Sanofi Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 25, 2024

There are 16 speakers on the call.

Operator

Welcome to the Q2 2024 Conference Call for Investors and Analysts. As usual, you can find the slides on sanofi.com. Please turn to Slide number 3. Here we have the usual forward looking statements.

Operator

We would like to remind you that information presented in this call contains forward looking statements, which are subject to substantial risks and uncertainties that may cause actual results to differ materially. We encourage you to read the disclaimer in our slide presentation. In addition, we refer you to the Form 20 F on file with the U. S. SEC and our France Registration Document for a description of these risk factors.

Operator

As usual, we will be making comments on our performance using constant exchange rates and other non IFRS measures. Numbers used are €1,000,000 and for Q2 2024, honest stated otherwise. Please turn to slide on the phone. First, we have a presentation, then we take your questions. We have kept the presentation short as other companies report today and we aim at keeping the call to maximum 1 hour.

Operator

For Q and A, we have Brian, Olivier, Thomas and Julie to cover the global business, Eunice and Roy, our General Counsel. For the Q and A, you have 2 options and 2, raise your hand or submit your question using the Q and A function. And with this, I will hand you over to Paul.

Speaker 1

Well, thank you, Tom.

Speaker 2

It's so much better when you do the intro. Thank you, and hello to everyone on the call. Our strong business momentum continued in the 2nd quarter. We delivered double digit sales growth at CR and we continue to execute on our pharma launches and we keep advancing our pipeline of new medicines. Our growth was driven by a strong quarter for Dupixent 7 years into its launch and the broad based performance of our new medicines.

Speaker 2

Our vaccine sales were stable when excluding the effect of last year's COVID sales. The sales of Opella, the new name of our consumer healthcare business grew by 10% with the U. S. Wellness brand Cunol as the main driver in the United States. Based on the robust growth we've seen in the first half, we are confident about the strong business outlook for the remainder of the year, and that's why we are upgrading our earnings per share guidance for 2024, and Francois will provide more details in a moment.

Speaker 2

Turning to Slide 6. Dupixent reached a significant new milestone for the first time. Sales exceeded the €3,000,000,000 mark in a single quarter. This new quarterly sales record highlights continued strong volume growth across approved indications, age groups and of course geographies. Dupixent's growth of 29% in the quarter was fueled by its consistent and robust U.

Speaker 2

S. Performance. Given the timing of July 4th, Holy Week, we saw a slightly stronger volume trend at the end of June. The rapid expansion in key markets outside of the U. S.

Speaker 2

Such as Japan, China and Europe further boosted Q2 performance, growing at almost double the pace as the U. S. Looking ahead, we remain excited by the near to mid term growth outlook for Dupixent, which recently obtained the EU approval for COPD. Looking forward to the U. S.

Speaker 2

PDUFA decision at the end of September, which is expected to be a significant driver for Dupixent's continued expansion. Overall, we remain on track for our target of around $13,000,000,000 in 2024, in line with our low double digit compound annual growth rate goal set from 2023 to 2,030. Now on Slide 7, turning to our launches and how we bring innovation to patients. Quarter after quarter, the growth of these new medicines increasingly contributes to our top line growth. Francois will explain the key contribution of these successful launch to the accelerated business dynamics in a minute.

Speaker 2

Growth of Nexviozyme due to patients converting from legacy treatments in Pompe franchise remains a key driver. Most eligible patients in the U. S. Are now on the new standard of care with Nexvirzymes and patients continue to convert outside the U. S.

Speaker 2

Altuveo annualized its launch at the end of March. Growth rates remained very strong with high sales predominantly in the U. S. Where it was driven by patient switches, of which an increasing majority came from medicines other than Eloctate. Other medicines also did well in growth in absolute terms, including Sarclisa's fast expansion in Europe and Japan.

Speaker 2

As expected, Baywater sales in Q2 were low due to vaccine seasonality. Looking ahead to the upcoming RSV season in the Northern Hemisphere, we remain excited by the opportunity for Bay Fortis to advance towards all infant protection and reach blockbuster status globally in 2024. As the world leader in flu vaccines, Saudi Arabia has a pivotal role to play in bringing forward innovative solutions against this disease by addressing current challenges and building strategic partnerships. In May, we announced a new partnership to combine Novavax's COVID-nineteen vaccine with our differentiated flu vaccines with the goal to create a best in class combination. This new combination will include our flu vaccines that have proven efficacy in preventing flu infections and its severe consequences such as pneumonia and hospitalizations and of course has received an ACIP preferential recommendation.

Speaker 2

We believe our truly differentiated combo vaccine will demonstrate favorable tolerability compared to current COVID-nineteen mRNA based combination vaccine candidates, ultimately driving higher vaccine rates. To clarify, we believe that combination vaccines developed by competitors that would compromise tolerability or proven level of efficacy would damage vaccine confidence and further impact vaccination rates negatively. In addition, Sanofi will commercialize Novavax's COVID-nineteen vaccine for next year and book the sales. Thanks to our leading commercial capabilities, we hope to be able to further drive broader acceptance of COVID-nineteen immunization. Considering the recent public concern about H5N1 avian influenza, we take responsibility in pandemic preparedness with 2 pivotal programs.

Speaker 2

Our egg based protein adjuvanted vaccine is set to begin a study in Q3 in collaboration with BARDA, and our mRNA pandemic flu program will enter clinical studies in the coming months. In summary, our commitment to innovation continues to drive our a positive note relating to our ESG commitment. Time Magazine recently ranked Solvia as the world's 7th most sustainable company across industries and 1st in pharma. This ranking reflects the progress of our integrated ESG strategy and thanks to our comprehensive carbon transition plan, we are now on track to meet carbon neutrality in 2,030 in line with our science based target initiative commitment. To achieve this target, we focus on key decarbonization levels presented on the slide.

