues to be the market leader, driven by our differentiated product portfolio, which represent the majority of our total flu sales.

Speaker 4

And 8.

Speaker 2

In line with Q3 earnings call comments, approximately 30% of our H2 2023 Flu sales quarter. Well reported in the Q4, generating 4% sales reduction year on year as we saw lower flu immunization rate this season and an increased level of competition in the U. S. Market. Finally, we are very pleased by the Q4 performance of our pediatric franchise, Which benefited from a favorable public order patterns in the U.

Speaker 2

S. Despite Vaxelis sales not being recorded in our net sales. In Q4 2023, Vaxelis has become the U. S. Pediatric primary series leader and continues to gain share over the pentavalent vaccines.

Speaker 2

The next slide is focused on our RSV franchise. Starting with the left. You can see that the launch of BFortis in the U. S. Set a new record in terms of routine pediatric immunization uptake when compared to similar pediatric vaccines launches, such as rotavirus and panomoccal conjugate vaccines.

Speaker 2

With an average adoption rate of 38% in only 6 months after launch, BayFortis' performance illustrates the successful implementation of its first broad infant recommendations in the U. S, in France and in Spain. We're very encouraged by the strong real world clinical data generated in Spain, and we now look forward to rolling out Befortus more broadly in 2024. But beyond the infant segment, the respiratory syncytial virus is also a significant burden for toddlers and older adults. We are developing vaccines specifically targeting to these 2 groups.

Speaker 2

And I'm glad to report that our vaccine candidates are making good progress. Quarters. Our live attenuated intranasal arisivaxine candidate received EU Prime designation in December, following U. S. Fast track designation in 2020.

Speaker 2

These designations do recognize the potential of our vaccine candidate to address a significant unmet medical need. As communicated at our Vaccines Day, Phase III will start this quarter. For other adults, we initiated last November the Phase III clinical trial of our mRNA, RSV and HMP vaccine. As highlighted then, we believe that our combo vaccine has a real potential to be 1st in class and that its medical value compared to RSV standalone vaccines will provide a more compelling case to recommending bodies. The value of this combo is already recognized by the U.

Speaker 2

S. FDA, which granted it the fast track designation in October 2023. If Phase III results are positive, The Phase 3 trial is planned to start by the end of this year. Overall, I'm thrilled by the phenomenal progress Our RSV team has made in the last 6 months, building foundations for Sanofi to become the leader in the RSV franchise. Let me now hand over the call to Olivier.

Speaker 6

Thank you, Thomas. General Medicines sales in the 4th quarter Showed a slight decrease of 2.4 percent to €3,000,000,000 Our core assets grew by 6.3%, quarter, driven by Plavix, Toujeo, Resurox and Paluent, which was partially offset by lower sales of Mozobind due to generic competition, quarter, which started in the U. S. In July 2023. Sales of Resurrect in the U.

Speaker 6

S. Continued to grow strongly, quarter driven by increasing patient numbers as well as improved adherence rates. UJIO Q4 sales delivered double digit growth driven by China. This largely offset lower sales in the U. S.

Speaker 6

Due to a lower average net price. Quarter. Sales of non core assets decreased, mainly driven by lower Lantus sales in the U. S, which continued to be affected by a negative channel mix

Speaker 4

year 2019 outlook as

Speaker 6

well as lower inventory and trade in anticipation of the 2024 list price decrease. Full year 2023, Gen Med sales decreased by 7.1% due to the exceptional impact from the U. S. Launches decline and 5 year period. As mentioned, tZIL continued its gradual uptake in type 1 diabetes.

Speaker 6

In November, we launched a well received national screening campaign in the U. S. To increase awareness and encourage screening for at risk individuals. Quarter. As a result, skinning grew 31%, driven by endocrinologists in 2023 and 168 patients were infused by the end of the year.

Speaker 6

The number of patients infused grew by 25% in Q4 versus Q3 quarter despite the year end holiday seasons. The full results of the product studies with newly diagnosed Stage 3 Type 1 diabetes patients share that the ISPAD Congress and interaction with FDA and EMEA are ongoing. With this, I'm handing over to Julie.

