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Sanofi Unveils Growth Strategy, Ends Diabetes & CV Research

Zacks Equity Research

France-based pharma giant,Sanofi SNY announced a new strategic framework at its Capital Markets Dayin a bid to drive innovation and growth at the company under the leadership of Paul Hudson. The company appointed Hudson as its new chief executive officer in September. Hudson had previously led Swiss pharma giant, Novartis NVS.

Sanofi announced plans to restructure the company‘s operations under three core global business units – Specialty Care (immunology, rare diseases, rare blood disorders, neurology and oncology), Vaccines and General Medicines (diabetes, cardiovascular, and established products). The company’s Consumer Healthcare will operate as a standalone business unit. This move will likely help the company to unlock shareholders’ value by forming a joint venture or conducting an outright sale among other options for the Consumer Healthcare unit.

Importantly, the company announced that it is discontinuing all its research activities in diabetes and cardiovascular (“CV”) area. Sanofi enjoyed leadership positions in these two franchises but patent losses in recent years dented sales. Sales at Sanofi’s Diabetes and Cardiovascular franchises declined 7.9% and 4.6%, respectively, in the first nine months of 2019. The company plans to discontinue research in diabetes and CV areas, and does not plan to launch late-stage type II diabetes candidate, efpeglenatide, to help it focus on high growth franchises.

In 2019, sales at the Specialty Care franchises grew the most with Immunology franchise leading the growth. Sanofi stated that it will focus on further development of key immunology drug, Dupixent. Please note that the company has collaboration with Regeneron Pharmaceuticals REGN for the development and commercialization of Dupixent. The drug is now annualizing at around €2 billion in sales after just around two years on the market. The frequent label expansion approvals are driving the drug’s sales higher with the positive trend expected to continue in the future quarters.

The company expects peak sales of Dupixent to cross €10 billion. It expects sales of its Vaccines franchise to grow at mid-to-high single-digit CAGR from 2018 to 2025. Sanofi possesses one of the world’s leading vaccine operations.

The company has also prioritized six investigational therapies, including fitusiran, venglustat & nirsevimab, and expects these to be potentially practice changing therapies in areas of high unmet patient need. These pipeline candidates will cater to patients with hemophilia, breast cancer, multiple sclerosis and several rare diseases.

Along with these restructuring initiatives, Sanofi also announced a cost-saving plan, which is expected to generate €2 billion in savings. Sanofi expects business operating income margin to improve to 30% by 2022, which was 28.5% in the first nine months of 2019.

In a separate press release, Sanofi announced an acquisition offer for clinical-stage biotech, Synthorx, Inc. THOR, of $2.5 billion. The buyout will strengthen its Oncology pipeline with the addition of an immuno-oncology candidate, THOR-707.

Sanofi’s shares have gained 4.3% compared with the industry’s increase of 7.2%.

The company’s shares have witnessed muted growth in the past five years. Although the new strategic framework seems positive for the company, its impact will be clear only after a few quarters. The successful development of pipeline candidates followed by strong commercialization will be necessary to boost shareholders’ value.

Sanofi Price


Sanofi Price

Sanofi price | Sanofi Quote

Zacks Rank

Sanofi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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