Sanofi (SAN) Earnings Call Transcript
March 10, 2021
Earnings Call Speaker Segments
Sorry, we're a couple of minutes late. Things aren't working as well as we can get them to here. But I just want to say we're delighted to be hosting Sanofi today. And from the company, we have the CFO, Jean-Baptiste de Chatillon; and also Dietmar Berger, Head of -- Global Head of Development and CMO. So I will turn it over to you guys just to make a couple of brief opening remarks before we jump into the Q&A.
Yes. Thank you very much, Emily. Hello to all of you. Thank you very much for making time for us. We are ready to answer all your questions. As you know, in 2019 at the very end of 2019, we committed to you some actions, a plan, Play to Win, and we are delivering proof points one by one, and we'll be very happy to discuss the understanding you have about this journey. And we are quite happy to see that in 2020, we were able to deliver as we presented for the full year. But of course there are many details on things we are happy to share with you during this meeting. So don't hesitate asking all your questions. Dietmar?
Yes. Also thank you, Jean-Baptiste. Also welcome from my side. I want to just add that we're proud of the transformation that we're going through with Sanofi. I'm with the company since roughly 2 years now. We've definitely reshaped the portfolio. We've worked a lot from an R&D and development perspective to move forward medicines that can be transformational for patients. And we've announced the portfolio and really the highlights and priorities during the recent Capital Markets Day as well in some of our key areas, including immunology, oncology and some other specialty care areas we're focused on. So happy to take your questions as well.
Great. Yes. I'm hoping I can get enough questions to encompass everyone. But I guess I just wanted to kick it off with some big picture questions. One of the most common topics that we are discussing with investors is thinking about M&A. So I was just wondering probably [indiscernible] to you, if you could talk about just the company's overall approach to M&A? What are the factors that are most important in assessing whether a target is more or less attractive? And then sort of thoughts around willingness to do a deal that would perhaps be more transformational?
Okay. Yes, that's an important question. Let me maybe step back of where we are and what do we need as Sanofi today. We are blessed with some growth engines with Dupixent, with vaccine. And our priority is to refresh our pipeline and invest deep in science. And we are really making a huge exercise of reallocation of our cost base to really cut where it's not a priority, to fuel those growth engines on our pipeline. So that's our starting point. So we're not looking for sales. We are not looking for an Alexion play for instance, because we don't look for a financial bridge. We -- as Sanofi, we are strong enough financially. And I think the free cash flow generation we are now tracking to is a good sign of it. We have enough resources to really focus on what creates value for investors. And what in our vision is creating value for investors is going early in very specific places, where it makes sense within our TAs to build a TA where we could lead. I think a good example of it that we try to convey during our last Capital Market Day is what we do in immunology. And of course Dietmar would explain that better than I do, but it's typically what we do in M&A. Like building on the back of what we experienced on Dupi, going down to Kymab, which is the next-gen products. So we are looking long term. And in between, having a wealth of products, Phase I, Phase II, Phase III, which are really making sense to create value. So that's what we try to do. We don't need to make a big operation. And by the way, we have a very strong commitment to you all, which is to deliver on our BOI margin in 2022 to reach 30%. It means that we are always playing on the squeeze, making as many acquisitions we can to multiply the chances of value creation, but within this boundary. So that's quite clear.
Now that's an interesting point that you brought up Alexion, just because that's been an incoming question for us that that's something that you would have considered. But I mean are you prioritizing business development in any particular TA more than others across rare disease, immunology, oncology or more of an opportunistic approach would you say?
Yes. Maybe, Dietmar, you want to...
Yes, I can chime in here, right? We've spoken a lot about the transition from more of a primary care base now really into specialty care, and that is our focus area. And within specialty care, we've highlighted some key areas, including immunology obviously also at the last Capital Markets Day. Then obviously oncology, but also neuroscience and rare disease and rare blood disorders. These are the key areas we're active in. In those areas, as you know, we have our anchors. We're building around those anchors. There's very good examples of that, both in immunology with Dupixent as an anchor and a suite of molecules and principals we're now evaluating, but then also in oncology. And when you look at some of the recent acquisitions, you see that they bring in additional molecules in those areas, specifically also in oncology and immunology. But they also bring in a whole platforms of technologies and additional portfolio.