Speaker 7

Thank you, Olivier. Firstly, I'd like to start with an update on the separation of the CHC business, which as previously announced could happen in Q4 this year at the earliest. We're making solid progress on our journey to full business autonomy and continue to enhance our own internal talent pool with selective hires in key areas. The service agreements are being put in place and we are establishing our digital infrastructure so that we can hit the ground running on day 1. Regarding performance, Q4 marks our 11th consecutive quarter of growth with sales up 8.5%, quarter driven primarily by price.

Speaker 7

Excluding divestment and acquisitions, Q4 growth was around 5%. The Q and A acquisition closed at the end of September drove growth over 50% in our physical and mental wellness category. As you may recall, Q and A products focus on healthy aging in the U. S. I'm very glad that the CUNAIL is now part of our CHC business, giving us a fast growing platform with which to compete in the important U.

Speaker 7

S. VMS market. Last quarter, I introduced you to the 15 priority brands, These brands were once again our major growth drivers, which resulted in a 6.3% growth for the full year with good growth across all categories. Our largest category, Digestive Wellness, continues to perform strongly with double digit growth and market share gains. And I would like to give you some more background on one of these brands in this category, Docollects.

Speaker 7

Docollects is the world's number 1 non prescriptive laxative. Important to note is that 1 third of the world's population suffer from constipation, yet nearly half still don't seek treatment with laxatives. This makes an attractive and substantial market opportunity. Docolax has been growing faster than the market for the past 3 years, executing on its repeatable model of growth, of which 3 main drivers are. 1, the change in the focus of marketing to consumers, moving from our positioning from purely medical and functional solution to a more emotional communication, breaking down the taboo of constipation whilst educating on how Docollects works naturally with your body.

Speaker 7

2nd, launching innovative, more consumer friendly and gentle formats such as chewables That have driven category penetration, last but not least, working with health care professionals, resulting in strong endorsements. With its simple repeatable amount of growth, I'm confident Docolex will continue to help consumers and gain market share. With this, I'm handing it over to Laurent Batista, our CFO.

Speaker 8

Thank you. Thank you, Johnny. As you just heard, sales were up 9.3% in the quarter, Driven by double digit growth in Specialty Care and Vaccines, Dupixent and Rare Diseases were key drivers in the Specialty Care, worldwide vaccine sales grew more than 20%. Neural Metins sales declined decelerated and CHC reported another quarter of growth of 8.5%. Looking at the Q4 P and L on Slide 31, gross margin expansion was driven by our improved product mix on the strong contribution from COVID-nineteen vaccines revenues in the last quarter.

Speaker 8

R and D expenses grew 6.6% at CER, mainly reflecting the continued progress of our vaccines pipeline, mainly driven by the mRNA development programs. This quarter. We also start recording a share of the Phase III development costs related to the recently announced collaboration with Genji on our potential 1st in class EXPECT vaccine. The BY margin decreased 1.7 percentage point to 23.7%, mainly due to a decrease in capital gains related to product disposals when compared to the same quarter last year. And 8.2 percent in Q4.

Speaker 8

Turning now to the full year group P and L on Slide 32. We recorded and improvement in gross margin, of which almost 1 percentage point was due to COVID-nineteen vaccine related sales and revenues. The product mix also contributed to gross margin expansion, partially offset by lower Probatio sales due to generic competition and lower net prices of launches in the U. S. Operating expenses grew roughly in line with sales, and our business operating margin remained stable at constant exchange rate.

Speaker 8

And 8.5% in line with our full year 2023 guidance. On Slide 33, our Board is proposing an annual dividend of €3.76 which represents 5.6% increase over last year. Our progressive dividend policy remains an important part of our capital allocation policy. We have launched the different efficiency initiatives presented in Q3 with the objective to reallocate up to €2,000,000,000 savings. We will focus on the programs with 1st best in class potential, reallocating resources on growth drivers on strategic therapeutic areas.