Speaker 2

For Scopes 12, 43% reduction of our activities was already achieved and we are targeting 55% reduction by 2,030. For script 3, 10% reduction was accomplished so far. We are aiming for 30% across our value chain. With that, I hand over to Francois, our CFO.

Speaker 3

Thank you, Paul. Good morning and good afternoon to all. Let me start with our sales development on Slide 11. We have delivered robust results in the 2nd quarter with 8% reported growth and even 10% at constant exchange rates. Our growth is broad based across businesses and geographies and hyperinflationary countries add only a limited contribution to our growth.

Speaker 3

We are delivering quality growth as you can see on the right hand side. Our continued portfolio transformation is a key growth driver with strong performance from Dupixent and the ramp up of our newly launched medicines. Other products also had a significant contribution. Please turn to Slide 12. Gross profit showed double digit growth in line with our sales performance.

Speaker 3

Gross margin was slightly down due to unfavorable currency impact, OBAGIO LOE and COVID-nineteen revenue last year. At constant exchange rates, our gross margin has slightly increased, mainly driven by improved product mix. Total operating expenses were up by 5.2% as we invest in marketing and sales to support launches and in R and D. R and D expenses grew double digit when excluding the one time €200,000,000 reimbursement from Sobei related to Altuveo. We are fully on track with the step up of our R and D spend by approximately €700,000,000 this year to land 2024 around €7,400,000,000 SG and A expenses grew substantially less than sales growth, generating a positive growth leverage impact on margin.

Speaker 3

Business operating income grew 8.3% and business EPS growth was up by 4%, driven by higher BOI, partially offset by the higher tax rate of 21% as well as increased finance costs from higher net debt. Please turn to Slide 13. Based on our current performance in the first half of the year and a strong business outlook for the remainder of the year, we upgraded our earnings per share guidance for 2024 to stable at constant exchange rates. Let me now give you a little bit more color on some key consideration for the balance of the year. On Bay Fortress, we anticipate the 1st shipment in the Northern Hemisphere to take place in Q3.

Speaker 3

Regarding phasing, Q4 sales are likely to be higher than Q3 1s based on regulatory approval of the 2 additional filling lines expected in September. On Flu, we anticipate a phasing with approximately 70% of sales in Q3 and 30% in Q4. Total sales for flu are expected to decline low single digit versus last year due to an expected softer vaccination rates. Other items are similar to what we shared with you last quarter. So overall, we are pleased with our Q2 commercial and financial performance with sales growth of 10%, underlying improvement in gross margin, further cost discipline and the continued modernization across the company.

Speaker 3

This positive momentum in Q2 and the positive outlook for the balance of the year leads us to upgrade our guidance. With that, I hand over to Uman for further positive news on the pipeline.

Speaker 4

Thank you, Francois. Slide 15, we've achieved several milestones this quarter showing our continuous pipeline progress. Dupixent for the treatment of COPD was approved last month in the EU and this

Speaker 1

is the first time Dupixent

Speaker 4

has been approved in the EU ahead of the U. S. Further, it is the only biologic medicine approved to treat COPD anywhere. Now, ALTUVIO is also approved in the EU under the name Altivox. We've received several accepted regulatory submissions including priority reviews of Dupixent and CRS with MP and adolescents and sarcoza in newly diagnosed transplant ineligible multiple myeloma with U.

Speaker 4

S. PDUFA date in H2. Additionally, fiduciran, our RNA and zupiran antithrombin for patients suffering from hemophilia A and B has been submitted in the U. S. With a likely regulatory decision early next year.

Speaker 4

In support of our drive to become a tech powered biopharma company, we formed a recent collaboration with Formation Bio and OpenAI to accelerate drug development, also supported by the collaboration with Bellhara to advance discovery and drugging of immunology targets fitting perfectly with our Neurics research program STAT6, a key target in immunology. Completing our focus on rare diseases, we've recently announced a development and commercialization agreement outside the U. S. With Fulcrum for lasmapimod, AMPK a MAP kinase inhibitor and in facialscapular humoral muscular dystrophy, a genetic neuromuscular disease characterized by progressive muscle weakness. This medicine is in Phase 3 with an expected data readout by the partner at the end of the year.

Speaker 4

Moving forward with neurology, we have 2 recently announced, we have also recently announced our exclusive license right with Avigil with 1 small molecule in Phase 1 focusing on an area of huge unmet medical need, Alzheimer's disease. These recent activities are helping us to replenish our early stage projects to ensure the sustainability of our life. Next slide please. At the ATS meeting in May, we presented high dose Phase 2 data from the proof of concept withdrawal design study of rilzabrutinib, are advanced oral targeting both type 2 and non type 2 inflammation in moderate to severe asthma. At week 12, treatment with high dose rosubrutinib resulted in a 36% relative risk reduction in the loss of asthma control events compared to Tresiba.

Speaker 4

This extended the 25% reduction observed in the low dose cohort. Additionally, we observed the rapid, normally significant and clinically meaningful improvement in asthma symptoms and quality of life with a well tolerated safety profile. These positive results demonstrate the potential of relazobrutinib as an add on for uncontrolled asthma patients and are part of a broader set of studies to build on the positive Phase 3 data in ITP for the regulatory submission expected later this year. Slide 17. Turning to oncology and the recent ASCO meeting, we presented our important Phase 3 data from the IMROAR study in the newly diagnosed multiple myeloma transplant ineligible patients.

