Sanofi (SAN) Earnings Call Transcript & Summary

Good morning, good afternoon, and good evening, everybody. And thank you for joining us. My name is Keyur Parekh, and I cover Sanofi for Goldman Sachs. Bill, thank you so much for joining us. It's my pleasure to welcome Bill Sibold, who is Executive Vice President, Head of Sanofi Genzyme and also a member of the Executive Committee at Sanofi. Bill, once again, thank you so much for your time, and thank you for joining us. Before we move to kind of Q&A session, Bill, I don't know if you want to make a few introductory comments kind of on some of the recent kind of data sets you guys have presented, what are you seeing in the business? And then we can take it to Q&A from that.

Sure. That's great. Well thank you, Keyur, and thank you, everyone, for joining. It's a real pleasure to be here, though I certainly wish that we were all live in California. We've been making great progress in our Play to Win strategy at Sanofi. We continue to focus on growth, execute on our pipeline and to lead in innovation. And I'll also say that in a moment I'll just touch on some of the series of R&D events that we've been hosting. We've really adjusted to kind of the realities of the situation and some new ways of working. We've also been accelerating our efficiencies throughout the organization. And this -- we're in a new world, and we're reinventing how we work. And I would have to say that I'm really, really impressed what we've been able to do as a company with our employees around the world, which have really gone above and beyond in prioritizing our patients and focusing on the science, which is so important. Maybe a good point to remind you that we're in the middle of a series of R&D events. And as -- tomorrow, we're going to host our third of these virtual events, where we'll be talking about DUPIXENT R&D, it will be a virtual event, and we'll highlight really the potential and the confidence that we have in this brand and its unique biology in type 2 inflammatory diseases. So we'll be spending a lot of time kind of going through what really is the core as to why this is such a successful product now and will be in the future. We started the series of investor events with our BTK inhibitor, our brain-penetrant BTK inhibitor 168, this was in late April, with our Phase II data. And also, I can tell you a little bit, we had, last week our ASCO presentation where we -- we talked about our 4 anchor assets there. So today, we can cover all these various topics, invite everyone to come to our DUPIXENT R&D event tomorrow. And also final call-out is for our virtual R&D event, which is going to be June 23. So I'd like you all to come to that. And then our final call will be for nirsevimab, our RSV antibody. So with that, if you want to go to Q&A, I...

Of course, Bill, and thank you for those comments. I'm sure a lot of people are looking forward to those R&D events, so thank you for highlighting those. Let me just start off with the big picture of COVID-19. I think you touched a bit on this. But just how is COVID-19 impacting the Genzyme part of the business, a lot of what you do is about individual patients and delivering therapies to them, perhaps, in a nonhome setting. So just would love your thoughts on how you see COVID-19 impacting Sanofi more broadly, but also your business in particular? And what do you think are the learnings from this that you will take forward, even when things become much more normal?