Speaker 8

We will also leverage procurement to generate additional savings. Lastly, we will modernize the commercial delivery Optimizing our country setup, expanding the hub strategy to increase centralization while refocusing R and D and most critical sites on technology platforms. On Slide 36, we are providing an outlook for both the full year 2024 and the Q1 2020. Full year 2024 sales. We expect Dupixent to reach €13,000,000,000 and the vaccines franchise to grow mid single digit, Driven by the ongoing launch of BreFortis.

Speaker 8

The Opagio LOE will continue to impact, mainly in H1. The planned JetMed divestments will lower the top line by around €300,000,000 On full year 2024 P and L, We expect the gross margin to decrease slightly due to the absence of COVID-nineteen sales and revenues. OpEx is expected to grow due to roughly €700,000,000 step up in R and D, while SG and A expenses are expected to remain stable. Finally, as announced in Q3, the ETR will increase to 21% due to the implementation of Pillar 2. The dynamics in Q1 will differ from the overall year, mainly due to high base effects in vaccines on Gen Med on top of the Dupixent sales annual step up in U.

Speaker 8

S. Co pay as already mentioned by Brian. Similarly, On the P and L side, I remind you of a high level of capital gains generated in Q1 2023. So advancing to my final slide, Slide 37, we expect full year 2024 Business EPS to decline in the low single digits year. Excluding the impact of the tax rate change, the full year 2024 business EPS would be roughly stable.

Speaker 8

On foreign exchange, we see a negative currency impact of minus 3.5 to minus 4.5 based on January 2024 average exchange rate. Year. 2024 is a year where we are resetting the company for long term value creation, and we expect a strong EPS rebound in 2025. Let's open the call now for Q and A.

Operator

We will now open the call to your questions. As I can see many raised hand, please limit your questions to 2 week. And we have the first question please.

Speaker 9

Yes. The first question comes from Louisa Hector, Berenberg. Louisa?

Speaker 10

Hi, can you hear me? Luisa, can you hear us? Yes. Can you hear me?

Speaker 6

Yes.

Speaker 10

Great. Thank you. So maybe the question would be on Bay Fortis, just to get a bit more color on where you are With manufacturing and the ability to meet demand this year, and whether you would anticipate perhaps some demand for second season vaccination. And is are you able to now show, given your sort of high vaccination rates in some countries, When you show that the emergency room entry for RSV Thank you, JB. Congratulations on the move.

Speaker 10

And I guess a question for you would be what words of advice you would pass on

Speaker 4

to do better?

Speaker 1

Well, thank you, Louise. I think it's very gracious of you to say that to JB. We'll give him a moment or 2 to think about words of advice. Before that, Tom, I will come to you on Bay Fortis. And perhaps if you're Open, you could share some of the data from Galicia as a guide to what it might look like.

Speaker 1

I know they've been publishing some of that, but under supply for B4's 2024.

Speaker 2

Great points indeed. So as you've seen from the Q4 results, we are very happy with a strong Befortus launch in Q3 and Q4 with more than €400,000,000 sales in Q4. I start by that because I think that's showing that the implementation of full in front protection programs is highly feasible and goes very well with the record uptake in 6 months. Now back to your question, first on the supply elements. As we discussed previously, clearly, Sanofi and AstraZeneca are working very hard to extend the manufacturing network, packaging sites, filling sites.

Speaker 2

And as always, and that's why we're not going to be very precise today. As always, first, you need to Qualify the lines and then make them registered by the different regulatory authorities. That's the work that is ongoing right now in order to be able to completely, I would say debottleneck the supply and have the full supply for the season 2025. For the season 2024, We see an increase in supply, and I think we can share here together, but our expectations is to reach blockbuster status full year 2019 2020 4. To be more precise, it's a bit too early.

Speaker 2

Again, as we ramp up the supply progress And as we get further with regulatory authorities, we'll come back to you. Your second point is extremely important, Luzhan. I really thank you for asking that Because at the end of the day, the reason why we are in this industry is to really make sure that we have an impact in terms of clinical efficacy, But actually babies don't go to hospitalization or don't go to ER. I really ask everyone if you guys have a moment To look at the Galicia data, which is referenced on our slides there, have a look there. I know that it's not the end of the season, But the Spain data is very important because unlike the U.

