Sanofi (SAN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Sanofi conference call on the expansion of their collaboration with Translate Bio to develop a COVID-19 vaccine. I would now like to turn the call over to Felix Lauscher from Sanofi Investor Relations. Please go ahead, sir.

Thank you. Good morning, and good afternoon to everyone on the call. We hope everyone is well. Thank you for joining us to review the details of this important new initiative against the coronavirus. As usual, you can find the slides to this call on the Investors page of our website at sanofi.com. Moving to Slide 2. I would like to remind you that information presented in this call contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F document on file with the SEC and also our Document de Référence for a description of these risk factors. With that, please advance to Slide #3. Our speaker today is David Loew, Executive Vice President of our Vaccines GBU, Sanofi Pasteur. David will start by discussing Sanofi's public health response to COVID-19. He will then provide context and detail on the expansion of our collaboration with Translate Bio to develop an mRNA-based vaccine against COVID-19. We will close with a Q&A session, where we will be joined by Ron Renaud, Chief Executive Officer of Translate Bio; and also John Shiver, Sanofi Pasteur's Senior Vice President of R&D. Please note that we will not be addressing wider questions on the impact of COVID-19 on the current business or the first quarter, and we would like to ask you to focus only on the vaccines programs we have underway. With that, I'd like to turn the call over to David.