Okay. Great. And just on some of the targets introduced at the Capital Markets Day back in 2019, one question we get a lot is sort of why the Street -- the Street's pretty close to your forecast for the 2022 business operating income margin target, but is a little bit further below, I believe, on 2025. So in your view, what do you think the Street isn't appreciating just yet as you get out to 2025?
Always a difficult question, but I'll have a go at it, Dietmar. So first, I think part of the answer is what Dietmar just said, is that we are very focused. So the money we spend in R&D even if it looks, as a total company as a ratio to net sales, not so high, in fact since we have really moved all our sources behind specialty cares and vaccines, when you make the ratio on our net sales of specialty care and vaccines, we are really on the high end of the benchmark in terms of dedicating resources to this pipeline development. So that's the first piece, which is promising for the '25 onward. The second piece, I think and I see it is that Dupixent is still, slightly or significantly depending on the consensus, below what we think we can do. Maybe the point that we announced that it will become accretive in the second part of 2022 is also maybe understood -- not really understood. It's an incredible drug. And of course we are also looking to improve the COGs of this drug very significantly. We are looking at some step changes there. The third piece would be the vaccines. I guess it's because of the shadow of what happened with COVID-19 and everything that I think there is a misbelief that our guidance of mid- to high single digits stands, and it stands very strongly. We demonstrated in 2020, we will demonstrate it again in 2021 and until 2025. Because of course COVID-19 was never part of it. It's all about differentiated products, market expansion, launches. So we are quite confident. Consumer health, the fact that we would unlock the OTC switches is also something which is not recognized yet. And we will bring you up to speed progressively of the discussions with the FDA, of the progress we make. There are some very interesting pieces there, which could help unlocking it is the tech piece, which is improving the equation. FDA is now very very open to new ways of accelerating regulatory pathway from this point of view. General medicines, the stabilization we just announced I know some people are skeptical -- we need to demonstrate it, but we have in our hands enough to stabilize general medicine. In the end the gross margin, we are looking at an improvement, not in Q1 2021, but on the whole year of 2021 we will see some improvement on the gross margin. That's what I believe. That's what we are looking for. So all this trend is not fully baked in the models of investors. So I don't think anybody is missing really something, but it is our track record, and I fully understand it. And that's why we are committed. We have no impatience. We will deliver, and that's quarter by quarter.
No, that's very helpful. And so I guess since Dupixent is going to be such a big driver, that's a good segue to ask a few questions there. So perhaps if you could just talk about which of the follow-on indications, whether the EoE or any of the others, are you most excited about? And then also kind of how you see the split, the intra-indication split funding between the larger ones, such as AV and asthma kind of in the years ahead?
Yes, maybe I can give an initial go at this, right? For Dupixent, we have a broad development program, really going back to the biology of the drug. It's very well differentiated hitting IL-4 and IL-13. That's why we've also with the understanding of type 2 inflammation, we've started a broader development program. And the most exciting indications are obviously always the next ones that are coming. So you will see the chronic spontaneous urticaria, the CSU data in 2021. You will also see the prurigo nodularis data in 2021. You've seen the EoE, the eosinophilic esophagitis data in 2020 and I think those have a high probability of success and will overall add to the potential that we have with Dupixent. Obviously, moving forward, we will definitely work also to grow [ Dupix ] further looking into the penetration of the drug, looking into geographic expansion, looking to expansion into younger age groups for example in atopic dermatitis and asthma, which really adds to the overall potential.
Okay, great. And maybe just on those 2 indications, we've been getting a lot of questions just about the potential competitive threat to AD specifically posed by the JAK inhibitors and Rinvoq [indiscernible] of their recent data, and then also having just seen a more complete data set from tezepelumab and asthma. Perhaps if you could talk about whether you see those as encroaching on the Dupixent trajectory? Or if not, why not?