Speaker 2

S. Or France, which have a partial taxation coverage this year, The actual Spain data is in a country where there is about 90% coverage rate. And you will see that they show extremely impressive data Well, you can see that the hospitalization rate this year in Belbin is less than 8 months of age, I. E. Eligible To be fair to you, the hospitalization rate is extremely low.

Speaker 2

While for babies that are above 1 year of age, I. E. Susceptible to normal RSV infection because they were not protected, Actually, it's a high RSV season for them. RSV disease is there. When you receive before this, it's not there.

Speaker 2

You don't go to a specialization. We'll provide you more data at the end of the season, obviously. 2nd season? 2nd season. So the product is indicated for your 1st RSV season except for a very small population of infants that are either Specific conditions or specific lung conditions, it's usually depending on the population, about 1% of the newborn population, For which Bifrostus is indicating for the 2nd season.

Speaker 2

So it's retargeting for the 1st season. But interestingly, as you have seen, We have an RSV toddler intranasal vaccine that we are targeting to bring just after before this for kids for the 2nd and third seasons

Speaker 1

Thank you, Thomas, and congrats again on an amazing launch. JB, you've had some time To reflect to what advice you would give. You certainly gave me plenty of advice while I've been together, so I'm sure you're not short of something.

Speaker 8

No, I'm not short. But first, thank you very much, Louisa, I'm a bit it's a lot of emotion for me today. And Of course, the financials of the company are better, but what counts is that the pipeline on the science and innovation we have We make the most of it and bring them to fruition, develop them all in. That's what we have decided. That's what we should do.

Speaker 8

And of course, Paul, G and A, as you know,

Speaker 11

has to be kept under. No, all right, all right.

Speaker 1

So I just saw in the opening comments, but I think we've all worked well as a management team, but JB and I particularly well. And we pushed each other pretty hard, to be honest, over the time. And it's been necessary to try and have as much discipline as possible whilst making sure we take advantage of opportunities. I think your comment about pipeline is It's extraordinarily well made. We've made sacrifices to be in a position where we have it.

Speaker 1

Don't squander it, I think is what you're saying, and you're right. I think for those that should be interested, of course, we'd announced a cost saving program. And I think you need to know that Aligned with JB's wishes and comments, we go full ahead for the reallocation of that. That doesn't blink. And One of the reasons why I'm excited to work with Francois Xavier is because He picks up this well run machine, but with the same intensity.

Speaker 1

And I think that's very important for people to understand. We won't squander it, JB. Okay, next question.

Speaker 9

The next question is from Joe Walton, UBS. Joe? Okay. Let's move on and we'll come back to the Can you hear me?

Speaker 12

Yes. I'm sorry. I have a question on the consumer side, please. Just looking at any progress on the Rx OTC switch trials that you're doing for Tamiflu and Cialis, Just thinking as to whether they will how visible they will be at the point of separation going forward. And secondly, just on the timing of your COPD launch.

Speaker 12

I know that you've filed and you don't yet know the time frame of that review. Do you have a priority review voucher? Could we assume that you would use that for such an important launch? Many thanks.

Speaker 1

Okay. Thanks, Jo. Great to have you connected. So Julie, updates on the switches?

Speaker 7

Sure. So as you know, we have already launched Cialis together in the UK and since our last call, we have now also received approval for nowhere in Ireland. What for the U.

Speaker 11

S. We have been conducting certain studies to support our strategy to lift

Speaker 7

the clinical hold. Those studies are now complete and we're looking forward to And on Tamiflu, there is no update at this time.

Speaker 2

Yes. I think,

Speaker 1

yes, yes, and I think, Julie, I mean, It is very much a conversation with the FDA, but I think it's fair to say what was expected of us to be done, we've done. So now we find out whether it will be enough. And that's we've gone further than others, but we'll find out. So certainly progress on Ciolis. I don't know whether we want to go to Brian then next on COPD.

Speaker 1

There was a question about the voucher and assumptions around launch.

