Sanofi (SAN) Earnings Call Transcript & Summary

Welcome to our continued morning here at the third day of the Goldman Sachs Healthcare Conference. My name is Chris Shibutani, member of the research team on the global front, along with many strong associates across the board, who are being very supportive and very helpful. We are super pleased to be able to have Sanofi join us here. A very important discovery, perhaps you can say your last name because I think even focusing your C-suite are doing variations on it. So here's your chance man.

See, that's disappointing to hear folks in the C-suite saying that, but no, it's Bill Sibold.

Okay. Bill, tell us a little bit about your professional journey. I always like to make this a conversation between us in this moment of time, probably a lot of grumpy people out there are going to say, "you didn't cover this or didn't cover that." But we have like 34 minutes remaining. I'm talking to you, tell me about your professional journey. It helps us understand kind of the head, the voice, the decision-making, where this is coming from.

Yes, great. So I've been in the industry over 30 years now. I have worked in small and large companies. It's mostly been in the specialty space and also have worked outside of pure pharma in the clinical trial world. So mostly, as I said, commercial, but a pretty good view across the whole value chain, worked in the U.S., Australia, from Canada originally and have had careers with Amgen, Biogen, Lilly and now Sanofi, and been at Sanofi now for almost 12 years and have seen a real remarkable transformation of the company in that time, and I really believe that we've moved to a position of being able to win, and that has really accelerated over the last 4 years with Paul.

Yes. No, I think some of -- you used some of the key buzzwords and the vocabulary around this, looking to win, also just the evolution of companies. All of these global pharmaceutical organizations have gone through various phases as a function of what's happening with the portfolio, with what's happening externally as well to put emphasis and to reshape. I know that your focus is on Specialty Care and the tremendous IR team at Sanofi had make sure to -- make sure that our discussion is very relevant to your topic. But I'll touch you a little bit in terms of just like the general shape. Help us understand what you think the key rationale is for the reshaping here because there's a couple of moving parts with Sanofi overall consumer side, but just the shaping and why you think you have the best job in the house.

Well, look, I think when Paul got here, and we did our Play to Win strategy in 2019, it was very much focused on Specialty and on Vaccines. And I think that is taking advantage of just kind of some of the industry dynamics we see with the science moving forward, you can go after some of these very complicated diseases, like you haven't been able to in the past. And our research and development efforts really ended up focusing in that space. We went with more of a first-in-class, best-in-class approach. We weren't looking for any me-too late any longer. And it required us to improve our scientific capabilities. I think we brought the right teams in, I'll say specifically in immunology. I think we have a great team, and I think that the fruits of that is really showing right now. So when you look at where we are in Specialty, for instance, and I do think I have a great job, and I think it is the best job that's in the company. We cover really 5 therapeutic areas: immunology, oncology, rare, rare blood and neurology. Now if you go back all the way to the acquisition of Genzyme in 2011 by Sanofi that was purchasing kind of that rare disease business and capability, which really became our Specialty Care foundation, if you will. We added multiple sclerosis to that and then oncology, immunology and then built into rare blood disorders. So it's been quite a journey, and I think that we're focused in the places that are the high-growth spots in the industry. And I think we begin to differentiate ourselves there as well.

So the golden goose, Dupi, what a ride, what a drug, what opportunities continue to unfold here. Right now, what we have is we have some tremendous numbers here, EUR 13 billion peak sales currently. And everyone is like come on, man. We know that we have further to go, we have some COPD data, and we'll talk a little bit about sort of like the journey of like finding out when we have the conviction to sort of tack that on to the numbers. But this does not include the opportunity for COPD now that we've had on trial readout. Is that correct? And help us think about -- because I know that [ Tarek ] will get really angry with you and some other folks, if you put a number on this. But how do we think about sort of the peak sales upside scope that could come from that COPD?

