Sanofi (SAN) Earnings Call Transcript & Summary

Good afternoon, and good evening. It's my pleasure -- I'm Jo Walton, and it's my pleasure with my colleague Matthew Weston here to introduce Dietmar Berger as our speaker from Sanofi. We also have the main Sanofi IR team available should we have any broader questions. Dietmar is the Head of -- Global Head of Clinical Development and the Chief Medical Officer. He has had wide experience before joining Sanofi in 2019. And in fact, coming back to Sanofi or coming to Sanofi here, he works once again with John Reed, who he worked with at Roche.

I'm going to start with a broad question on R&D. And then we're going to move on to look at some of the individual products. We've had an extensive disclosure this summer through a series of R&D meetings, and we're hoping to build on that disclosure with more Q&A today. So firstly, my question to you is surrounding the products that we're going to hear a lot about through 2021. Now they're clearly important and they're supported by the new management of Sanofi, but many of them were selected by the older management. And so people wonder the degree of confidence that you have in these assets, which didn't look so shiny before, but now look very shiny under your leadership. So should we think of these projects as having average chances of success, higher chances of success? Just what your sort of general thoughts there before we go to more specific product questions.

I think Sanofi is, as you said Jo, right, is really undergoing a transformation, and you've seen some of that during the R&D days where we had our Capital Markets Day last year. And you also see a strong reshaping of the portfolio. We're literally making the move from a primary care company to a specialty care company, which is a highly important transition. We're focusing now on areas that I think have a higher probability of success that also require different types of decision-making, different types of operational principles. And I'm thinking we are actually progressing really well on that part, especially also with Paul Hudson's arrival. Now when you think about some of the key molecules that we've highlighted, I would actually argue that they have been buried within, I think, a larger amount and a larger portfolio. And we are now much clearer regarding what we prioritize, right, and which are the molecules to focus on. And personally, I think the priority molecules that we've selected, and for some of these, we will have readouts next year, like for example, Amcenestrant, our selective estrogen receptor degrader, like our hemophilia portfolio with fitusiran and BIVV001, like venglustat, right? These are molecules where the biology is strong, where we have a really good development program. Obviously, we had the chance to adjust those programs and where I think the probability to make a difference for patients and the probability of success here eventually is high.

Can I jump in then. And can I just ask -- oh, seem to have some reverb, I don't know why. Hopefully, it's going to improve. Can I just ask around the transition of the organization at Sanofi? Because clearly, that was a very significant goal of the new management team. But pharma is inherently a very long life cycle business. And so R&D transformations tend to take a great deal of time from the personnel, from the way people make decisions, from the risk appetite that's inherently built into the organization and then let alone getting down to the molecules and pointing them in the direction and make sure that the trials are right. So if I think of the new management transition, I sort of think of long-term -- sorry, short-term quick fixes and then really long-term cultural change. And I'd be very interested to understand where you think we are on that journey. And whether the organization is prepared for that really quite, you've already alluded to it, significant shift from a primary care mindset to that much more nimble and potentially risk-taking specialty care mindset to make sure that you get best-in-class, first-in-class and really make your move quickly?