Speaker 5

1st and foremost, thank you so much for the question. We're really, really excited about this next potential opportunity. As you may recall, back in August, the FDA, when in quite Unique move granted us breakthrough designation at that time, and that was off of the first trial. Since then, as you know, we read out the second trial, both trials positive and exacerbations we filed we announced that we filed as of December 27th. And so we are waiting regulatory feedback or feedback from the agency as we speak.

Speaker 5

We are anticipating, as we said earlier in the pre setup that we did, that we will be launching in 2024. Still to be determined whether or not it will be a priority review or not, but we will see.

Speaker 13

Okay. Thank you. Anything else, Tim?

Speaker 4

No? Yes.

Speaker 13

Okay. Good. Thanks, Joe. Next question?

Speaker 9

The next question is from Tim Anderson, Borch.

Speaker 11

Quarter. Thank you. Yes.

Speaker 1

I have

Speaker 11

a couple of questions on Bay Forwardis, if I could. Can you describe the longer term opportunity and how it parses out by geography, meaning U. S. Versus ex U. S.

Speaker 11

Is this one of those products where it will be Most likely, most sales coming from the U. S. As it often is with different products. And then second question 4. Your views of potential competition from Merck, they have this product, casurovimab, in Phase 3 data In the back part of the year implies a launch in 2025, also monoclonal.

Speaker 11

Any first impressions of that product based on what you know today?

Speaker 2

So to the risk of disappointing you, Tim, I might not give you a spreadsheet with a detailed forecast by geography over the coming years. But of course, we are very encouraged by the Q4 launch of this year. As said before, we are doing everything and we're confident Supply will not be an issue. And we're doing we're looking broadly in terms of geography. You have noticed that we just got the registration Pifortus in China.

Speaker 2

And we expect to have the registration of Pifortus in Japan in the coming few months. And we will progressively staff launch in China and in Japan at the end of 2024. So but we're really going as per as we named it full year. It will be a progressive rollout. Geographies such as China, as you've seen it with multiple vaccines, do take time.

Speaker 2

So So it will be a progressive slowdown up, but the opportunity, if I look at the mid- to long term, could be significant. This year, in 2023, the sales are about 2 thirds U. S, 1 third EU, and that might be the fair representation for the short term. But again, RSV is everywhere, and we want to go forward geography progressively one step at a time. For the competition aspect, There are 2 players, as you know very well.

Speaker 2

1, which is already licensed. This is about maternal immunization. But I think it's very clear. The fundamental difference between Befortus and maternal vaccines is that Befortus is designed to protect all infants. And back to the previous question from Luisa.

Speaker 2

Please have a look at the Galicia results. When there is more than 90% coverage rate in all infants, the impact against hospitalization is impressive from year 1. And for the other products, the Merck product is in Phase III. We cannot comment on it. We don't have data about the Phase III.

Speaker 2

The only thing I can say is that I do believe The bar has been set in terms of standard of care. And if you look at the profile of Befortus, Not only in the efficacy, which is impressive as per the Gilly Ceta, but also in terms of safety. And we are talking here about the most Fragile part of our population here with the newborns. The safety profile of ophniacemimab is just pristine.

Speaker 4

So I

Speaker 2

think that's a high bar. Now let's look at the Phase III results from the net product.

Speaker 13

Okay. Thank you. Thanks, Thomas. Thanks, Tim. Next question?

Speaker 9

The next question is from Peter Welford from Jefferies.

Speaker 4

Hi, thanks for taking my question. I'm going to stick first of all, just Dave Fortis Again, if you can, just wonder if you could comment at all about the phasing. You made a comment in the Q1 you don't have supply, but I think at Same time, you are delivering some doses still to the U. S, if I'm not wrong, that was sort of carryover. But should we then anticipate Bay Fortress sales to dip And then rise again before the winter season.

Speaker 4

Or I guess, do you have any plans at all for the Southern Hemisphere The results we should be considering during those middle three quarters. And just curious the statistic near 2,000,000 that was given, was that the U. S. Alone Or is that across all the regions so far where voclos has been launched? And then the second question, just one for JB, just on the PRD the increase in other operating income during the quarter.

Speaker 4

Are you referenced in the release that needs to do with litigation related payments. Wonder how much of that is to do with it? Or could you just quantify a bit what it was that led to the significant increase in the OOI in the quarter perhaps relative to expectations? Thank you.