Speaker 4

The primary endpoint is met with a statistically significant reduction of 40% in disease progression or death for patients treated with sarcoleza VRD versus VRD alone. Estimated 63.2% of patients had no PFS event in 60 months versus 45.2% for patients treated with VRD alone. This frontline use in transplant in eligible patients performed potentially the 3rd indication of sarcoleja with expected regulatory decision by September 27 in the U. S. Several additional studies are currently ongoing to further extend indications for sarcoleza including the subcutaneous formulation.

Speaker 4

Slide 18. On my last slide, I would like to highlight the exciting upcoming news flow for the next 18 months in support of increased R and D productivity. We plan 12 Phase 3 readouts, 13 submissions, 9 regulatory positions and we look forward to keeping you updated on the progress. Before handing back to Paul, I'd like to extend my sincere thanks to every colleague in the R and D team for the work they do for collections. We've undergone changes over the past month.

Speaker 4

We're well on track for the pipeline of new opportunities as we chase the miracles of science to improve people's lives. With this, I hand back over to Paul for Q and A.

Speaker 2

Well, thank you, Hooman and Francois. We'll now open the call to questions. As a reminder, we would like you to limit your questions to 1 or 2 each. Excuse me. Remember, we're seeing many of you again early next week.

Speaker 2

You'll be notified when your line is open. You can ask a question at that time. Please make sure you unmute your microphone Now we'll take the first question. Thomas?

Speaker 5

So your first question will come from the line of Ron Barry, Bank of America. Ron?

Speaker 6

Great. Thanks for taking my questions. So firstly on BayFortis, could you just confirm current guidance still only assumes the existing capacity and €1,000,000,000 of sales with approval of expanded supply being upside to that? And then can you clarify the scale of the expanded capacity? So I think you talked about 2 lines adding to 1.

Speaker 6

So can we just assume that's a tripling? And can we read that your phasing comment on Bay 4 to say more in Q4 and Q3 to mean that you might not have the manufacturing approved by the beginning of the season in September? And then secondly, on Opella, just wondered if you could update us to the time lines in which you expect to be able to clarify to the market the route of separation, so sale versus spin and perhaps just help us understand the factors that go into the decision between the two at this stage?

Speaker 2

Thank you. I think there's 5 questions there. Graham, thanks. I don't know what I need to do. But anyway, Tom, over to you.

Speaker 1

Thanks for the question, Graham. So a few elements to answer to your questions. First of all, we're confident that Fortis will be a blockbuster in 2024. That's the guidance that we have provided, and we're fully aligned with that. You remember the different messages we have provided previously, the fact that in order to increase supply, we need, as you pointed out, we had 2 filling lines.

Speaker 1

We wanted to make sure that we are doing production at risk with our partner AstraZeneca and that we are submitting, of course, the regulatory application for the regulatory body to approve those lines in due time. So we are exactly on track with this plan, I. E, we have done production at risk as expected. We have done PPQ batches and validation batches, and we have submitted to the different regulatory bodies all the different regulatory applications for those lines. Now it's in the end of the regulatory bodies for the exact timing of the approval, which will enable the overall shipment of the lease.

Speaker 1

But we believe that there's all the reason to be confident about the accelerating process of those lines and about the fact that we'll be able to move forward for the supply for the 2024 holiday season. Now in terms of the indication we've provided on the split in quarters between Q3 and Q4, we have pointed out to the fact that we expect, again, within what we know today, to have Q4 sales above Q3 sales. That's because here, while it's a seasonal product, there are some differences with flu, for example, where you have in flu, vaccinations very early on in the season and that's it. Here, for RSV, there's all the in season born babies that are born in the month of October, November, December, January, February March, and that also accounts for a significant part of the demand. Therefore, with the information we have today, we believe it's reasonable to expect Q4 sales to be above Q3 sales.

Speaker 1

Overall, confidently moving towards the coming R and D season, again confirming the guidance that it will be at least blockbuster set us in 2024.

Speaker 2

Thank you. Francois O'Pella?

Speaker 3

Yes, Graham. On O'Pella, so as far as the timing is concerned, we confirm what we had said before, which means we expect that transaction to take place at the earliest in the Q4 of 2024, could be potentially in the Q1 of 2020 5, but it will make a big difference. I do confirm as well that we are still in a very competitive process with basically 3 options. Of them are public, either an IPO or a spin and one of them is more sent to a private party. So the game is still totally open as we speak with one objective, which is value creation for shareholders.

Speaker 3

Maybe to help you a little bit, the 2 main items that we are looking at is clearly the valuation, the value as of today or whatever we could extract as value in the future as well under different configuration, but it's a very essentially value story. We are taking into consideration obviously the execution risk, certainty of transaction versus uncertainty. That's part of what we are looking at. The good news I can share with you as well is that the process is anyway between the different options very competitive. So which means that usually when you have a competitive process, you are in a better position to extract value.

Speaker 3

So we are very positive for what is a quality asset.

Speaker 2

Okay. Thank you. Next question?

Speaker 5

The next question comes from the line of Shirley Chang from Barclays. Shirley? Shirley?

Speaker 7

Shirley Shen from Barclays asking questions for MAZU. We have one question for flu vaccine. Can you please share with us the timeline for the COVID-nineteen and fast flu vaccine on the collaboration with Novavax? In addition, how would you comment on the perspective of dual vaccine over solo flu vaccine? Also noticed you have a mRNA flu vaccine in Phase 1.

Speaker 7

How would this candidate provide potential synergy or other impacts on your current product launch plan? Thank you.

Speaker 2

Thank you. Thomas?

Speaker 1

Thank you very much, Charlie. A few elements in your question. First point, I understood you were questioning on the partnership with Novavax and more specifically about the combination vaccine where we are, as you understood very well, we really want to make sure that there is no compromise, neither on safety or efficacy. And we believe that the combination is only worth if you're at least as good or better than the best standalone product separately. That's exactly what we want to do with the commission Brexit.