Yes. No. Thank you. Look, I'm extremely impressed, as I've stated, just how the organization has stepped up, and it stepped up along a number of fronts. We have 5 programs that are towards COVID-19, 2 vaccines, 2 therapeutics and diagnostic, I can cover those in a minute. And I -- if you look at just our ability to maintain business continuity, we have 100% of manufacturing sites that are operational. When you get into a crisis like this, the first thing you want to make sure is that you can manufacture your medication and get your medication to patients. And we've had continuous access to medicines for our patients as well, as you mentioned, staying highly focused on those. Clearly, you have missed doses that occur just from the practicality of patients getting places. But overall, we've really maintained access. Our clinical trials have been largely maintained. It is dependent on where on the COVID curve each country is. But for the most part, we've managed through that. The field force has been fully digital, and that's the way we've been engaging with health care professionals. I think as you look towards where we go in the future with this, the learnings that we've had from this digital engagement are really here to stay. So I believe that there's been an acceleration of the use of digital and I don't think we're going to go back. And I don't think our customers are going to go back either. But the final piece, we've really been making sure that our employees are staying safe as well. And that's something which we've taken very seriously. Some of the changes that will take place, I think in the future, I don't think we're going to be traveling as much. And I can tell you, I certainly, like everyone I'm sure on this phone, is in kind of week 11 of no travel. And I think that we've learnt that we can get a lot done by staying in place. Obviously, I said the increased use of digital is important. And we have really taken a look at reinforcing our new procurement priorities. We've shortened our list of suppliers and offering them more volume, in which case they're going to hopefully -- or they will be offering us more favorable pricing. Just a couple of comments on the efforts that we have underway here. I mentioned we have 2 different vaccine approaches. Obviously, with Sanofi Pasteur, we have a long history in vaccines, which, I think, put us in a very good position as the pandemic broke out to think about the approach that we'd take. So we have -- the first is our baculovirus recombinant vaccine, which, this was -- this is the backbone of our Flublok vaccine, and this came from protein sciences. And we have -- the good news there is we have existing large-scale capacity, we think between 100 million and 600 million doses, and want to try to scale that up to over 1 billion in the next 12 months. We have a collaboration with BARDA on that. And we also announced our collaboration with GSK. Just from a timing perspective, that's going to be first-in-human study starting in Q4, and then we would have earliest approval in the second half of 2021. And kind of taking on our knowledge of the vaccine space, we knew we wanted to have another shot on goal as well. So we are in partnership with Translate Bio on their mRNA vaccine. And that's something that from a time line perspective, we believe first in human about the same for our recombinant approach, so Q4 2020, and then earliest approval in the second half of next year. And Translate had invested in capacity initially as part of their growth and has capacity for anywhere from 90 million to about 360 million doses for 2021. And then we're investigating ways to extend capacity there. So we've been really committed to this effort, and I think we've been really well set up to react to COVID-19 because we have not only the vaccines experience but we could look at some of our therapeutics to see if they might have utility to have an effect. KEVZARA is clearly one of those. And we moved quickly, got these things moving and into the clinic. And so actually, really quite excited about what the organization has done. And I think it's been -- actually, for me anyway, it's been a proud moment for all of us.

Just on one of the areas you touched upon was increased digitalization, would love to hear your thoughts on the commercial side of things. This is obviously being very different, the last 6 to 12 weeks. But how are you measuring the efficiency of your digital interactions? And as we go forward, what proportion of your interactions with health care professionals do you envisage being physical versus digital?

Yes. So look, I think that we will have, as I said, continued digital engagement. I think it will -- I don't think it's a replacement for some of the face-to-face, but it's certainly going to augment it. And in some cases, it will be a -- in some cases, it will be a replacement. And the reason why I say that is not all practices are going to come back in the same way that they were prior. We're seeing -- the biggest impact that we saw from a prescription perspective was you just had practices that weren't open. And when the practices isn't open and they hadn't shifted all the way to any kind of telemedicine, patients just weren't getting new prescriptions at that time. I think that the way we've been measuring it is really through the -- a lot of the traditional means, how many -- what's your frequency that you have with the physician. We look at, essentially, we can still measure share of voice and so forth. So it's a lot of the traditional metrics. I think what we're learning, and I think this is not just us as a company, but as an industry, is what's that balance of bringing the most value-added materials information to physicians and health care practitioners and to make sure that their time is not being wasted and is value-added. I think the barrier to entry, so to speak, because of the electronic medium and the use of Zoom and so forth, that's pretty easy. But you still have to have something interesting to talk about or people aren't going to talk with you. So we're going to incorporate it more. It's accelerated our plans a lot. I've been really impressed by some of the results that I've seen where it appears to be very effective in this new way of interacting. But also, I have to say, I think a lot of our customers, most of them, and our employees, are looking forward to getting back to actually having some kind of face-to-face where you can see the other person. And I think we've had a lot of requests for let's get back together as soon as doors open up.

Bill, I want to move the conversion to a bunch of your products that you're in charge of, but before a couple of more big picture questions for you. Obviously, Sanofi's decided to execute on its stated strategy of from a Regeneron perspective. Just help us think about what is the priority for the cash that you're getting from selling that stake? How should we think about your appetite for reinvesting it either organically or inorganically? Where is your focus? Small? Big? Indifferent to size? Just help us think of those things.