Speaker 1

So maybe some thoughts on Q1, the what you can share on phasing And the distribution of the almost 2,000,000 doses that we put out there already.

Speaker 2

So first, on the first The RSV disease is, of course, a very seasonal disease. And therefore, you will see that it will be a cadence if you wish. NH countries will have their sales in Q3, Q4. South Hemisphere countries in Q1, Q2. Due to the supply limitation and the fact that we are in the progress in the process, sorry, of ramping up supply, I would expect in 2024 that Q3 and Q4 are the key quarters for Bifortus.

Speaker 2

You will see, As it was communicated by the White House, some small sales with the delivery of products in January. And we are looking for a couple of countries maybe for South municipal entries. But again, from a significant sales perspective, It's really about Q4 and Q3 and Q4 for 2024. And back to the point you mentioned, to be very precise, on the approximately 2,000,000 doses of 2023, 2024. So it includes the season, so I.

Speaker 2

E. It includes January, February. It's really total, I. E, U. S.

Speaker 2

Plus Europe.

Speaker 1

Okay. JB, the other end

Speaker 8

Yes. Thank you, Will. You realize that so ForEx is very readable on the impact on our P and L, but effectively more specifically, We had a few here on there tens of 1,000,000 of provisions that we had to pass In Q4, scattered topics, nothing in particular.

Speaker 13

Okay, good. Thank you. Next question?

Speaker 9

So the next question is from Richard Bussell, JPMorgan.

Speaker 14

Hi, thanks for taking my question. Question on INBRx101 101 or the Hin Hinbrix product. I think Hinbrix was highlighting the first readout at the end of 'twenty four. So could you talk through the difference in timing with your second half twenty twenty five timing and whether we will still see some initial data ahead of maybe the final data on the 25? And then a question on flu, please.

Speaker 14

Obviously flu vaccine hesitancy, and we've been hearing about increased competition. I think you've referenced it too. So, are we back to a situation of sort of overcapacity for the flu market outside of high dose and outside of very old adults. So should we expect price pressure going forward? How should we think of the flu seasons going forward?

Speaker 14

Thanks very much.

Speaker 1

Okay, good. Maybe Hooman, do you want to comment?

Speaker 3

Yes. So Richard, thank you for the question. The short answer is in terms of operational outcome. We expect the results in 2025. I didn't have any further comment on that and we look forward to seeing those results.

Speaker 3

There are other elements So this is we bring the molecule in once the deal is faced.

Speaker 1

Okay, good. Thomas, getting plenty of airtime today. Flu. Maybe comments on high dose and the differentiation piece and the thoughts on what it could mean for pricing in standard dose?

Speaker 2

It's an important question, Richard. And I would say it's the continuation of what we have observed for the past few years. The situation in the flu market overall is that there is definitely ample supply versus the demand, and That's been accelerated by the decrease in flu VCR over the past couple of years, especially in North America for various reasons. I think one point to have in mind, though, is that it's very linked to the fact that there has been very moderate flu seasons in terms of disease. And as you know very well, this year gets softer after 3 or 4 seasons that are lower.

Speaker 2

And suddenly, this year comes back after the first big hit. I'm saying that because right now, we're in Western Europe with an increase of flu disease, and the U. S. Will not be immune to that. So that's for the overall situation.

Speaker 2

Of course, we had anticipated that. That's why we came earlier with differentiated flu vaccines. We have the 2 differentiated flu vaccines in our portfolio that have significant data, significant data that are showing impact in terms of improved protection versus infection compared to standard dose, which none of the competitors have. That's what we call protection beyond flu. And that has brought the success of these differentiated vaccines, but represents still in H2 2023 more than 60% of our fusel.

Speaker 2

So to summarize, I will say overall for St. Arnaud's price per share is my expectation. You're correct. But we're seeing still ample room for trajectory of differentiated flu vaccines such as Zalindose, Efuelda or Rubel.

Speaker 13

Okay. Thank you. The next question please.

Speaker 9

The next question is from Gauravn Pari, Bank of America.