Thank you, Felix. Today's announcement is an important element in Sanofi's multipronged approach to combating the COVID-19 pandemic. Our company has a long-standing history of improving public health, including more than 120 years discovering, developing and manufacturing vaccines. Today, Sanofi Pasteur is among the top 4 global suppliers of vaccines and brings in significant large-scale production experience, which is very relevant in a pandemic situation. In times of public health crisis, we believe collaboration is critical, and public-private partnerships are of vital importance. Sanofi has worked with BARDA for 15 years, especially on pandemic influenza preparedness. We believe it's our duty to answer the call to action, where we have the capabilities that can truly make a difference. And this was never more true than with the COVID-19 pandemic, which is undoubtedly the largest global public health threat since the Spanish flu pandemic a century ago. This slide sets out our unique portfolio of approaches to address the threat of COVID-19. In terms of vaccines, we have an agreement in place with BARDA to progress a recombinant DNA vaccine that arose from our response to the SARS pandemic in 2003. I remind you that SARS is a member of the coronavirus family and, like COVID-19, is capable of causing acute respiratory distress. By utilizing the same recombinant technology used for our Flublok influenza vaccine, we were able to develop an advanced preclinical vaccine candidate. This has not progressed further as the SARS pandemic was thankfully very short-lived. However, we estimate that with this platform, we will have a vaccine candidate available for in vitro testing in the summer, and our goal is to have a vaccine on the market in 12 to 18 months from now. Today's announcement doubles up our approach in vaccines through a messenger RNA-based approach. By employing 2 different platforms, we believe we will have a greater chance of success in achieving our goal of developing an efficacious and safe vaccine. Outside of vaccines, Sanofi has 2 potential therapeutic approaches that are being explored for patients already infected with the virus. The first is our anti-IL-6 antibody Kevzara, which is currently approved for the treatment of rheumatoid arthritis. Through its anti-inflammatory mechanism of action, Kevzara may be effective at blocking the cytokine storm in the lungs and resulting mortality in the most severe patients with COVID-19. You're probably aware that there are reports from China of significant symptom improvement in some patients with another IL-6 antibody. And so together with our partner, Regeneron, we have this month, initiated the Phase II/III program evaluating Kevzara in patients hospitalized in the United States with COVID-19. And we expect to rapidly initiate trials outside the United States, including areas most affected by the pandemic, such as Italy. The second potential approach is with an oral small molecule, hydroxychloroquine, which Sanofi supplies under the brand name Plaquenil. This drug is indicated mainly in rheumatoid arthritis and dermatologic diseases and in some countries also indicated for malaria. Again, there is some data in this case coming out of France as well as China, suggestive of potential benefit in patients. Today, however, there is not yet sufficient clinical evidence to draw any conclusions over the clinical efficacy or safety of the drug for COVID-19. Further analysis and more robust and larger clinical studies are required. Sanofi is designing 2 studies to test efficacy and safety of Plaquenil in COVID-19 patients, and we're also supporting the WHO international study as well as investigator-initiated studies. While I have mentioned these pharmaceutical programs for completeness, I would remind you that I'm responsible for the vaccines global business unit, and so I'm not the appropriate person to ask about those potential medicines in our closing Q&A. Moving to Slide 5. I want to focus on how our expanded agreement with Translate Bio broadens our capabilities. The upper part of the graphic summarizes the cell-based technology we're employing in our BARDA program on the repurposed SARS vaccine candidates. The advantage of this recombinant approach are that the technology is already licensed through our marketed vaccine Flublok, and we have a great deal of safety experience here as well as existing large-scale manufacturing capacity. The lower part of the graphic illustrates the Translate Bio messenger RNA approach. The benefits are the different mechanism of action, which allows for the protein antigen to be generated in the cells of the vaccines, the addition of manufacturing capacity that can be scaled up very quickly if needed and the fact it builds on our existing collaboration and will benefit from R&D synergies with our other vaccine candidates. Consequently, through the expansion of our collaboration with Translate Bio, we believe we could quickly assess multiple candidates in order to progress a potential COVID-19 vaccine, and we could scale up manufacturing in a flexible way to meet future demands for pandemic response. And I will elaborate on the last point just now. On Slide 6, let me give a little bit more background on our existing collaboration with Translate Bio and where we stand on manufacturing. The COVID-19 messenger RNA vaccine collaboration builds on the ongoing collaboration established in 2018 for the development of novel messenger RNA vaccines for 5 infectious disease targets. We have seen encouraging preclinical data generated on the current collaboration and significant progress in advancing the vaccine technology. The lead messenger RNA and lipid nanoparticle vaccine candidates were tested across multiple infectious disease targets with comprehensive in vivo studies complete. Very importantly, and I really want to stress this point, on the manufacturing side, large-scale process development is underway for messenger RNA and lipid nanoparticles with an opportunity to scale up to commercial volumes. And let me provide a bit more explanation to this point. Translate Bio has, in fact, invested over a decade on building manufacturing capabilities to support repeat dosing to treat chronic pulmonary disease, so cystic fibrosis, which requires large quantities of inhaled messenger RNA. Translate Bio is already in the clinic in patients with cystic fibrosis with the first inhaled messenger RNA therapeutic and is, therefore, well positioned in terms of manufacturing scale, which we believe is a key differentiator and a critical capability to meet the needs of a pandemic. Now Sanofi will contribute its expertise and development of the vaccine. Sanofi has a global research and development organization and has executed trials in over 60 countries. With respect to the specific projects, Sanofi will be able to contribute the knowledge gains on assays, nonclinical and clinical development for SARS-CoV-2 development through its work on the recombinant DNA protein-based candidates. Leveraging this expertise will create synergies and accelerate the program. Furthermore, we leverage our existing partnership with health agencies. So we believe this collaboration will be very productive for everyone. Moving to Slide 7. Given the success of our collaboration and the encouraging preclinical data on multiple infectious disease targets, we're today expanding our agreement to include COVID-19 as a sixth target. Both companies see this as an exciting opportunity to leverage Sanofi's deep expertise in vaccines development and manufacturing and our external networks together with Translate Bio's leading-edge messenger RNA technology. The expansion of the agreement will also have the advantage of accelerating the messenger RNA platform for our other targets. In terms of the financials, there is no upfront payment involved. For pandemic COVID-19, there will be no milestones, but royalties will be negotiated with a cap in the high single-digit to low teens percentage range. For nonpandemic usage, the milestones and royalties from the existing agreement will apply. The 2 companies will additionally explore the possibility of a public-private partnership to assist in funding the development program. So to conclude, I'm proud that Sanofi is once again able to demonstrate and build on its commitment to global public health. And together with Translate Bio, we have a great opportunity to bring to market a vaccine to manage the biggest global health scourge in a century. With that, I would like to welcome Ron from Translate Bio; my R&D colleague, John Shiver, to join me. Over to you, Felix, to start the question and answers. Felix?