Yes. Yes. And I think it's a very fair question. And I think about it exactly the same as you think about it, right, the -- you need to focus on very different areas, from what kind of molecules are you focusing in research? Are you focusing on in-house versus externally developed? Is it biologics versus small molecules? And then all the way to what's your development paradigm, what's your commercial paradigm, what is your risk appetite and what's the culture? Definitely, John joined roughly 3 years ago. I joined under 2 years ago. Paul Hudson joined last year. And I think we're progressing well in that transformation journey. And let me just give you a few examples. When you look at the portfolio overall, it's currently heavily skewed towards late-stage assets, right? Those are assets that are derisked at this point that are in Phase III programs and closer to filing, and obviously, you will see those through, right? And some of those I think have really good potential. And we were talking about drugs like what I mentioned before, the venglustat, fitusiran, BIVV001, Dupixent, right? Those are in those Phase III programs that derisk 2 different levels for Dupixent. We know it works really well in all types of type 2 inflammation. So we know we can extend to a large number of additional indications. And then you get to the earlier portfolio, and that's really where you make those more dramatic changes, where you prioritize, where you make sure you have the right molecules that you move forward. And we've given ourselves objectives with regards to how many first-in-class and best-in-class molecules do we need to see. We want to focus on first-in-class and best-in-class. And currently, around 70%, 75% of our portfolio is first-in-class, best-in-class medicines. And that will only go up. We have our objective there, and we're making good progress. We're also saying we want to focus on in-house development of molecules, and we want to have really molecules that we own 100% and that are not partnered. And also there, when you look at the prior 5 years and then now the recent time, we're making good progress. About half of the molecules that are really meaningful in the portfolio are now fully owned and were originally Sanofi developed in-house. When you think about the biologics versus non-biologics, we want to focus on biologics. Because the -- you can really address unmet medical needs, but you also have a higher probability of success. And again, there's a real portfolio shift to biologics. So you need -- so you see this output in the research portfolio already, and you also see a shift both from an investment perspective and how the portfolio is shaped towards some of those key areas in specialty care, when we're talking about oncology, talking about immunology, talking about rare disease, rare blood. But you also see focus areas, for example, around vaccines, and you see really good progress in all of those areas. When it comes to the mindset, when it comes to the culture, when -- one important piece also to me is that we had a very fragmented structure over the longest time. And for example, in development, we have now united all of those different fragmented pieces within structure -- within 1 structure, within an integrated development organization. I basically oversee everything from the strategy, early development, late development operations. And you see the impact of that integration. When you look at the development of our BTK inhibitor. We had a readout of the Phase II studies basically early this year, and we have the first patient in our Phase IIIs 4.5 months later. We have a comprehensive Phase III program with tolebrutinib with a BTK inhibitor in relapsing-remitting MS, in progressive MS with 4 Phase III studies, and you just have to imagine the transition. When you read out your Phase II, you have to select your dose, you have to manufacture the drug at that dose, you have to finalize your protocol, you have to start all the sites, you have to get the drug to the sites and all of that in 4.5 months, and then you recruit your first patient. That is quite unprecedented in the organization and just I think signals that type of mindset shift. And no, we're not entirely there, definitely not. It's an ongoing process. I would actually argue that type of optimization is an ongoing process in each and every large company, right? And we have a recent example with our SERD with Amcenestrant where we read out the Phase Ib for the combination with palbociclib earlier this quarter, and we've already started the Phase III in first-line hormone receptor positive breast cancer, and we're already recruiting the first patients. That's the type of transition we're making, eliminating that white space. But also moving forward decisively and hopefully on the right prioritized assets.

Perfect. That's really helpful, comprehensive. I was just going to jump in with fitusiran, Jo, you go ahead.

Well, I had one slightly broader R&D one before we move. We -- the questions are coming in. And people are saying, hang on a minute, you talked about de-risked assets here and you mentioned fitusiran. So we'll obviously come back to that. But I had one other question about technologies first. So you've obviously got Ablynx, so you've got Nanobodies. You've got the PEGylation, and you pointed to some of this allowing non-druggable targets to become druggable. So my question is broadly, are there any other technologies that you think that you are particularly lacking, I don't know, T-cell stuff, drug antibody conjugates. Anything that you feel in your armamentarium that you need to get you going forward?

Yes, that's another aspect that Sanofi and especially the research organization have worked on over recent years. There's now a broad portfolio of platforms as well and really different types of technologies that we can use in order to develop drugs that then address specific targets and specific unmet needs. When you look at the recent acquisitions that we've made, there were usually acquisitions that are both around the molecule, but then also around the platform. Synthorx was the not-alpha IL-2, but then also the Synthorin platform and really this targeted PEGylation technology as 1 potential application. Ablynx with Nanobodies. You've mentioned we now have the Principia acquisition, which is not only a specific molecule like tolebrutinib or rilzabrutinib, but also the capability to really work around the BTK space and work with brain penetrant versus non-brain penetrant, covalent versus non-covalent binding and really different types of approaches. So I think most recently, we've announced the plan to acquire Kiadis, which is an NK cell company, right, which really is our first foray into cellular therapies, which is one of the technologies we didn't have, right? And utilizing not so much the T-cells, also we're not interested in the autologous space. It's really about the allogeneic and off-the-shelf technology. And we feel that NK cells have different advantages. And call it, Kiadis would give us a really nice opportunity to combine also with other technologies in our portfolio. We have ADCs. We have good ADC capabilities. And obviously, with our CCAM 5 ADC, we have the first molecule in that ADC space. And it's really hard to speculate what else is missing or what is coming up tomorrow, right? But I think we have a good armamentarium at this point in time, and we will keep our eyes open, whatever is there, that can really add to that platform.