Okay. So let me just take a step back on our -- and talk just a little bit about our capital allocation priorities, and we talked about this in December at the Capital Markets Day. So our priorities are organic investment, M&A or BD, and I'll get to that in a second, growing the dividend and anti-dilutive share buyback. So as it relates specifically to what are some of the external opportunities that we would pursue, we're looking for opportunities that really build on our innovative platforms, our pipeline and strengthen the prioritized areas that we've mentioned. So that's very similar to our December deal that we did, the acquisition of Synthorx. There, it kind of hit on all those measures. It's an innovative platform, there's a pipeline, and it really helps us strengthen our oncology area and it also helps towards immunology. So I think as we're building this best-in-class, first-in-class strategy that John Reed when he arrived, almost 2 years ago now, I guess it is, and certainly Paul has reinforced that, that's how we want to use any proceeds that would be put towards M&A and deals. Now our main areas of interest, I'm very happy about our main areas of interest in specialty care, with immunology, oncology, neurology and rare diseases. And I think these are areas that are going to be reinforced. We're also interested in vaccines, as you know. So certainly, don't get me wrong, but that doesn't fall under my area. So I think early stage, late stage, I think you're going to see more of a trend towards early-stage opportunities that kind of build and augment the pipeline or capabilities, and it's similar to the Synthorx-type acquisition that we did in December. Now look, we're going to -- we're keeping our ears open as well for any other potential opportunities, but this is where the focus would be for now.

And as one of things about modalities or platforms, anything specific that you feel you wish you would have as a part of more greater exposure to any gene therapies, one that people talk about a lot as potentially revolutionizing the way medicines develop over the next 5, 10, 15 years. Just remind us what your in-house capabilities are there? Is that an area of further interest from your perspective?

Yes. So look, we're accelerating our internal efforts in the field. And Paul can now play a more active role in this. He was precluded until March to really participate in this. So we have some interesting internal gene therapy programs, platforms and capabilities, but we also aim to accelerate our pipeline and augment our manufacturing capabilities. And as we move throughout the year, we'll be sharing a little bit more of that. And again, it's another good discussion point for us as we get to our R&D Day a little bit later this month.

And then just on the last big picture stuff. As -- are your priority areas from a therapeutic perspective changing because of COVID-19? Is it opening opportunities for a Sanofi portfolio that otherwise you might not have thought about, be it more on the vaccine side in certain geographies like China or be it more as you think about where the next leg of R&D expertise needs to come in? How are you guys thinking about what COVID-19 means for your areas of therapeutic priority expertise?

Yes. No. It's a great question. And I think as you think about the COVID-19, there's the acute moment that we are in. And what we did as a company was we looked across all of our capabilities, our pipeline, our portfolio to say is there anything here that could have an impact? And we very quickly moved to trying to explore some of those. So I think -- and we're in a great position. This is where you have the advantage of being a company that's got a lot of products in a lot of therapeutics areas, a lot of history, a lot of capabilities in order to execute on them. Vaccine is a bit of a no-brainer, right? We are leaders in the space and we wanted to look at it. And we've been thoughtful about not trying to create any hype around it. We've been trying to be really focused on what are two solutions that could make sense? Now one of the comments could be that we're going to be a little bit -- we look like we're a little bit behind. We think that this being a global pandemic, a global therefore issue, it's going to take more than a single company, and we're going to be talking about needing billions of doses to satisfy the world. So we think getting it right even if we're not the one who's out in front, if we get it right with an effective, safe vaccine, we're going to be in a good position. Now so that's going to be acute. How do you throw the resources that we have as this large, experienced pharma company behind the problem? How does that evolve into where we go next? It hasn't changed our focus that was laid out at Capital Markets Day by Paul. We're not going to be making a big switch just to going into infectious diseases or anything outside of the areas of prevention that we're looking at with our vaccines. I think that we always remain open and listening to first-in-class, best-in-class programs, products that can transform the practice of medicine. But we are completely behind our stated strategy from Capital Markets Day in our Play to Win culture, if you will. And I think we're making really good progress on it. We're making trade-offs. John's gone through the pipeline, made some adjustments, obviously, to the pipeline. You can see where we focused some more and made it very public about areas that we're focusing, such as DUPIXENT.

