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Here's Why Sanofi (SNY) is Outperforming Its Industry Of Late

Zacks Equity Research

Sanofi’s SNY shares have outperformed the industry this year so far. It has risen 7.1% in the said time frame against the industry’s decrease of 0.8%.

 

The company’s performance has been backed by quite a few positive developments on the regulatory and pipeline front mainly related to its new successful drug Dupixent, strong performance of its Specialty Care segment, as well as a decent earnings performance in the first half of the year.

Sanofi’s Specialty Care segment, particularly, is on a strong footing with recent FDA approval of new drugs Libtayo and Cablivi, and Dupixent for its second indication in asthma. Dupixent was approved for the asthma indication in the United States in October 2018 and in EU in May 2019. It had gained approval for the first indication — atopic dermatitis in adults — in 2017. Please note that Sanofi markets Dupixent in partnership with Regeneron REGN.

Dupixent generated sales of €825 million in the first half of 2019, up 175.3% year over year. Sales were driven by continued growth in atopic dermatitis indication and rapid uptake in new asthma indication.

Meanwhile, Dupixent was launched for adolescent atopic dermatitis and for chronic rhinosinusitis with nasal polyposis in the United States in mid-March and June, respectively. It was approved to treat adolescent atopic dermatitis in Europe last month. All these label expansions should drive sales of this key drug higher in the future quarters.

The performance of Sanofi’s Vaccines and Consumer Healthcare franchises has also improved of late.

Sanofi’s R&D pipeline is strong and has delivered important results with several positive data read-outs and the achievement of regulatory milestones this year.

Late-stage studies on key pipeline candidates, asthma candidate, REGN3500 and refractory multiple myeloma candidate, isatuximab, met primary endpoints.

This year’s new drug approvals include Libtayo for advanced cutaneous squamous cell carcinoma in the EU and Cablivi for a rare blood disorder called acquired thrombotic thrombocytopenic purpura in the United States. Key approvals for line extensions include the ones mentioned above for Dupixent and approvals to include cardiovascular outcomes data on the label of its PCSK9 inhibitor, Praluent in Europe and the United States.

Sanofi, which currently carries a Zacks Rank #2 (Buy), has its share of challenges like weak performance of the Diabetes unit, generic competition for many drugs and slower-than-expected uptake of core products like Praluent. However, we believe, continued strong performance of its Specialty Care unit mainly Dupixent, upcoming product launches, aggressive cost-cutting efforts and a promising late-stage pipeline should keep the stock afloat through the rest of the year.

Some other top-ranked large-cap pharma stocks include Merck MRK and Novartis NVS, both carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Merck have risen 11% this year so far. Earnings estimates for 2019 and 2020 have risen 3.8% and 1.9%, respectively over the past 60 days.

Novartis’ earnings estimates for 2019 have gone up 1.8% while that for 2020 have increased 1.1% over the past 30 days. Novartis stock has returned 15.9% so far in 2019.

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