Speaker 15

Great. Thanks for taking my questions. So first question is just on Altuveo. I think you had quite a lot of patients on free drug in 2nd Q3. Just if you An update on how many patients are actually on free drug or bridging programs in Q4 and then how you'd expect that to progress into 2024?

Speaker 15

And then separately on the excuse me on the INHIBRICS asset, I recall INHIBRICS had indicated that the FDA wanted some data linking functional AAT levels going to normal levels with some sort of clinical outcome as a sort of precursor to filing on the basis of AAT level for accelerated review and then they still had to agree a clinical endpoint for the confirmatory trial. So if you could just give us an update on Where you think that process is? Is that data generated? And what do you think the clinical endpoint that will be needed for approval will be? Thank you.

Speaker 1

Thank you, Graham. Brian, I'll take you.

Speaker 5

Yes. So first and foremost, as you all know, we have this 30 day program, which has been quite helpful for us. We've seen that About 90% of the patients that go into that program get converted to commercial, which is really fantastic. And as you have said, it is going to go down. It was at 20% previously.

Speaker 5

The patients that have gone through the program, it's at 14 now. We anticipate it to go down to between 85 and

Speaker 11

probably it

Speaker 5

will stabilize somewhere around the 5 range in the coming years.

Speaker 1

Thank you, Brian. Hooman?

Speaker 3

Thanks for the question. Excellent question. Just to call out, we don't own the asset yet. So We're beginning to dig into that question as you will fully appreciate. There are ongoing discussions with the FDA, both in terms of, as you say, biovelotib by equivalents with native alpha-one antitrypsin and the right endpoint, but we're deep in those discussions.

Speaker 3

And in fact, Even last week, we were in conversations with the Alpha-one Foundation patient group to consider exactly

Speaker 9

So the next question is from Simon Baker from Redburn. Installment. Okay, so maybe I move to the next question from

Speaker 16

Can you please provide more color on your view Of the potential of CACM5 as a target, given the recent And second one, again, on Bay Fortress. We've seen this strong uptake in U. S, but is there any group or payer channels or regions more Most strongly represented in others at AUC. Thank you.

Speaker 1

Okay. Thank you. Seachem V, given the To some minimum data, maybe some thoughts on the different payload and is it still a valid target?

Speaker 3

Thanks for the question. Excellent question. We continue to believe based on both our precision medicine computational biology approach classical immunohistochemistry. The CKAN5 is a highly specific and highly expressed target. Its density profile is well suited to an ADC approach.

Speaker 3

As you call out correctly, the previous molecule with a DM4 payload Sadly did not provide the high efficacy bar that we put in order to serve patient value. We believe for a number of basic biological reasons that the TOPO-one payload on the current molecule Both at preclinical level, but also now in clinic shows significant promise. The short answer is we remain optimistic about CCAM5 ABCs.

Speaker 1

Thank you. And Bey Fordas, in particular the

Speaker 2

So I assume, Simon, you're talking about the payout coverage in the U. S. First of all, a significant part Of newborn's coverage is through the VFC program. So for the public part, it will cover, as you know, very well. And for the private and 4th Medical side of things.

Speaker 2

I didn't check very recently, but a few weeks ago, we were already way more and way above 90% A few practitioners or a few HCPs that, of course, want to go slowly because we want to make sure that they will be reimbursed and probably covered. But what we've seen in the U. S. Over the past few weeks, I think it's now something from the past. I'm very confident for 2024 in the U.

Speaker 2

S.

Speaker 1

Yes. Just to build on Simon's question, of course, you referenced the U. S, but maybe to share some of the enthusiasm we're seeing from different countries in Europe.

Speaker 2

Well, definitely, I think that you know that it's well known that in Europe, if you look plenty of previous historical benchmarks, Vaccines entries in Europe normally takes a few years in terms of progress because there is a recommending body, there is a reimbursement decision and its usual stage. We are seeing a lot of European countries that are trying to accelerate that process in order to make sure that Befortus goes earlier for protection.

Speaker 13

Thank you, Tom. Next question?

Speaker 9

The next question comes from David Risinger from Leerink.