So talking -- that's a great segue to DUPIXENT, and I don't want to take away your thunder from the session tomorrow, but just what -- can you just share with us some of the recent trends you're seeing for DUPIXENT, both U.S., ex U.S., some of the conversations you are having with the health care professionals, DUPIXENT in a COVID-19 world. And then we'll go to the longer-term opportunity questions after that.

Yes. Look, DUPIXENT, again, just to frame it or give my view, our view on it, we remain incredibly excited, incredibly bullish about this product. This is, I think a -- I've been in the industry a lot of years, and this is one of those products that comes along, if you're lucky, once in a career. And I feel like we're really fortunate to have it. And we really see it as a leader across type 2 diseases due to the unique mechanism of action. And that's why I think this is so fundamental to the potential of this product because -- and this is why I would encourage you to listen in tomorrow as we get a little bit deeper into the science and have some of our, I'd say, just world-class scientists that are going to be there answering questions and presenting. But this fundamental biology that allows us to explore these various type 2 diseases, and you see that through the expansion of indications that we've had and what our future development program look like. Most recently, we gained pediatric approval in the 6 to 11 age group for moderate to severe atopic dermatitis. And I think on the one hand, it is exciting because it expands population of patients potentially that we can use for the product. I think more importantly, it signals this evolving safety profile of DUPIXENT. As it goes younger and younger -- as you go younger and younger into patients, obviously, the hurdle for safety, I think, is higher. And the fact that we are moving younger and younger is a huge ringing endorsement of the product and what it's able to do. I think that, again, it just further reinforces this best-in-class clinical profile. It has rapid and sustained efficacy across all these age groups. There's long-term proven safety profile over 3 years now. And that's why the metrics look so good on this. If you looked at our first quarter, we had $776 million in sales. We're firing kind of on all fronts. In Q1, we had -- TRx was up 118% over the previous year. We have 21 -- had over 21,000 NBRx's. It's been a demand-driven story here. There isn't -- it hasn't been a story of stocking or any other padded result. This has all been really driven by the performance. Now we talked about in the Q1 call that there had been about a 60% reduction in in-office doctor visits at that time. Now telemedicine has certainly made up for some of that. But there's still -- when you have practices that have been closed for a very long period of time and now we're just coming back, that clearly is going to have an impact on your NBRx. TRx has been incredibly stable, actually. And so we're really encouraged that we get through this blip of just not having practices open. There were still prescriptions going on -- still new prescriptions being added, but clearly when you've got a lot of practices closed, there's that practical how do you get in? We see things coming back to very strong NBRx and new patients going on therapy in not only the current indications but the new indications that we're moving into. So completely bullish. We are committed to the greater than $10 billion that we've communicated in the past.

And Bill, just that greater than $10 billion, how would you characterize that target, if I would call it? So do you think of that as realistic? Do you think of that as a blue sky scenario? Because obviously I think people appreciate that DUPIXENT is going to be a big drug, but there's still a reasonable amount of skepticism on the greater than $10 billion. So just help us think about your confidence. And if you can, what are time lines we should think about in getting there?

So the time line is a little bit tougher question. However, if you just see the growth rate that we've had, as I said, $776 million in the last quarter, we're annualizing just on that alone in the $3 billion-plus range already, which is something pretty exciting. I'm extremely confident in the greater than $10 billion. I think if we just look at the sizes of the populations that we have with the indications today, and that's before adding in a lot of the potential new ones, I think you can very quickly, assuming various levels of biologic penetration and then what is our share of that market, I think you can pretty quickly get the numbers that exceed $10 billion. Look, it's one of those things I think when we're there looking back, we'll say, of course -- everyone will say, of course, kind of a no-brainer. I think just trying to dimensionalize things by looking through each of the populations that we're serving and where do we think you can go from both that biologics penetration and our share, I think we've got the best product period in each of the areas that we're competing. I think we are -- we look really great in atopic dermatitis. Safety is a big issue. You've got a category of products coming in, the JAKs that anyway you cut it, if you start scratching that below the surface a little bit, they have the problems that they have in other indications. This is going to be something that it's a safety-driven specialty in dermatology. I don't think the JAKs are going to displace us. They'll be saved for some later line. I think in asthma, we've got a great product. We've got a real impact on lung function, which is really important. And so many of these patients that we're dealing with in both those 2 key indications, because it's a type 2 disease, they have other stuff going on as well. So I mean, when you're looking at the biology being so fundamental here, I really believe that DUPIXENT is going to be the one that rises to the top and is the winner.