Well, you're right. It has been a wonderful journey with Dupixent. We've had our partner, Regeneron, that we've been working on this for so many years. And we did say the most recent way point that we gave was $13 billion, and we also said that we were expecting $10 billion this year from Dupixent. And at the same time, we talked about the $13 billion, we said that we'd expect $22 billion for immunology overall by the end of the decade. Clearly, if you -- just at the most recent ATS meeting, et cetera, we've had a lot of readouts, including COPD. And at this point, we would expect, probably later in the year, with the interest to come back and have a discussion to contextualize the opportunity for us in immunology and Dupixent a little better. And so I'm not giving you a number, you're absolutely right. It didn't include COPD. But I think when you look at COPD, the dynamics are really favorable. Across the G10, there's about 2 million COPD patients. It's the third leading killer in the world, and there has been no innovation for 10 years. We now have Dupixent, which if you look at that G7, it's about 550,000 patients and in the U.S. alone, 300,000 patients. These patients have really nowhere else to go at the moment. They are literally at a dead end. And when we have the efficacy that we've shown, that is a real opportunity. So we're excited about that, but also right behind it. We have Itepekimab. So between Itepekimab and Dupixent, we get to about 80% of the opportunity in COPD. Two very different mechanisms, 2 products are going to be in almost entirely different segments. So that's a real exciting opportunity for us. And now that we have data, we're in a little bit better position to begin to dimensionalize what that opportunity is.

And then let's go through a couple of points there. And [indiscernible] on my part, I kind of gave you an off-ramp, although you're very kind, you sort of unlock the key to help think about the COPD opportunity here. But let's talk concrete, as we do on the Street, about some sort of time lines, COPD U.S. and European regulatory submissions in 2024. That's the current plan, correct?

Yes, we are in -- we are looking forward to our discussions with the regulators about the single study that we have with Dupixent.

Okay. And so therefore, is there potential to move that forward?

Well, I mean, we'll have to see, depends on those discussions. We'll have the second study, the confirmatory study, the [ NOTA ] study next year. Typically, you would need the 2. We'll start the discussions with the regulators now.

And remind us, how the readout that we've already had from BOREAS informs the probability of success on [ NOTA ]?

Look, I think our expectations are that it would be positive. I mean, we don't see -- the studies are very similar. So there shouldn't be any differences.

Okay. And then you also brought up the breadth of the pipeline, the IL-33 Itepekimab.

Yes. Very good.

You talked about -- the word you used was different segments of the market, say more, help us understand.

So the -- it's actually really quite unique. Let me start with Dupixent, and we look at that in type 2 diseases. And that's the one thing. I was talking with somebody earlier today and what makes Dupixent successful. It's because the biology is so pure. It is so targeted, the IL-4, IL-13 focus really allows us to tackle all these type 2 diseases. So when we look at Dupixent -- when you look at COPD, there is a segment of patients, in that 30% -- 20% to 30% range that are type 2, and that is both in smokers and former smokers. And that's where we see this opportunity, and that's where I gave the number of 550,000 on a G7, 300,000 in the U.S. When you expand out though and you look at that non-type 2 population as well, that's the remainder of it. For IL-33, we did the study. The study is being done in former smokers, either type 2 or non-type 2. And that opens up quite a large segment and expands us to about 80% overall of the COPD opportunity between the 2 assets. So we think that they are highly differentiated. There is some overlap. But between the 2 of them, we cover the overwhelming majority of the COPD opportunity.

Okay. With the golden goose, Dupixent, maybe you can comment about demand trends, update us on the latest for the various indications, AD, asthma and chronic rhinosinusitis with nasal polyposis. By the way, what do you call that in-house? You can't possibly say that.

No. We usually say nasal polyps.

Okay, cool. Demand trends in each of those different end market segments?

