Sanofi's pipeline revival ignited by respiratory win for AstraZeneca RSV venture

Sanofi's pipeline of experimental medicines was boosted by positive late-stage results for nirsevimab, a single-dose respiratory medicine co-developed with AstraZeneca PLC to tackle a leading cause of infant hospitalization.

Paris-based Sanofi is competing with companies including Pfizer Inc. and GlaxoSmithKline PLC to address respiratory syncytial virus, or RSV, a highly contagious virus that can be fatal in the very young and for which only Synagis, a monthly injectable medicine developed by AstraZeneca, is approved. A single dose of nirsevimab would offer the advantage of covering the whole RSV season and widen the eligible patient population, according to UBS analyst Laura Sutcliffe.

While UBS says the drug's economics are not "game-changing," the promising results suggest that Sanofi's pipeline is turning a corner after several years of being perceived as lackluster by investors. But with much of its research and development still in the early stages, analysts, including HSBC's Julie Mead, are not yet fully convinced of the transformative and commercial rationale for several programs, including oral breast cancer medicine amcenestrant and venglustat for rare diseases.

"Sanofi continues to go 'all in' on its pipeline reinvigoration strategy, focusing on speciality care," said Mead, who rates the stock a 'hold.' "Dupixent is clearly the jewel in the crown (for now) and is in phase III trials for eight additional indications (excluding pediatric expansions), and remains the core asset behind an R&D focus on type II IL4/IL13-driven inflammatory disease," the analyst wrote in a research report following Sanofi's full-year results in February.

Refocus on cancer

Sanofi CEO Paul Hudson Source: Sanofi

Sanofi CEO Paul Hudson has refocused the world's third-largest vaccine-maker on immunology, with Dupixent as the cornerstone of this strategy thanks to multiple new indications planned in order to reach his €10 billion annual sales target. The company's most recent deal, licensing U.K. drug developer C4x Discovery Limited's preclinical oral IL-17A inhibitor program for inflammatory disease, is worth up to €414 million. The IL-17 family of cytokines are implicated in many autoimmune diseases, including psoriasis, psoriatic arthritis and ankylosing spondylitis, and the only treatments currently available are injectable monoclonal antibodies.

The CEO has also backed oncology and pushed into rare disease, leaving behind Sanofi's rich history of research into diabetes and cardiovascular disease following bolt-on acquisitions of companies including Synthorx Inc., Ablynx NV, Kymab Ltd., Kiadis Pharma NV and Principia Biopharma Inc. to bolster the early-stage pipeline and add new technologies. Of note on the distant horizon are ambitions in the mRNA vaccine area and in gene therapies — a therapeutic focus pioneered at Basel, Switzerland-based Novartis AG, where Hudson headed up the pharmaceuticals business before taking up his role at Sanofi.

More immediately, Sanofi is making its consumer business "stand-alone" in the next 18-24 months. Although no decision has been made to spin this unit off, analysts ascribe a valuation of about €25 billion should the company decide to do so. The Paris-based group is also working on two COVID-19 vaccines and has been expanding vaccine manufacturing capacity as well as assisting Moderna Inc., Johnson & Johnson and BioNTech SE in manufacturing their vaccines during the pandemic.

At its first-quarter results on April 28, Jefferies analyst Peter Welford will be looking for pharmaceutical sales of €6.31 billion. After gaining inclusion on China's National Reimbursement Drug List for adult atopic dermatitis from March, Dupixent trends in the country will be a notable focus, and Welford estimates sales of €1.01 billion despite COVID-19 curbing new patient demand, particularly in dermatology. UBS has penciled in Dupixent sales of €1.04 billion, with IQVIA scripts suggesting volume growth of more than 50% year on year.

SG Cowen is looking for first-quarter EPS of €1.40 — a year-on-year fall of 9% — compared with consensus of €1.38, with total sales forecast at €8.75 billion against consensus of €8.50 billion.

Jefferies' Welford was notably more upbeat on Sanofi than some analysts and said he believes it is the European large-cap pharma with the most compelling valuation. The vaccines business is underappreciated and an intriguing optionality from the pipeline is being overlooked, Welford added.

"Exciting late-stage pipeline assets that are perhaps overlooked, in our view, include 'pipeline in a product' venglustat for rare diseases, amcenestrant for breast cancer, rilzabrutinib for pemphigus, tusamitamab ravtansine for lung cancer, and nirsevimab for RSV prophylaxis," said Welford, who rates Sanofi a 'buy.'