Yes. Thank you very much, David. We will now open the call to questions, if any. As a reminder, we would like to ask you to limit your questions to 2 each. We would also respectfully ask you to keep your questions to the subject matter of this call. To repeat, we will not be answering questions on the impact of COVID on the business of first quarter. We would ask you to focus only on the vaccines programs or any questions that are related to them. Operator?

[Operator Instructions] So our first question is from the line of Michael Leacock.

I have one question. I think the dose that you're using for the cystic fibrosis product is in the sort of 8- to 25-milligram range. Clearly, you'll need a lot less for the vaccine. Would you be able to give us some idea of the scale? Would it be a few micrograms of mRNA needed per person?

Ron, you want to elaborate on this one? I think you're on.

Sure. Yes, thank you for the question. I think it's probably, at this point, a little too soon to determine what the doses that we're going to ultimately be using in the clinic. That being said, if we look at some similar programs using messenger RNA as a vaccine, clearly, with the scale-up that we are anticipating and being able to accommodate at least 250-gram batches per month, we believe that the capacity will allow us to do somewhere in the order of hundreds of millions of doses. And so I think the manufacturing know-how that we have in place will be significant.

Next question is from the line of Wimal Kapadia.

Wimal Kapadia from Bernstein. I guess I just wanted to get your thoughts on how exactly the platform is differentiated versus peers. I really struggle when I can think of CureVac, Moderna, BioNTech and yourselves. Now we've seen some of these companies partner with some of the larger vaccines player. But just to get some sense of the differentiation here and what makes this platform in particular special. And then I guess my second question is just more on the -- more broader topic of regulatory hurdles in vaccines. So based on everything you've seen and heard for the past decades is that vaccine manufacturing is very difficult, the regulatory hurdles are very, very high. So when I think about the time lines that are being talked about for COVID-19 vaccine, how should we think about how the government and the regulators are going to think about approving these products? So when I think about safety data, how much safety data and how many patients is justifiable to get why they use the vaccine? So just your thoughts there would be great.

Thank you, Wimal. So what is so special? I think it's fair to say that other messenger RNA platforms have also made good progress with clinical data on the vaccine side. However, what Ron just said, Translate Bio has more than a decade of investment and know-how focused on manufacturing processes for the platform that have positioned us very well in terms of manufacturing scale. And so you have heard, for example, Moderna announced that they can produce 10 million doses, perhaps they can scale up to a certain degree, but we have not heard more on this. And you have just heard Ron elaborate in saying like we believe we can get to hundreds of millions of doses. That's a key differentiation in a pandemic. Because you have like 7 billion people that in theory need to get vaccinated. So you need hundreds and hundreds of millions of doses if we want to go and get a good coverage around the world. So that's absolutely key. And perhaps on the regulatory side, John, do you want to elaborate on this? And Ron, feel free also because we all have meetings with regulators.

Yes, of course. So obviously, with the importance of this coronavirus outbreak, it's important that the dialogue with the regulatory agencies is critical. And the agencies are showing great willingness to engage in early dialogue and answer question, get facilitated reviews to the proposals for toxicity studies, preclinical package and what's required to go into the clinic. So this is certainly helping to accelerate everything. It helps explain why vaccines are starting to move rapidly into people. In terms of the amount of safety data required, obviously, vaccines have to be proven to be both safe and efficacious. And however, the amount of data that's going to be required to show that the vaccine is working will actually be plenty sufficient to show the safety as well. So the 2 go together, and so I think all these things collectively are helping to drive these candidates into the clinic as you're seeing happening. And I think it gives the likelihood if the outbreak persists of being able to get much earlier licensure of whatever candidates work much sooner than it has been typical with vaccine.

Yes, this is Ron. I would echo what John said. I think we're also in some unprecedented times here. And we know that the regulatory authorities globally, the European Medicines Agency, the FDA, are all looking at how to expedite vaccines here but also are stressing the importance of risk mitigation strategies. So I think in some cases, where it's taking us a little bit longer to evaluate some of these things, I think the guidelines are changing almost on a day-to-day basis to be able to accommodate a much more rapid development of a COVID-19 vaccine. So I think looking at vaccine constructs, looking at immune responses, looking at preclinical data is all going to be important. So as much that you can bring to the table by the time you start, I think, will help speed things along. And that is what's going to set this, I think, apart from nonpandemic vaccine development.