Yes. I mean, look, I think we're top line. We're winning in each of the segments. Clearly, in AD, any of the competitors have come in to date have not really been able to establish much of a foothold for the simple reason that the biology isn't as clean as ours is. And we really do -- are seeing that the efficacy and safety is driven by the targeting that we have. Now as you know, in AD, we're down to 6-month year olds, which is just 6 months old, I should say, not 6-month year old, but 6 months old, that says a lot about safety. There's no other biologic that is approved down to that area. Now where we are, though, with the growth there is, we're still only at about 10% penetration, bio-penetration overall in that segment. So there's a long way to go to grow that market. And if you look at where we were at a comparative time versus psoriasis, we have -- there's greater bio-penetration in atopic dermatitis than there was in psoriasis at this point. Our hope is that we exceed the bio-penetration of the low 20s to mid-20s of psoriasis and move it up closer to 30-plus percent. It's a more challenging disease, more uncomfortable disease that we think the unmet need will end up leading to greater bio-penetration. And because the profile of a product, like Dupixent, is so good that it should really answer any of the concerns of the dermatology community. Looking at asthma, as we reported on Q1, we are the leaders in respiratory, including asthma. Again, I think it's based on the profile of the product type 2 asthma, which is about 80% is where we focus. And so we're seeing great results there. In the nasal polyp space, boy, we are #1 in there as well, I think, by a long shot. In all these areas, I think it's really just showing just what a great profile drug can do.

Yes. No, I appreciate the quantification, that's confidence in leadership. So I'm a fan. Dupixent has, as it continues to grow, had a tremendous margin contribution. What's the incremental margin contribution like from this point on board?

Well, I mean, look, we've -- one of the things that we've been working on is the manufacturing of the product and the next generation of process improvements. And that's something, which you've heard us talk about where we see that in -- by '25 when we see the full effect of it, you can have, overall, about a $600 million gross margin improvement about $300 million to each of ourselves and our partners. You back that all the way, it's like an incremental $1 billion in top line. So we're looking at ways to make it a more profitable, better product. Now when you think about how we are evolving from an indication perspective. We have done a lot of the build already, and the new indications that are coming in fit in with the existing infrastructure that we have. Now we're going to continue to make adjustments to that. We'll build more for COPD, et cetera. But for the most part, the big infrastructure piece is already in place. So as you -- in time, you're driving top line, your cost of goods looks good, and your investment is for the most part, the bulk of it's complete, it begins to look better and better over time.

Got it. In immunology beyond Dupi, what else are you excited about? We talked a little bit about the IL-33. I'll make sure that we don't end this segment of the discussion without talking about the oral TNF, which is something that got a little buzzy during the earnings call there. But without leading you too much, even though I just led you, what are you excited about in immunology, ex Dupi?

Amlitelimab is really exciting. That's our OX40-Ligand. We are going to have this year, Phase IIb AD data. Next year, we will have the asthma data. And this looks like it is a product that could have very strong efficacy and very convenient dosing as well up to 12 weeks -- an up to a 12-week interval, which is a profile that would be very convenient for patients. So we're really very excited about that asset, and I think when you think about immunology assets, you've got to think about multiple indication selection or development. And I think that you -- it's become harder and harder to do things just in series. If you look at Dupixent, we did a lot of things in parallel. We got out of the gates early with AD and asthma, but then we rapidly followed it with multiple indications. And I think that's the way you have to think about immunology development. So as we have a product like amlitelimab, we'll look to see where does the biology take us. And those are the indications that we'll go after. Right now, we see atopic dermatitis that will wait for those results. and then asthma. But then assuming that works, you would expect that we would look at other indications as well. So amlitelimab, we designated a priority asset, which Dupixent's one of the priority assets as well, obviously. So it's getting a lot of attention by us internally. If you then -- just one of the ATS that we were just at American Thoracic Society in D.C. a couple of weeks ago now or a few weeks ago now, we reported out on our IL-13 TSLP, nanobody bispecific with some asthma data. And early reads of that looks like it could be a best-in-class, best in disease actually. So that's another one that we're excited about. And as we move along a little further, we'll see what the data says and come back with the full development plan. You mentioned the oral TNF. That's something which has been kind of a Holy Grail for people for so many years. Ever since I've been -- not ever since I've been in the industry, but soon after when the TNFs came out, people would say, great product, but I wish it was a pill. And there's been a lot of efforts along the years, and people have failed with that. We think we have something here that looks like a very compelling product for us. Now the question is, how are you going to position that? It's going to be based upon the data that we ultimately generate. One could look at it, if efficacy is there -- if efficacy is very strong, it could be a substitute for a biologic or it could be a step through to a biologic and think of it as a safe oral that people would step through prior to a biologic. So we'll look with our development plan to be able to answer the question of exactly what the positioning is. But certainly, the economics are very attractive when you think about the size of the TNF market today, and you think of the indications where TNFs work, and what that is -- what that potentially means. So more to come, and we'll be talking a little bit more about that asset a little bit later this year at one of -- at a major meeting.