Understood. Can I pivot to products then? And we may as well get fitusiran out of the way. So you have mentioned it a number of times as a late-stage asset, where we're going to get some data in '21 and is one where you see high probability of success or in a portfolio, which you see as having a higher -- or being derisked. I shouldn't put words in your mouth in terms of high profitability of success. Clearly, we recently saw it move to, I think, the full late-stage program to clinical hold because of observations of thrombotic events in patients. It's a side effect we've seen in the program a number of years ago previously. What is it that you can tell us about fitusiran and the magnitude of the issue and when we should anticipate a resolution from the DSMB?

Yes. So what we've seen is a limited number of nonfatal thromboembolic events, right? So the situation is really not that dissimilar from what we've seen in 2017, when actually we had a clinical hold of the program. Remember, we don't have a clinical hold at this point in time. We have seen this very limited number of thromboembolic events. And I'm not giving you a specific number because there's still question around these events, right? So I don't even have a final number, but it's very limited. And as I said, they are nonfatal. And in 2017, we also took time to really analyze the cases, find out all relevant information, then think about what's our mitigation plan or risk management plan moving forward, right? And what is the path forward? And you see these thromboembolic events in these patients, especially when they're doing additional things, right? And these are patients that have multiple comorbidities, and many of these patients also use not only 1 antihemophilic drug, they're actually adding other drugs on top of it. And that's what happened in 2017, where they added -- on top of fitusiran, they added bypassing agents, they added Factor VII, and we needed to manage, like, how do you do that so that you don't drive coagulation too far into this thromboembolic space. And those lead management guidelines have worked well. We had them in place. They were actually agreed with the FDA. And now we've seen this limited number of additional cases. And we just need to see what additional data can we generate? And are there -- what's the path forward, right? Is it, for example, in addition to those lead management guidelines because we need to make sure that treatment is working in the right way. Now this doesn't change our overall strategy at this point for the hemophilia space, where I'm -- I'm strongly convinced you need to understand the patient needs and the different options. And I broadly look at this as the factor and the nonfactor market at this point, and then we also at one point have to talk about gene therapies. There are patients that are really well served with an IV factor therapy, and that market is going towards elongated half-life factors and there with BIVV001, with literally normal -- normalized coagulation and putting patients in a space where they can have strenuous activities with BIVV001. We have a best-in-class, potential best-in-class molecule there. And then with fitusiran, we're addressing the nonfactor market. And again, we have very good efficacy with fitusiran. We have the only true once monthly approach, where we can give the drug subcutaneously once a month with a small volume injection. So it's potentially the best-in-class molecule for that nonfactor space, but obviously, we need to work through now this situation. And this is not unprecedented, right? You've seen the same for other molecules; when you run into thromboembolic event situations you pause. You can do that very well with fitusiran because of the long half-life. So patients are still protected, even though we have taken a decision not to dose patients at this point in time. All the other study activities are ongoing, so patients are coming in for checkups and all that. It's only that we've said we're not dosing patients until we've sorted this out, and then we're going to communicate more broadly once we have the path forward.

Okay. And just a quick clarification there because I think it has been reported that it is on clinical hold. So what you're saying is it's on dosing hold, but the clinical trial continues, but -- which I understand there is an important difference there. But dosing in the program currently is on hold?

Yes. Dosing in the program is on hold, and we have taken that decision, and...

Yes. So it's a voluntary decision by you.

A voluntary decision, exactly. I think that's the distinction versus the 2017 situation.

Understood. Jo, over to you.

Can I just understand then -- I'm coming up to the end of my month. I would normally come back and get a fitusiran injection. I can't have nothing, so is it doctors' choice as to what I do while I'm effectively on hold? This is a condition where you cannot leave people untreated because there are serious consequences. So I go back to whatever I had before. And does that screw up your study because the patient has effectively left? Or can you pick up again? Just trying to see whether this is a problem that will -- could ultimately delay your filing longer than just the interruption in dosing.

So at this point in time, the vast majority of patients will still be protected, right? Eventually, that's a decision of the treating physician and the patient and hemophilia patient take a lot of this also in their own hands because they are very well aware over years of their disease. So it's their decision. But at this point, the vast majority, because of the long half-life of fitusiran, are still effectively protected from the hemophilia. So if it's a limited interruption, then I think there's a good likelihood that we can just continue the studies as they are.

Understood.