Yes. Well, I do not see them encroach on the trajectory, to use those words. It's interesting, it's all going back again to the biology. It's going back to the understanding of type 2 inflammation really to the role that both IL-4 and IL-13 play. And Dupixent is a unique molecule in addressing those key drivers. And when you look at some of the other molecules, whether it's an AD or an asthma, they're just from a biology perspective, not targeting with the same depth when it comes to the biology of the underlying disease. Let's start with atopic dermatitis. Really what people are looking for is rapid and sustained efficacy and then very good long-term safety. And Dupixent has shown that and has shown that in spades. And when you look for example to the comparison versus some of the JAK inhibitors like Rinvoq that you mentioned, Dupixent is definitely showing strong efficacy when you look at the EASI 75 scores also in a direct head-to-head comparison. But then especially when you look at maintenance of that effect over time, you see that Dupixent has very strong efficacy. You also see that from a benefit/risk perspective when you look at the adverse events, Dupixent clearly has advantages when it comes to the immunosuppression, when it comes to some of the lab monitoring that's required for the JAK inhibitors, when you look at the black box warnings that are there for the different drugs. And when you see how Dupixent did during the COVID-19 pandemic and continues to do when you look at prescriptions, et cetera, we see that many people prefer Dupixent actually for that positive benefit/risk profile. Looking at the asthma space at the tezepelumab data, again I think the DUPIXENT data are very strong, specifically in the type 2 inflammation. There are some data in the low eosinophil range like the eosinophils below 150 where tezepelumab had some data, but even in that setting the benefit was not statistically significant. So overall also in asthma, I don't see a major impact of those data on what we can do with Dupixent and what we can offer to patients.
Okay. That's very helpful. And I guess the next I believe big kind of clinical catalysts that we're waiting for is the AMEERA-3 data and second third-line metastatic [ threat ]. So perhaps if you could just talk about your level of confidence there and what you're hoping to see in that data? And then also, we were just discussing this on our team that everybody -- the larger players at the third, all say that their third is the best in class. So perhaps you could just remind us why you believe that yours is likely to prove out to be that way.
Yes. So we're now talking about our third and amcenestrant and obviously the broader field of estrogen receptor, degradation in hormone receptor positive breast cancer. AMEERA-3 is our study in the second third-line setting in hormone receptor positive breast cancer. The study will read out this year. We're actually waiting for data this half year, but it's an event-driven study, so we'll have to see how the events are developing. What we're looking for in that study, that's a study in the second, third-line setting versus physician's choice. So you will see a mixture of aromatase inhibitor-treated patients and fulvestrant-treated patients in the control group. And we're really confidently going into that study. We're confidently looking forward to the outcome, and we're looking for definitely strong efficacy. The end point is progression-free survival. It's a superiority study and also confirmation of the excellent safety there that we've seen with amcenestrant at this point. You will see more data with amcenestrant at a scientific meeting during this half year. And that's some of the data that we got from our Phase I and Phase Ib studies. And that's also the data that gives us confidence for amcenestrant in the first-line metastatic setting for the combination with the CDK4/6 inhibitor. We've kicked off our study in that setting, our pivotal study in the first-line setting, November of last year after having seen the data basically just a month earlier. And that's based on the data that you see later this half year. And I'm mentioning that data set also because the key data, the key clinical data that we've presented so far have been at ASCO 2020. Going back to that, that data has shown what I consider excellent safety, but also very good efficacy, albeit on a smaller number of patients, right? And we were looking at clinical benefit rate there. We were looking at response rates there. And I think the efficacy and the safety we've seen there absolutely gives us a potential to be a best-in-class molecule. But then I'm even more encouraged by the data that you will see at a meeting during the first half of this year. Again, going to why is this a differentiated molecule, when you look at the backbones of the different SERDs that are out there from Sanofi, but then also from some of our competitors, they are actually different. So the underlying chemistry is different. And you would expect a different set of efficacy and also safety data. And this is what we see, right, with amcenestrant, we see excellent safety. We don't see any bradycardia. We don't see any hematologic adverse events or anything like that. So from a safety perspective, we clearly have the potential to be best in class. From an efficacy perspective, as I said I'm very encouraged by the data that you will see. We've kicked off our first-line study. We've got the second third-line study ongoing. We're preparing for a study in the adjuvant setting really to develop amcenestrant as a backbone, as an endocrine therapy backbone for patients with hormone receptor positive breast cancer. And then finally, we are ahead, with the second third-line study, we are ahead. And with the first-line study, I think we're pretty much with the same time lines as many of the competitors as well.