Next question is from the line of Keyur Parekh -- yes, sir, it's from the line of Keyur Parekh.

I hope you guys can hear me okay. Two questions, and apologies if I missed this already. But can you give us some more details around the potential time lines for the vaccine and kind of how we should think about the next steps? So I believe Moderna have been talking about their vaccine being available for the high-risk population of health care workers potentially in the fall of 2020 and for the broader population in 2021. So would be keen to hear how you guys think where you are from a time line perspective relative to that. That's question number one. And then question number two, would be great to hear your level of confidence kind of on the vaccine itself based on the data you've been able to generate in-house so far.

Thank you. So your question can include the 2 candidates, so the recombinant one on the baculovirus and the messenger RNA one. So let me start with the recombinant one. What we have communicated before was that we think we can go into the clinic in summer -- sorry, in animals into -- in summer and into the clinic in autumn, and so probably have vaccine for the larger public available in 12 to 18 months from now. On the messenger RNA, it will take a little bit more time, so it's going to be in the clinic towards the end of the year and probably the end -- summer end of 2021 but in large-scale availability. So that depends, of course, also what authorities are going to request from us, et cetera. So it's still very early times. It's a bit speculative. You need to keep that in mind. But we see that regulatory authorities are really trying to accelerate providing meetings to the industry, having open discussions, et cetera. So I think we see a very positive attitude of the large regulatory bodies. And then in terms of confidence, John, do you want to elaborate on this one? And Ron? John, do you want to start on the recombinant?

Sure. So we have a lot of experience with the recombinant protein approach that we've already started at Sanofi in collaboration with BARDA. And this is because it's based upon a very well-understood and well-developed technology, the same that's used for our vaccine Flublok, which is the only recombinant protein vaccine for flu licensed anywhere in the world. And so based upon that knowledge and early work that was done with that technology to produce an early SARS candidate in the early 2000s, we can move very quickly to a process and manufacturing capability of the recombinant protein candidate in the time frame that David just summarized as well as the confidence that we can produce at very high levels of -- into the hundreds of millions of doses actually based upon our existing infrastructure to produce flu vaccine, and very importantly, without jeopardizing the flu vaccine supply. So that's very critical because flu is obviously a critically important disease as well. And we need to and we'll deliver on that supply also. Ron, you might want to answer the mRNA part?

Sure. With regard to the differences, I think first and foremost, I think we would all agree that this is certainly not a competition. And while Moderna is -- has moved out in advance of other mRNA efforts, we've also learned a lot about the virus since they've started. And as this has continued to evolve, I think that has educated our thinking about our approach using messenger RNA and the flexibility of the platform. And so other mRNA platforms have made good progress with clinical data on the vaccine side. But as David mentioned in his remarks, we -- in addition to the messenger RNA itself, we've got more than a decade of investment and know-how on the manufacturing process. And so I think having multiple groups bring as many potential solutions to bear on this is going to be important. But also having the scale-up, having the manufacturing process for the platform has us very well positioned in terms of being able to provide this for as many people globally as possible.

Next question is from the line of Peter Welford from Jefferies.

I've got 2 quite broad questions. Firstly, one, just on the differences between the 2 vaccines. I guess I'm just trying to understand what the potential advantages and disadvantages of the 2 approaches are. I wonder in particular if, first, you could comment on the risks of antibody enhancement with the 2 approaches, I think, as being commented as a potential risk of rushing vaccines, if you like. And secondly as well, just with regards to the recombinant DNA vaccine. I think you mentioned the need for adjuvants with that approach. Is your supply and manufacturing of the adjuvant likely to prove a limitation? Or have you got sufficient of that to meet hundreds of millions of demand? And then the second question, just on the platforms, particularly the mRNA platform. With that, is it possible to achieve a, I guess, platform approval, if you like? I guess I'm thinking if coronavirus '19 becomes coronavirus '20 next year or '21, is this approach -- have you discussed with regulators the viability of getting approval for the platform approach and then being able to apply that in future pandemics? Or would this be very much vaccine-by-vaccine approach?

Thanks, Peter. I counted 3 questions, in fact. So -- okay. So the first one on difference in -- between the 2 molecules, notably on your question on ADEs. John, do you want to start?