Yes. No, it's interesting because obviously, TNFs were foundational historically. It's the OG in terms of just thinking about major mechanisms and drugs that really able to get momentum and become critical mass leaders here. And oral, what's been sort of like technologically the holdback here? And are we coming up with an oral version that is later to the party, and the party is more crowded because actually, this trend of coming up with oral agents in the immune space, to kind of hit that very large middle section of the moderately affected patients and as you say, kind of a transition to the more biologics and the [ severe is ] there. So talk a little bit about sort of what the technological challenge is to help us think about probability of success? And sort of how do you feel TNF, very familiar new cool stuff, should we still think that familiar is good?

Yes. Lots of questions there.

Yes. Sorry.

No, no, no, no, that's great. And I think that I think everyone knows the journey for search of small molecules is always challenging. You always have to worry about off-target effects, et cetera. So as appealing as it is, it also has its set of challenges. That's why as well we have rilzabrutinib, which, again, an oral that we think would fit that setting of a safe oral, and we have the IRAK4 degrader that we're working on. And we're really excited about that. We see that the early data that we've seen gives us real confidence to move forward into a broader development program. So I think one of the -- not prerequisites, but certainly, one of the things that you want to do when you're looking at a small molecule strategy is you don't always just have a single shot on goal. I think you pick the pathways that you think are going to be the highest likelihood of success and try to move in parallel with a number of them, and that's certainly what we've been doing.

Yes. And I appreciate you bringing up the IRAK4. I have an embedded interest in the broad scope of the coverage there. So that's a Kymera asset here, KT-474, last December, the announcement of the decision to move into a Phase II program, 2 opportunities. I think HS, hidradenitis suppurativa, was sort of like listed head of AD. Can you help us understand any underpinning behind that? And maybe help us with some of the timing of where you think the Phase IIs could kick off for both of those, respectively?

I think that, as I said earlier, with immunology products, you're going to have more than one indication. We like both the indications, obviously, and working closely with the team. It's been a great team to work with Kymera. We're looking at as early as next year as we'll be in the clinic.

For both of the indications, earliest '24?

Yes.

Okay. Great. And the commitment is there?

Commitments there. Yes. I mean, look, we'll do everything we can to accelerate as well. The date could be plus/minus, but the teams are working really well together. We're really excited about it. We think it's a -- we think it's an exciting asset. And I think that this whole degrader approach is one that certainly not everyone's looking at. It's something that, as I said, our teams are excited about.

Right. Oral delivery as well. So immunology, very much center of gravity, but tangentially from a mechanism standpoint, neurology, MS, let's talk about some of those opportunities there. There's an oral BTK brain penetrant, tolebrutinib once a day. Recruitment is ongoing here. I think we have an update most recently, 3 out of the 4 studies are fully recruited, GEMINI. There's so many different subsegments of the MS population. Just remind us where the landscape is? And you, as the boss, how pleased you are with how progress is with the program?