Speaker 1

It's a bit too early to talk to you about specific time lines, but why we have not shared anything about this. But it's probably not crazy to think that following this partnership, we want to go fast and we intend to start clinical operation this year in 2024 on this combination vaccine. That's for the combination vaccine. Now you I pointed to a couple of elements which are very important. First of all, you had the questions on mRNA flu project, and you had a question about is it synergistic or not.

Speaker 1

So a few good points there. On mRNA flu, you've seen in the pipeline appendix that we are moving our Phase I mRNA flu from one product to another product, very simply fully in line with what we discussed at the investors event last year, where basically we were showing that the 1st generation of mRNA flu are not moving neither. Basically, 1st generation mRNA flu are generating flu titers, flu antibodies, but their efficacy is not known and the level of safety is definitely not at the level of safety and tolerability of the current standard of care in flu. So that's why we claimed at that time that we want to go to the next generation of mRNA. And that's exactly why we are doing this new contract.

Speaker 1

We wanted to go to the next stage of mRNA flu because if you're not improving for now, there's no point doing further development. And that's why we believe our approach to mRNA flu and our approach on combination vaccine is the right one. Of course, you've seen the difference with some other, but there is a big compromise on tolerability and maybe efficacy. We don't think it's a winning recipe. Last but not least, you understand that putting all this together, we see a synergistic effect and not a cannibalization effect.

Speaker 1

We are leaders in field today. We will be again leaders in field tomorrow.

Speaker 2

Thank you, Thomas. Next question?

Speaker 5

So your next question comes from the line of Seamus Fernandez, Guggenheim, please. Thanks very much for

Speaker 8

the question. So, why don't you just drill into expectations for the COPD launch, hoping you could just provide us with a little bit of color on the trajectory of growth. We saw very strong growth from Dupixent in so many other launch categories, but this is a uniquely large one and just wanted to get some color there. And then just as a separate question, can you give us your thoughts on the where you think the CD40 ligand asset has the most appropriate opportunity outside of multiple sclerosis? Thanks so much.

Speaker 2

Okay, Brian,

Speaker 9

COPD? Well, thank you so much for the question, Samus. We are really excited about the COPD launch. Obviously, we just remind everybody that we just received approval in Europe, 1st ever advanced therapy to be approved in COPD, 3rd leading cause of death worldwide, really important moment for us in the company and certainly for patients. As it relates to the uptake, the good news is we're already in this particular physician population on a day to day basis with asthma.

Speaker 9

The good news is also this disease state as we've highlighted is driven by underlying Type 2 inflammation and that is also very similar to asthma. So the storyline is still very strong. The opportunity will be for us to find these patients and make sure that we get them into the treatment centers and make sure that we are able to get them introduced to therapy soon. As we said, we think that most of the growth will hit us in 2025. We'll begin the launch this year and most of our growth will be in 2025.

Speaker 2

Thank you. Hooman, CD40 Ligand?

Speaker 1

Yes. Thank you

Speaker 4

for the question. Outside the multiple forms of multiple sclerosis where this may be relevant, confidence around the use of this node, both in type 1 diabetes and in transplant stroke transplant rejection is the most obvious place where the biology is directed.

Speaker 2

Thank you. Next question?

Speaker 5

The next question comes from the line of Jo Walton with UBS.

Speaker 10

Thank you. If I can return briefly to Bay Fortis, I think we can work out for ourselves the level of demand in the U. S. And assuming that you have capacity, how you might deal with that. But can you give us a sense of where demand is building outside of the U.

Speaker 10

S? Will there be significant new countries that you can supply this year? Or will other major markets really come in next year? So it's really trying to get a sense of the U. S.-ex U.

Speaker 10

S. Split. And on fitusiran, which is now a filed asset, could you remind us what where you think that's going to fit in for hemophilia space, please?

Speaker 2

Seijin, now to hear loud and clear. Thomas, over to you on both orders.

Speaker 1

Yes. So on the geographies, thanks for the question, Joe. You remember that last year, we were already focusing on 3 launch countries, namely the U. S, Spain and France. So those, of course, will remain in balance and really moving forward.

Speaker 1

In addition to this, we will be opening this year a few countries. I'm not going to name them also. So I hope nobody will be distressed if I forget a couple of them. But to tell you the key ones, we expect a few provinces in Italy to launch all infant programs. We expect Germany, you've seen the STICCO recommendation, to move forward on vaccination.

Speaker 1

We expect other European countries such as Ireland, Belgium and Portugal, which have also provided some recommendations. So that gives you a bit of an example of how we will expand this year on year.

Speaker 2

And maybe I'll just add that Bay Fortis is not the reason for the upgrade in guidance today. So that's a positive overall. I apologize for anybody offended by Thomas' language. Hooman, over to you on fitusiran.

Speaker 4

Hi, Joe. Thanks for the comment on fitusiran. Based on the mechanism of action, we believe that fiduciran is applicable to all patients with hemophilia and will likely be used broadly. I'll come back to it in a nanosecond. The real issue is the major unmet medical need today and in the hemophilia B, especially with inhibitors.

Speaker 4

And I suspect that the immediate use of this medication will be in that group, but will certainly extend more broadly. It's important to remind everybody

Operator

that this is a

Speaker 4

highly differentiated therapy with very clear data. The factors that make this an important part of the landscape of the hemophilia treatment is that it's a low volume treatment with really tolerable profiles of injections 6 to 12 times a year compared to the manifold number of treatments for other treatment categories. And importantly, there's no cold chain. Unlike antibodies, this is very easy to provide worldwide. So in many ways, this is a highly differentiated therapy and we are optimistic about its outcome.