Sure. Well, let me take, first of all, critical difference in the 2 platforms. In the case of recombinant DNA protein vaccine that Sanofi is already working on, you actually produce the antigen of the vaccine in a bioreactor, and we are making a form that closely mimics that on the service of the virus. Now there's a good understanding of what that structure is because there's actually a protein structure for it. So we're producing that antigen, and so -- and that's what is actually introduced into the vaccinee. Whereas with the mRNA, it's actually the nucleotide information that encodes the viral antigen. And so you inject the RNA. And in the body, the antigen is produced and should make also the same structure of the protein antigen that we're making the vaccine against. So 2 very different mechanisms. They both potentially could achieve the same goal. But again, because we don't know exactly what's going to be required for a successful vaccine, this is why it's good to have to so-called more shots on goal to make sure that we're enabling success. Now in the course of our preclinical studies with both approaches, we will do experiments to make sure that we make functional antibody and immune responses that can neutralize the virus and show that the antibodies are directed towards the very native structures of the viral antigen on the surface of the virus. And these things are actually -- are the things that you do to build the strength of the case that the vaccines are not likely to do harm. We will assess that in animals also, looking and talking to partners right now how to obtain those tests. But we think that the likelihood of either of these technologies, of having the likelihood of enhancing disease is quite low based upon the attribution that I had summarized to you.

And then on your next question, Peter, on the adjuvant. Indeed, we need an adjuvant for the recombinant platform. We shared this analysis. We'll have an internal adjuvant, the AFO3 that we are developing together with this recombinant. In order not to run into a bottleneck situation for the adjuvant, we are indeed having discussions now with other producers. We are advancing those discussions, but we are not ready yet to announce something. So you might hear in the coming days or weeks or so. And then on the platform approval, yes, Ron?

Yes, I was just going to say with regard to the seasonality, that is the strength of the messenger RNA platform, in that once the sequence is identified, we can move the vaccine very quickly. In fact, from the time of sequence identification to actually generating antibodies and in vivo testing, it's -- that time line is measured in single-digit number of weeks. And so in terms of the ability to potentially have this be a seasonal-type situation, if this does occur, I think is one of the strengths of the messenger RNA platform.

Next question is from the line of Marietta Miemietz from Primavenue.

And apologies, I had some technical problems, so I apologize if my questions were asked. The first question is on the different viral strains and mutations. I understand there's at least 2 different strains, and the viruses are mutating quite quickly. So how do you actually address that in vaccines development? And what sort of coverage ratios would you expect? I mean, we've had situations where the coverage ratios could be quite low for the flu, and it seems that this virus mutates even faster. And then just following up on the earlier question about sort of the platform approach. I mean realistically, I mean based on everything we know about the virus and the science, so irrespective of your ability to deliver, would you ultimately expect this to become an annual opportunity with universal recommendations, much like the flu shot? Or is the expectation more that, okay, once this pandemic subsides, it might be a couple of years before people need another vaccine and it might just be useful in specific vulnerable groups, especially if the coverage ratios are not high? So just to help us a bit with our modeling there would be very helpful.

So on the first one, I will defer that to John on the viral strains and the mutations.

Yes. So a bit of virology here first. It's true that the RNA viruses, and coronaviruses in general are RNA viruses, do have a mutation rate. However, the best data to date, and this is true for coronaviruses in general and this specific COVID-19 causing virus, that the mutation rate does not generally produce different strains in terms of antibody coverage, not like flu. And so the mutations that are accumulating right now that have been observed with the COVID-19 causing virus are consistent with the projection that it actually has a slower mutation rate in general to flu, maybe 3 times less. Obviously, the data are young and there's a lot of work to be done, but the emerging data do support that and is consistent with what we know about coronavirus virology. So based upon the virus classes, we would not expect this coronavirus to change in a seasonal basis like flu does, necessitating updating the vaccine on a regular basis. If it were observed to happen, however, then -- and necessitate changing the antigen, both technologies certainly are capable of being able to make the transition to a variant of the coronavirus very rapidly. And with the protein sciences-based baculo technology we use for our Flublok vaccine, that is something we do on an annual basis as flu strains emerge, and the mRNA technology should afford the same ability.