Okay. Great. And unfortunately, given the late start and I apologize for the issues there. I probably just have time for one more question, and perhaps just kind of a broad one on vaccines. I know you're expecting to potentially launch your COVID vaccines jointly with GSK in the fourth quarter. Maybe you could just update on whether you think there will still be commercial value kind of to being perhaps the [ fifth ] or whatever line player in the market there? And then also, when you expect those update on the efforts with Translate Bio?
So the -- from a, I will start and then obviously, Jean-Baptiste will also chime in. As you know, we've got these 2 approaches. One is the recombinant one that you mentioned. The other one is the mRNA one with Translate Bio. There's clearly, clearly a need for more vaccine approaches in -- during this pandemic, and we're really looking forward to doing our part. We were already doing our part as we're supporting some of the manufacturing for other vaccines, but we will bring forward our own vaccines. And as you know, we are in the clinical trials. We began the Phase II studies for the recombinant approach. We hope to go into Phase III in the second quarter of this year. Also for the mRNA study, we are on track to start the Phase I/II basically this month in March. When we come to market, there will still be millions and maybe even billions of doses needed around the world. Also when you look at the different mutations, we're also evaluating how can you address some of those mutations. We will also integrate that obviously into our development program and into our clinical studies. So we feel from a commercial perspective, there is definitely a key opportunity here, but also from a perspective of how can we have an impact on the pandemic. There's even a potential that you may need recurring vaccinations for different types of coronaviruses for different strains and different mutations that are emerging new variants. And with our technology that we have with the recombinant approach but then also then with the mRNA approach, we are very well positioned to also address the need for some type of recurring vaccinations. As we are doing for flu for example, that's a tried and true technology. And we will apply those technologies as they fit best to the emergence of the pandemic.
Dietmar, maybe just financially, it's clear that as far as COVID-19 is concerned, we discount any impact. We just always committed to keep it neutral. What we spend is financed, it's pre-financed, so no impact. If we can bring a product to the market, it will be there. But our main position right now is what can we do for the community. And that's why we are also manufacturing fill and finish for BioNTech vaccine or for J&J because that's we want to contribute to fight the pandemic.
Exactly, yes, yes.
On the future of the...
Yes.
Sorry. Go ahead, Emily.
No, I'm sorry. I didn't mean to interrupt you.
So I just wanted to add on this vaccine piece, it's quite interesting because we have clearly been a bit punished by the overshadow of what happened on COVID-19, as if it was something which could threaten the -- all equilibrium of our vaccine business unit. And as I said, it's not the case. We are going to deliver on our mid- to high single-digit growth. So it's a good understanding of where we stand is we own currently the standard of care, for instance, for flu. So can mRNA address flu? Well, if one company is well positioned to try and see if it's possible, it will be us as owner of the standard of care. Because it's going to be quite difficult to perform any study versus the standard of care in a very short period of time on a multi-balance. Might become a reality that it's a good way to address it, and we will participate. It will take a bit of time because the current standard of care, proven with clear efficacy studies, is Fluzone High-Dose of Sanofi worldwide, which the demand is growing very fast not just in the U.S. but worldwide. And we now are seeing some countries in Europe declaring, like Germany like declaring that Fluzone High-Dose is the standard of care for 65 years old and above. So this is a very interesting starting point. And we will look for mRNA as being a possibility to extend our portfolio of vaccines, and we will look at mRNA also beyond vaccines. So we will be an mRNA player, that's for sure. But it's the stronghold we have currently on flu vaccine is going to be a difficult one to take for someone else, because we are very strong into it. We have proven efficacy. We are the standard of care, and we will be also trying to disrupt ourselves with mRNA at the same time.
Great. Thank you so much. That was very comprehensive in the short amount of time we had. So thank you very much, and I hope you have a good time at the rest of the conference. Thank you.
Thank you very much.
Thank you, Emily.
Thank you.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete Sanofi transcript - plus 252,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to Sanofi earnings transcripts and 252,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.