Speaker 2

Yes. Thank you. It does have a great profile except that there will be some tailoring, titrating not uncommon with this patient population, but has a really great and compelling profile. Next question?

Speaker 5

The next question comes from Tim Wojsen with Wolfe.

Speaker 9

Thank you. Just on talibrutinib, just update on timing and then really what the most likely base case expectations should be. I guess if I could distill it down to a single question, do you think talabrutinib will be approvable in some form or another based on the upcoming readouts or could it be a total of 0? Thank you.

Speaker 4

Thanks for the question. No update on the timings, as we discussed late August, early September this year, consistent with what we've said. I'm mindful, of course, of our reporting obligations, and we will be deeply conscious of how we provide the data flow at the top of mind, just in terms of speculating on the outcomes of the trials. Of course, I can't do that. But I have to say, we're optimistic about the path for these drugs.

Speaker 4

And I would really point out simply that currently in multiple sclerosis, there's a huge unmet medical need in secondary progressive disease. And at Phase 2, we had really interesting results. So going forward, we'll see the results very soon.

Speaker 2

Yes. And I think we know that mechanistically the fact that the cost of blood brain barrier in a meaningfully meaningful way, we'll find out when we get the results whether that is applicable to the readouts in the studies and we'll see when that differentiation holds. So we stay on the original timelines. Next question?

Speaker 5

The next question comes from the line of Luisa Hector, Berenberg. Hi there. Thanks for taking my question.

Speaker 7

So it's on Dupixent and expansion into more indications. So first of all, with CSU and doctors we speak to certainly absolutely love Dupixent, but they're also confident there is an effect in CSU. So I'm just wondering how we should think about Study C, will it be sufficient for approval, what's the profile you're aiming for and how you put that in the context of the broader pipeline, riluzabrutinib, etcetera? And then perhaps just a comment on the UC Phase 2, when should you have the induction data in house?

Speaker 2

Okay. Thank you, Louisa. Brian, DUP indications and expansions to Lucy?

Speaker 9

Okay. I think Uman is going to talk a little bit about the profile potentially. But just as you said, and I like I love what you said, when you talk to patients how much they love DUPIXENT and physicians how much they love DUPIXENT, you're absolutely right. Dermatologists are excited about the potential expansion into CSU. We need the trial to read out positively and then we'll file for this.

Speaker 9

We, by the way, just to let you know, our first launch in CSU is actually in Japan a little bit earlier this year and it's gone exceptionally well, still early days. But again, I think it further reinforces the profile that we bring to the dermatologist community who are treating multiple of these disease states that we have today. So again, we look forward for the data readouts and bringing this to patients all around the world.

Speaker 4

Yes. I mean, Louisa, nice to your voice and thank you for calling. Study C, monikers, Study A, we have high hopes for efficacy in patients with CSC. Okay, good. And TL1A?

Speaker 4

So TL1A, thanks for the question for that. As you will have seen, as an example of the potency of the collaboration and what we bring to the table in collaborations when Sanofi comes to the table in immunology, we have accelerated the study by 3 months. We finished early, we over performed. We're optimistic about both this disease class and the differentiation of this TL1A, particularly based on its raw horsepower and potency, but also its ability to distinguish between DR3 and the decoy3 receptor, which makes this a highly unique version of the TL1A molecule. We anticipate results, I think, has been described in Q4 of this year.

Speaker 4

And we're using this trial to both guide dosing, but also indication. And just to call it out, we've enjoyed the relationship with our partners, Teva. And from this point on, the end of this result, we'll pick up the baton on the Phase 3s.

Speaker 2

Great. Thank you. Next question.

Speaker 5

Next question comes from the line of Florent Cespedes, Bernstein, Societe Generale.

Speaker 11

Good afternoon. Florent Cespedes from Bernstein. Two quick questions. First, a follow-up on BFortis. If you have the approval of the 2 manufacturing lines later this year.

Speaker 11

Could you tell us how do you see the capacity for 2025 will be twice the current level

Speaker 2

you have today. So some color

Speaker 11

on this front would be great. Second question for Oman, which are in our view the most important Phase 2 projects that will read out until the end of next year in your portfolio. It would be great to

Speaker 2

have this comment as well. Thanks. Omar, go forward.

Speaker 1

So on the Fortu Spline, we didn't give any specific number on capacity. But if we have the filling lines approved, which we will, I think we will be in a situation in 2025 to respond to the demand. So I don't see any supply issue there. Of course, it's I understand the short term focus on supply from everyone very clearly. But of course, you understand also that we need to build the demand over time.

Speaker 1

Registration is to be followed after by recommendation bodies. So in every country, new recommending bodies, we look at the file one after another. And I think we see a ramp up from there on.

Speaker 2

But capacity, we should be good. Thank you. And Hooman, the question about which is your favorite child?

Speaker 4

Yes. Thank you. Thank you for the question. I won't pick out my favorite child. I'll try and be brief and thoughtful about this answer, which is firstly, we've got

Speaker 2

a number of vaccine trials reading out. I don't want

Speaker 4

as we go through this, to forget those excellent vaccine trials that

Speaker 1

read out towards the end

Speaker 4

of next year. In terms of classes, you'll know that we've got an excellent accompaniment to our ITP franchise with way warm autoimmune hemolytic anemia with rosubrutinib, that's an extremely exciting result. Louise, I think, kindly referred to our TL1A product. I think that is going to be exciting for us both now and with Teva. And then going

Speaker 2

into next year, the IRAC for

Speaker 4

that we've gone in partnership, the oral small molecule PNFR1 signaling inhibitor, which could be transformative. We await with great interest, both safety and efficacy. And finally, and not least, not forgetting our energy franchise, our alpha- antitrypsin fusion protein is going to be an impact. It's going to have an important milestone next year. Haven't missed any out on purpose.