And on your second question, is that going to become a platform for an annual seasonal vaccine. What we have done is we have a lot of epidemiologists, obviously, in-house, but we also consult a lot with external epidemiologists, and there are many publications on this. We expect with a high likelihood at the minimum a second wave probably hitting us in winter times. That's particularly important because we need to prepare with vaccination, especially in higher-risk population on vaccines, for example, like pneumococcal or flu or pertussis, et cetera. So that's a short term what can be done. And then longer term, we expect that there might be a third or fourth wave or it could become seasonal. So in terms of how we think about it commercially, I think if it would be a short-lived phenomena, like SARS or MERS, which we think is unlikely, I think the governments would still want to buy pandemic stock because you're not really sure what's going to happen to this situation. And this is what actually happens today with flu pandemic stocks. We are producing each year, almost, some pandemic flu that some of the governments are buying and they're putting it into the stock. So really, it's hard to predict right now, and I understand for you guys it's difficult to model, for us as well. But what we do know is that we believe there is going to be a high demand.

Next question is from the line of Richard Parkes from Deutsche Bank.

Hopefully, you can hear me okay. Just got a couple out for you. Firstly, I just wondered if you could talk specifically about the challenges to development to coronaviruses to vaccine development. And actually, there's a vaccine available to the current coronaviruses circulating. So maybe you could just talk about your confidence that it is something that's achievable. And then secondly -- and excuse me if you covered this earlier on in the presentation, but I'm not an expert in any way on mRNA-based vaccines, and obviously, there isn't an approved mRNA-based vaccine. So could you just talk broadly about your confidence in that platform and maybe what the uncertainties are that remain over development of mRNA-based vaccines?

So let's start with your first question, the challenges in development and is it achievable. So since we have the 2 approaches, I would ask John to elaborate on the recombinant and Ron on the messenger RNA. And then the second question on the -- what's our confidence on the platform itself on the messenger RNA, I would ask Ron to elaborate that. So John, do you want to start?

Yes. Well, first of all, I want to state that, although there are several coronavirus family members that are known are human pathogens, they cause cough and cold and don't have the sort of severe disease that the COVID-19 causing coronavirus has. And to date, there has not been a vaccine tested or made and tested for efficacy against the coronavirus for that reason. However, we do know that coronavirus infection by a particular strain can produce protection against subsequent infections. And this is observed in animal models, and human data support that also. That's a very important observation for having some confidence that we can make an effective vaccine. Second, we know the most important part of the virus to focus on for the vaccine. That's the spike protein, so-called S-protein. That has been the focus of the vaccine efforts to date, and importantly, using the guidance of the known structure of that protein, as I said earlier, to build the recombinant protein and for the including antigen for the mRNA. So I think that, again, because of that -- knowing what to focus on, having a technology and the baculovirus recombinant system to be able to produce protein that should look like the virus antigen, as we know, it has done for other viruses that I do think that this is a very reasonable approach to have success.

And I think from the messenger RNA side, our confidence comes from the fact that both teams, the Translate Bio and the Sanofi Pasteur teams, have already generated encouraging preclinical data across multiple infectious disease targets as part of our original collaboration. So I think that, putting these teams and leveraging the strength of that collaboration, gives us a significant amount of confidence in going after these coronavirus targets or these spike proteins, as John mentioned. And again, I would just highlight, additionally, is having the vaccine is one thing and being able to make the messenger RNA is one thing, but being able to scale it up and have a supply that can meet the demand of many hundreds of millions of doses is critical, and our platform is well suited for that. So I think it's confidence in both the messenger RNA part of it, but also as well as the manufacturing scale-up.

Okay. So I think that concludes our discussion today. Thank you very much for having joined. Clearly, it's an unprecedented situation. As I said, we -- I think mankind has lived through something like this, the last time 100 years ago during the Spanish flu. We are all very, very significantly affected, and we truly hope we can find treatments and also vaccine solutions very fast. It's an important moment for everybody to work on this together. And I also hope you and your families are okay, and I wish you well. Thank you very much.

So that does conclude our conference for today. Thank you all for participating. You may all disconnect.

Thank you.