Speaker 17

Yes. Thank you very much. So I wanted to say thank you and best of luck to you JB. And I have two questions for Paul and you, please.

Speaker 1

Thank you, David. Okay, JB. Yes. Thank you very much.

Speaker 8

Yes, I can try to do that because The question is pretty simple, and I can lay it out for you. We enjoy a steady growth, and this is With us for many years ahead now with no Elois in front of us. And you heard Paul mentioning this underlying growth That we are enjoying when you neutralize the impact of Aubagio. So it's pretty easy to see that we are going to enjoy this growth. We said that we would increase in 24, and that's why there is a bit of a crush in 24 because we increased 700,000,000 R and D.

Speaker 8

While other programs are still running, like tolebrutinib, COPD, large phase multiple Phase III programs, Those programs will end in 2025 and the oncology to INI reallocation plus our efforts in terms of cost reallocation will fully kick in, in 2025. So Flat OpEx 25 versus 2024 with a clear top line growth, this will trigger leverage. Now looking beyond this, beyond 25, if we've done if we've taken this decision of going all in and developing pipeline. It's free to break the ceiling of growth rate on profitability that Sanofi As experimented in past years, so we will see where it goes. But as I said, we are going to enjoy a long run of growth and a clear opportunity to create value and go through the LOE of Dupixent with 2 to 5, a 3 to 5 asset with 2 to 5,000,000,000 peak sales potential.

Speaker 8

And you've seen in the R and D days that we have more than what it takes already. And you've seen also that we're relentless in adding to our portfolio inorganically as we've just did with in Eberix.

Speaker 13

Thank you, JB. Next question please.

Speaker 9

The next question is from Gary Steventon from Exane BNP. Gary, can you hear us?

Speaker 1

Maybe we move to the next one.

Speaker 9

Okay. So we'll come back to Gary. So let's move to Rajesh Kumar from HSBC. Rajesh? Okay.

Speaker 9

It seems like so do we have Gary on line? So I think I have also a question written in the box. So I'm going to read it out. It's from Florence Espedes from Societe Generale. So the question is from CHC.

Speaker 9

So there is one question. Could you elaborate on the dynamic in Europe, The decline in Q4 and U. S, what is the organic growth? And is it still possible to raise price in the U. S?

Speaker 9

And then there is another question on 2025. What are the drivers and challenges for 2025? How confident are you with the consensus EPS growth in 2025.

Speaker 13

Okay. Good. All right.

Speaker 1

Well, then, Julie, Europe dynamics, U. S. And Price flexibility and then JP will come back to the EPS rebound to EBITDA.

Speaker 7

Okay. So and that was on Q4. So I think maybe on Q4, I think there's 3 factors that is important to notice that have impacted our growth versus definitely consensus is first, some further divestments of our non core brands as part of our plan to simplify our portfolio, and we're coming to the end of that program. We'll still have some impact in But also some underperformance of our brands and actions to improve performance on these brands is happening as we speak, especially in the allergy and pain categories, Well, the addition obviously of Cunall is strengthening our position to deliver future growth in the U. S.

Speaker 7

Europe, full. We have strong positions. I think our strength overall is that we have more than 60% of our business that is Driven by leadership brands that have leadership positions in their in respected markets with all Still a lot of potential to grow, thanks to mainly penetration as well as innovation, if that helps. And price sorry, room for pricing. Room for pricing.

Speaker 7

Obviously, there's less room for pricing than in the past, but there's still we see that our category overall is a little bit more resilient, especially the OTC category is more resilient than many other consumer categories.

Speaker 1

Thank you, Julie. JB, maybe your last comment

Speaker 8

full. Well, it will be clear cut. With 2025, the strong rebound

Speaker 1

Thank you, JB. Wise words. So thank you to everybody. Thanks to those that connected today and for everybody that played a part. We've positioned ourselves well with the blockbusters that we have ahead of us with our launch performance.

Speaker 1

We have to keep delivering the now And wait for our readouts and celebrate our successes from launches. So thank you very much.

Operator

Year. Thank you. You may now disconnect.

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Earnings Conference Call
Sanofi Q4 2023
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