Speaker 4

I just want to call out that all

Speaker 3

of our

Speaker 4

franchises, immunology, neuro, rare and vaccine are firing on full thrusters.

Speaker 2

Thank you. Next question?

Speaker 5

The next question comes from David Risinger, DeRink.

Speaker 9

Yes. Thanks very much and congrats on the strong second quarter execution. So I have two questions, please. First, assuming itopecumab generates compelling results in Phase 3 next year, could you please characterize the magnitude or multiple of its sales potential in COPD relative to DUPI in COPD? And second, could you also comment, Paul, on China's interest in Bay Fortis and whether there is a potential path to launch in China late decade?

Speaker 9

Thank you. Okay. Brian? Okay. So first and foremost, thank you so much for the question.

Speaker 9

In reference to COPD, as we have framed COPD before, there's about 2,000,000 patients across the G7 really that suffer as we talk about this kind of that high unmet need goal D, if you will. This particular patient population, we're going to be bringing 2 therapies, at least to this particular patient population. Dupixent, as we said, which is very soon, atetepiximab is next. Atetepiximab, as we shared with you before, is largely non Type 2. We'll play in Type 2 as well, but all previous smokers.

Speaker 9

So these two drugs are really going to nicely sit together. And I think as we've contextualized this before, roughly around $5,000,000,000 in peak sales across the two assets.

Speaker 2

Thank you very much. Thomas, China before this?

Speaker 1

China before this indeed, there is interest in China for before this. But let me maybe provide some light on this. As many MNC vaccines here in this specific case of an immunization, we expect Bifertus will be private out of pocket market. That's very important to have in mind, which means progressive ramp up. We are starting from a base in China where the disease awareness is close to 0.

Speaker 1

We'll need the next couple of years to build that up. As you know very well, beta fit has been registered in China. So now we are in the phase of actually engaging with medical professionals, defining the pathway, moving forward, this is the 1F and then activating parents for out of pocket market.

Speaker 2

Thank you. And we were in China recently and we started senior officials, you could see the interest building significantly. So we look forward to opening that opportunity when it presents itself. Our next question?

Speaker 5

The next question comes from Gary Stevenson with Deutsche Bank.

Speaker 4

Gary? Hi, can you hear me now?

Speaker 2

Yes, we got you.

Speaker 12

Perfect. Thank you. First question is just on vaccines. You're reiterating the mid single digit growth target and also the Fortis blockbuster ambition, but there is a more refined low single digit decline for flu, which is probably a bit weaker. So the question is on kind of where the other moving parts in Vaccines are, which still support the mid single digit outlook.

Speaker 12

Is that purely just greater portfolio to think about? And then secondly, just on Dupixent, portfolio to think about? And then secondly, just on Dupixent, could you just talk to how the performance of the approved indications is trending and that relative contribution to the unchanged $13,000,000,000 target for this year and just whether there's any particular pockets of strength or weakness by any indication relative to your expectations in that number? Thank you.

Speaker 2

Thank you, Gary. I think we sort of touched on the relative moving parts from flu and break orders and etcetera. But Tom, any additional color to add?

Speaker 1

Yes. So Gary, I don't think there's any magic recipe in there. So blockbuster status for BFR2s, low single digit decline on flu, not driven to our own performance, which we expect will be strong, but not driven by the overall, I would say, market performance in terms of flu vaccination rate. We are at the end getting soon at the end of the pre booking season in North America, and we see a bit in trend with last year that the vaccination rate is probably on the subside of things, which is why we've made that perspective. On the other part of vaccines, it's well in line with what we said before.

Speaker 1

Some slight growth in our, I will say, classical endemic product or booster. And on the other hand, on the PS Exchange, you know very well that while on the BOA perspective, we are doing well. Vaxelis in the U. S. Is not booked in our sales performance.

Speaker 1

So while the product is doing well in the U. S, it does not come in the sales lines, but more comes in the income line. So I would say expected for the other parts of the business.

Speaker 2

Thank you. And you said yourself that we will likely gain share in the flu market. You get the vaccine coverage rate is low. So the expectation operationally we're in good shape. Brian performance of Dupixent in drug approved indication?

Speaker 9

Yes. Thank you so much for the question, Gary. First and foremost, I'd say it's heavily demand driven right now from a patient standpoint. We're in a great position where we're seeing expansion not only in our core indications that we've been launched in, but also in those core indications across geographies everywhere as we launch into those new indications around the world. So I'd say we're really benefiting again as Paul outlined on the very first slide that it is TRx demand is all about new patients on therapy or patients staying on therapy across all of our indications and across all the geographies.

Speaker 9

And that puts us really in a good position again to reconfirm, as Paul said earlier, our guidance on Dupixent of around $13,000,000,000 for this year and which sets us up nicely for the guidance that we've given double digit CAGR low double digit CAGR rate through 2,030.

Speaker 2

Thank you. Next question please.

Speaker 5

The next question comes from Simon Baker with Redburn.

Speaker 7

Hello. This is Shale speaking on behalf of Simon Baker. Just two questions for myself. One was about your appetite for radiopharma and if you had any changes in your approach that would explain the best performance in the older broader portfolio? Thank you.

Speaker 2

Okay. I missed the second question.

Speaker 7

Sorry. If you had any have there been any changes in your approach that would explain the better performance in your slightly older portfolio?

Speaker 2

Okay. Thank you. On radioligand therapy, Hooman, if you want to make a quick comment.