Well I have an investor question, where are we with the DUPI opportunity ex U.S? Do you think ex U.S. can take off the same way U.S. did? Or are there other dynamics that might prevent that from happening? And what is the plan for an RDL listing in China for DUPI?

Yes. Okay. So first of all, as we've got 38 countries where AD is launched, where we only have asthma in 14 and nasal polyps in 5. So the U.S. has benefited tremendously from a couple of things. First of all, it's had all the indications, because that's where we've gotten approved first, and we've launched and we've gotten ahead. And secondly, there is a price advantage in the U.S. as well. So those 2 things have really driven that uptake. As you look ex U.S., I've been very, very impressed with the results that we've had to date in each of the countries that we've launched. From a market access perspective, if anything, I would say, it's exceeded our expectations. I think for me that's reassuring not only for DUPIXENT, but it's reassuring for our industry in that innovation is being recognized. And as long as this -- as long as innovation is being recognized, I think that it's really, really good for us in -- for Sanofi, but also for the industry. So I think as we report out in Europe and rest of the world, you're going to see some really -- continue to see positive growth results. Regarding China in particular, we're expecting approval this year. Just to give you an idea of the magnitude of that population, we're looking at about 900,000 biologics eligible atopic dermatitis patients. So clearly, a big -- a big population that we're looking at there. Getting national reimbursement is going to take us some time, but we're going to be on the market this year. And I think we have high hopes for the potential in China as well.

So moving away from DUPIXENT for a bit. One other area I wanted to touch on was oncology. You have 2 assets there. Obviously, you've got Libtayo versus Sarclisa, recently some exciting data. I think the broad perception is those assets are perhaps second to market or behind the leaders, a bit undifferentiated. I get the sense that you guys are a lot more excited than the Street is on each of those assets. So just help us understand what's driving your excitement around them?

Look, so let me maybe start with Sarclisa, if that's okay?

Of course.

Yes. So the way you're going to win in oncology ultimately is with data. And you've got to have -- I think you've got to have strong data to have a seat at the table and then to win. And we are building on the evidence for -- we think it's going to emerge as perhaps the best-in-class profile in multiple myeloma. It has a different, we believe a different mechanism of action. We've seen really strong data in our ICARIA and IKEMA trials. The -- and that's where it's going to start. Now we've also, as it relates to Sarclisa, we've -- there is an advantage in being a little bit late. And the advantage in being late is that you can design your trials to answer the most important questions that exist. If you've gone first, you don't know how the market is going to necessarily evolve, and you may be using older regimens, et cetera. So we have been able to look towards where the market is going, and so we've combined with the right, we think, combos for the future. So -- but first of all, going back, our current data in ICARIA, 11.5 months, which is really impressive PFS in the third line plus setting. And then in the second line setting, we've had strong reduction of progression at 47%, and that was on top of KD, which is the standard of care backbone. We've also had promising early results in the newly diagnosed multiple myeloma with the gold standard of care. And if you look ahead to the future, as I was saying, where are we going, we're on very competitive time lines with [ DARE ] for the first-line setting for both transplant ineligible and transplant eligible in VRD combos. We've also initiated our Phase III in High-risk Smoldering Multiple Myeloma. So I believe that the data is going to win in the end. If you look at the data that we've put up so far, there's all the limitations across trial comparisons, but I think our data is extremely impressive. I think that we are starting to make a reasonable and a credible argument to potentially being the best-in-class in this space. So more to come, it's going to be dependent on the data, but we're excited. The community that's looked at the data so far that we released has been extremely excited about it as well. Now pivoting to Libtayo. Libtayo, if we think about it and we think about that PD-1 marketplace, we've got kind of 3 areas to think about for Libtayo. First of all is leadership in non-melanoma skin cancer. We were the first in the locally advanced and metastatic CSCC and now BCC and then we're moving into the adjuvant CSCC. So that's an area where I -- if you look just after 5 quarters, we're annualizing at about $300 million. So that's an area which I think that we are ahead in and winning in, and I think there's big opportunity, especially as we move into the adjuvant setting. That's where, obviously, the bigger opportunity lies. Now looking at lung, again, I would say, up until this point, there hasn't been anybody who's been able to put up some of the numbers that KEYTRUDA have, and I think that we've demonstrated that we can, and this was in our monotherapy trial. And we had a decreased risk of death by 44% in the modified intent-to-treat population. This is the largest data set from a single pivotal trial. So again, back to the data. And we're optimistic about our combo therapy that we'll read out next year. So that's a product that is going to have data that looks, again, cross-study comparisons, all the limitations, looks to have very strong data and data that is certainly in line with KEYTRUDA. And it's a big population, right? And I look at this as kind of one of two in some ways. Final piece is just with combination therapies. We've got a pipeline with a lot of products that will benefit from a PD-1 being combined with the PD-1. And that is nice to have that opportunity to combine, see the results and then we plan forward for larger combo trials if we like what we see.