Speaker 4

Thank you for the question. The reason this, of course, is radioligand therapy is at a recrudescence of interest. We remain watchful in this space and thoughtful about making moves into truly differentiated therapies, but there is nothing that we currently have going on in our portfolio.

Speaker 2

Thank you very much. And just to add to that, that we remain very committed to the core therapeutic areas. We've made trade offs to stay very focused. So a broad answer to a very specific question, we would have to feel there was something compelling to make us want to go of what we do because we are really focused on the areas that we want to win and play. I think Olivier, I don't know what prompts the question, but I do know that you've been in a radical modernization of the Gen Med business and have seen the benefits from that.

Speaker 2

Maybe you want to share a bit of your secret sauce?

Speaker 13

Yes. So we are happy with the performance of the old portfolio, even if during the quarter, we had some positive momentum on Lantus, which is a windfall, which reflects the fact that we had a very low base in 2023 and of course also to the unavailability of 1 of our competitors. But stepping back, I think we pay, we benefit from the effort that we have been doing in bringing more focus and you know that the focus we have brought it in terms of simplification of our portfolio. Back 4 years ago, we had close to 400 product families. Now we are on 100.

Speaker 13

We are benefiting also from the fact that we are simplifying our geographic footprint and deciding to go to a distributor model. And the last point is really about resource allocation. We have redirected our resources and some resources on the portfolio that can drive growth. On the so strong, strong momentum, we move more and more in digital in order to make sure that we continue to take out some resources and to maximize the value of this business. So overall, very good trend, very specific situation in the U.

Speaker 13

S, but we

Speaker 2

are overall very happy with the performance. Yes, I got to compliment Olivier and the team on this because this reinvention and this modernization, the radical transformation is pretty extraordinary and we did hold a couple of months ago and talked about our ambition and we declared that we wanted to try and bottom the business out and start returning to growth in a more efficient way. We're not declaring victory for comment, there's lots of puts and takes. But I would say, the indications, the early indications are great. So thank you for the question.

Speaker 2

Okay, next question.

Speaker 5

The next question comes from Ben Jackson with Jefferies.

Speaker 14

Hi. Thanks for the question. So firstly, on contracting for Dupixent for 2025. Are you able to give us any color on how the discussions of pads have been going considering the Part D redesign, but also the potential COPD indication by then? And then does the September approval versus the prior June expectation have any implications for inclusion in the formulary for next year?

Speaker 14

And then secondly, if I may, we've obviously seen a qualitative readout for competitors to be able to assist in the recent days. What gives you retained confidence in the differentiation of the asset and its commercial opportunity beyond perhaps the just the compelling real world data that we've already seen? Thank you.

Speaker 2

Okay, great. Thanks, Ben. D. P, Brian?

Speaker 9

Ben, thank you so much for the question. So yes, obviously, we don't comment too much on how the negotiations are going with the payers, but we always kind of remind everybody that we've been in this position for quite some time. We've worked very closely with these external stakeholders to share our ambitions to take this into a whole host of diseases driven by underlying Type 2 inflammation. And you can see obviously from the results we've generated a very strong track record of the year. So we find ourselves in a very good position, I think, as we continue the negotiations for next year and we do it each year.

Speaker 9

The second part to your question is, I think the best answer to that is, again, we reconfirmed our strong commitment to around $13,000,000,000 for the year. So again, we are committed to have a strong COPD launch whenever it does come, but agnostic of that, we are committed to $13,000,000,000 this year. And you may choose

Speaker 2

to answer, but the negotiations around COPD for 25 based on PDUFA in September rather than June?

Speaker 11

Yes.

Speaker 9

It doesn't really necessarily affect it as long as it's approved within this year. You're already negotiating for these indications within the next year. Thank you.

Speaker 2

Thomas, RSV?

Speaker 1

Yes, Ben, indeed, there has been some recent communication from competitive monoclonal antibodies against RSV. A couple of points I'd like to say about this. First of all, as you noted out, there was absolutely no data share, neither safety nor efficacy. So there's not much to say in detail. What I can tell you though is I can talk about our product and what it's doing very well.

Speaker 1

You've seen that we have a very strong pristine safety profile. And you've seen that we've demonstrated efficacy, not in one trial, not in 2 trials, but trial after trial, in clinical studies and in the reward evidence studies. And I invite you to go back to the last ACIP publication in June, where they were showing that actually the 2 effectiveness points against hospitalization were 91% 98% as measured

Speaker 4

by the CDC network.

Speaker 1

So I think that the overall data set that we will have is very significant. Now, of course, moving forward with if and when we're going to see some data coming down the road from competitors, I think it's going to be interesting to look at what is the exact safety profile because we're talking about the most fragile population of the universe. It may be also very interesting to see what is the exact efficacy data, especially when it comes to a specialization. And of course, we want to look at the duration of protection. On these terms, duration of protection, we're very confident about the Befortus profile.

Speaker 1

Why? Because we have seen from the previous studies from our competitors that the half life of BAYFORTUNE is significantly higher and longer than the half life of the coming competitor. So delighted to have some competition if it helps to bring more and more awareness about the importance of all infant protection. However, I think that there will be some difference between the products. And I do believe that the fact that we have done the formulation and the design of a product that gives the exact amount of quantity or the exact case to get the best protection is paramount to the success of Bifrostis.

Speaker 2

Thank you. Next question, maybe the last question. Two more. Okay.

Speaker 5

The next question comes from Eric Leberico with Stifel.

Speaker 1

Yes. Thank you. Two short questions. First, on the other revenue line into the P and L. We've seen less dynamic this quarter, but don't want to read too much into a quarter.

Speaker 1

Is there any chance you can guide us towards how we should see other revenues moving towards the end of the year and maybe for the following years? And then second question on Sotlisa, as you're moving closer to the launch of a very significant indication. So far, the drug is only €500,000,000 in sales, if we analyze where it is, but the IMBROSE indication is probably at least a couple of €1,000,000,000 in potential. Could you maybe share the kind of cost and resources you're putting behind out of the upcoming launch and how you see competition versus Dara that you have CPU's data coming later, subcu maybe ready, but you having 1 year launch ahead of competition. And so how big could be that opportunity for the drug?

Speaker 1

Thank you.

Speaker 2

Thank you, Erik, for two little questions. Most of

Speaker 3

it, Francois. Yes. Erik, thanks for asking the question. On other revenues, indeed, you're absolutely right, difficult to read it by the quarter. And we had a weak revenue amount in the second quarter, but it doesn't mean much at the end.

Speaker 3

I can confirm that we expect for the full year 2024 to be around the same level as what we have experienced, at least as far as disposal is concerned than we had in the previous years, which is about €500,000,000 of profit as a consequence of disposal. So some expectation this year in 'twenty four than what we have seen in the past.

Speaker 2

And Hooman, maybe you could kick up on sarclisa and Brian finish.

Speaker 4

Yes, thanks for the question. We remain bullish on sarclisa. Obviously, it's proven its case in transplant ineligible patients. But we're looking forward to seeing in the very short term, the outcome in transplant eligible patients. Which will give Cycliza the broadest possible indication profile.

Speaker 4

The second point I'd like to talk about is the fact that the subcutaneous formulation study will come next year, which will provide much more opportunity and potential sales to Suckleyza in multiple combination indications going forward.

Speaker 2

Thank you. Brian, do you want add to the results?

Speaker 9

Yes, I think, well, first I'll start with the performance. So as you saw in the quarter, we saw really strong performance again. And again, this is really important. It sets ourselves up nicely as we expand our indication. It sets ourselves up nicely because you talked about darou there, but actually the class of CD38 is really the strongest class there.

Speaker 9

And that class continues to grow and that's great. We talk about the pie growing bigger. But then what we've seen is our strong growth is because we continue to do very well and continue to take share in the areas where we've been approved. So as we look to this expansion to first line therapy very soon, we're really excited about that and we're resourcing it appropriately to be able to take share and to be able to continue to grow this great asset

Operator

for these patients in multiple myeloma. So we're excited.

Speaker 2

All right. Great. Thank you.

Speaker 5

The last question comes from the line of Pete Verdult with Citi.

Speaker 2

Good to

Speaker 15

you, Pete. Sorry, jumping from one conference call to

Speaker 2

the other. Can you hear me? Yes. Good stuff. One for human

Speaker 15

and one for Paul, please, just to end the call. Just a follow-up on tolebrutinib. Just given the absence of randomized Phase 2 data in SPMS, can you remind us why you are optimistic in this setting? Or is it just that it crosses the blood brain barrier very well and is against placebo? And then Paul, for you, maybe I'll continue to at least swing the bat a little.

Speaker 15

Consensus at about $8.65 of earnings into next year points to a very nice double digit rebounding growth for a stock trading on just 11x. Now I realize this is not a forum or a guidance call for 25, but hopefully I can tempt you where you can't resist saying something or giving us a sense, a level of comfort where consensus is safe. I know there are big swing factors, CPDB, Big Fortis, Gen Med, but just wanted to kick the tide of you on where expectations sit for next year and the journey of growth for the remainder of the decade. Thank you.

Speaker 2

Okay. Well, I don't want to disappoint you as you jump between calls thinking you could get me to reveal something about 25%. So Francois, do you want to start there?

Speaker 3

Yes, I can, Pete. As we said, it's not the time to talk about 2025. Let's learn 2024 to start with. But as you can see, we are very positive about it. But now I'm in a position to fully confirm the fact that we have a very positive the same positive outlook for 2025 as we had before.

Speaker 3

And even I mean, it gives us the good performance that we had in H1 gives us further comfort on our expectation for 2025. What you can see as well is 2024 is actually the dividend that the rebound is happening earlier than we thought. And just to help you a bit as well in terms of building blocks for 2025, we do expect to have a solid top line growth again. We will have some positive development in terms of gross margin as a consequence of a positive mix. We do expect to be around flat in terms of R and D spend and with a tight control of SG and A.

Speaker 3

So all of it is really giving us comfort on the outlook that we have provided before for 2025.

Speaker 2

Thank you, Francois. Hooman, we'll leave it to you to bring us home on TollIBRETA.

Speaker 4

Yes. Thanks for the question. The answer is pretty straightforward. I'd be a little more nuanced insofar as the pathophysiology of secondary progressive disease is clearly immunological in origin, existing therapies, albeit not well used, very focused on the immune response. And remember, we believe tolebrutinib differentiated not only through blood brain barrier permeability, but its effect on the profile of kinases that hit and importantly, the potency on those kinases.

Speaker 4

So bottom line is we believe it's a great drug working on target in an appropriate indication.

Speaker 2

Okay. Well, we'll get the data soon enough and we'll find out. Okay. Well, thanks for that. Last question, Pete.

Speaker 2

Our strong business momentum continued in the 2nd quarter. We did have a double digit sales growth at CR. We continue to execute on our pharma launches. We kept advancing our pipeline of new medicines. We upgraded our 2024 EPS guidance.

Speaker 2

Thank you for connecting. We know it's a busy day for you. We've tried to keep it short out of respect. We We look forward to connecting with many of you on Monday Tuesday of next week. Okay.

Speaker 2

Thank you.

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Earnings Conference Call
Sanofi Q2 2024
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