Thanks for that, Bill. So we're coming to the last 5 minutes or so of the chat and there are 2 kind of separate areas I want to zoom in on. But kind of first one, what are the recent trends you're seeing for your hemophilia assets and multiple sclerosis assets? Have you seen any implications or impact from COVID-19-linked disturbances? And how do you see about the second quarter evolving for those 2 franchises?

Yes. So look, I -- hemophilia, let me start there. It's all at-home administration, right? And patients have always been really good about making sure that they have supply factor to help them with their hemophilia. So I would say those patients have been -- or that segment, if you will, has been less impacted by product availability and ability to get the product. Looking at MS. MS, we've had really great performance through Q1. I think it was over 21% year-over-year sales growth with AUBAGIO, which is really driving things here. And AUBAGIO continues, after all this time, to really be a product that has carved itself a very loyal and good following. I think it's a great product. And I think that's really the reason why. So there's been some pause by not only the MS community, but other communities, to think about what are the products that you want to use if patients are potentially at greater risk with COVID-19, greater risk of infection. With AUBAGIO, that hasn't been really affected. And it's -- remember, it's the only [indiscernible] that hasn't had confirmed PML either. So it's considered a safe product. Lemtrada, a little bit, obviously, more of an effect based on the mechanism of action and so forth. I think that it's a little premature for me to speak about Q2. We're going to have -- we're right in the middle of it. We'll save those reports for when we get to the end of the quarter and do our earnings call. But we're excited about AUBAGIO. We're really excited about moving to our brain-penetrant BTKi, which we reported out in April. That's something which I think really could be that right combination of everything to make it the disease-winning product in MS. I think if you looked across 5 dimensions of MS, it really has the potential. It's got a convenient form of administration. It has efficacy. It's -- by targeting both the central and peripheral, you have a chance to have a little bit greater effect on things like disability and so forth, and it appears to be safe. So high expectations for that product and really we're moving forward with our 4 Phase IIIs there. We're on track to have our first patient in later this month. So MS remains a big focus for us with our current portfolio and as we move into the brain-penetrant BTKi.

Bill, thanks a lot. And just kind of wrapping up the conversation, but would love your thoughts on -- you've built Sanofi Genzyme from strength to strength since you joined Sanofi 11 -- 9 years back, right? But how is Sanofi under Paul different to your prior experience of working other -- under some of the other CEOs? What does Paul bring to the organization?

Look, I'll start with -- Paul is a really, really strong leader, great leader. It's been -- it's really been a pleasure working with him. He has brought certainly a clarity, focus and ambition to the organization that I think is great. He's picked the priority assets. He's picked a way that we want to work in the Play to Win strategy, which, obviously, it's not only about the how we work, but it's also what we deliver. We're being real cost-conscious. You've seen what we're looking at for our BOI margins in the 22% and 25%, getting up to 30% and 32%. I think it's just that clarity, focus, saying and doing -- doing what we say and earning the trust of investors that we are going to execute on the plan that we lay out. And I think it's been crystal clear. I think that he's helped push the organization to execute it. And so it's been -- for me, it's been certainly a lot of fun and good learning working with Paul.

Bill, with that, we're just out of time, so thank you very much, again, for joining us. To all the investors joining us, thank you again for your time, and we hope that you have a good rest of the conference. Thank you all.

Thank you very much.