Yes. Look, MS is really near and dear to me. I've been in that space for 25 years and have been involved in the development and launch of a lot of the products that are on the market today. So we've had an interest -- strong interest in MS. We were very selective in what would be the next segment to go for in MS. We had Aubagio and Lemtrada and what was going to be next. We didn't do CD20, but we saw that BTKi was going to be something of interest and not just BTKi but brain-penetrant BTKi. So we were very specific when we went out and got one, actually, 2. We wanted one that was brain penetrant. Principia was the result of that. And the reason being is we think you have to get into the brain to have an effect on the fundamental biology of progression. And that's what we've shown with tolebrutinib in studies that it does get to a therapeutic level in the brain. Now of course, we have to wait for the trials to see if that is actually proven out. In our Phase II trial, we were very satisfied with the efficacy. It was essentially from an imaging perspective like a CD20. It also -- if you go back to our Phase II, we still have about 85% of patients that are on the trial, which says now that's tolerability and actually the satisfaction people have with it. So the 4 trials, and this is the largest MS development program that's actually ever been done with tolebrutinib. We have 2 trials in relapsing-remitting that's the GEMINI trial. We have the HERCULES trial, which is a non-relapsing secondary progressive disease. And then we have finally PERSEUS, which is the primary progressive disease. 3 of the 4, the only one that isn't enrolled is Perseus, which is the primary progressive, and we're working towards that. So we see that the real winner is progressive disease, and if you can have an effect on that because the unmet need is still just so high despite the multiple therapies that exist today in multiple sclerosis.

So that is the segment positioning really there because you actually have kind of this cluster. There's a bit of a scrum here with multiple BTKs, evobrutinib, fenebrutinib, remibrutinib and tolebrutinib, and it seems as if -- it would be helpful to understand where the relative positioning. Is it a bit of a bake-off or...

Well, I mean, none of them, as I said, ours is the most comprehensive plan that's ever been launched in MS. Ours is the only one that is brain penetrant to a meaningful level. And we believe that's really important. We also -- not all of them are studying in progressive. And so we're the most complete plan. I think we have the best profile. Now of course, it'd be remiss not to discuss the fact that we have managed through or we are managing through some of the liver challenges that we saw. FDA has us -- we're on a partial clinical hold. We've been working with the FDA on that, but it only relates to the one study now, which is PERSEUS, which is the only one that's still ongoing. And we're looking at ways to mitigate the risk, look for any kind of markers of who may be at greater risk for liver injury, et cetera. So we think that we have the profile and the development plan that if there's going to be success with BTKis is we think it's going to be tolebrutinib.

What's a prudent investors thinking about the time line for being able to reinitiate U.S. enrollment in PERSEUS?

It's -- we're enrolling around the world.

Yes. I see that.

So in some ways, it's really -- it's a nice to have, but not a need to have to finish off that development program. And as I said, we'll continue our discussions with the FDA.

Okay. Fair enough. GEMINI, we're going to get readouts on GEMINI 1 and 2, I believe, second half of the year here. The outcome measure here...

No. We're saying '24. First half of '24, I believe.

I appreciate the clarification. Outcome measure is number of relapses on an annual basis, and it's being measured against Aubagio. What's a good result look like?

Well, I mean, look, I think that it's got to be superior, right? I mean we're going to look across -- actually, it's actually interesting. You can't cross [indiscernible] compare, but we're going to look across to see what are the best -- what's best-in-class from an imaging perspective and from a relapse perspective. So it's not a single point measure. We'll be looking across all the all the metrics in MS. I think what's going to be most important, well, I think GEMINI is very important because it will confirm what we saw in the Phase II. As we move to HERCULES in the non-relapsing second-day progressive, I think that's the real inflection of what do we expect from an effect on progression, which is, as I said, more of the Holy Grail.

Okay. Fair enough. Let's stick to MS. Talk about another pipeline asset, Frexalimab, anti-CD40 ligand here. We had some Phase II data recently, I believe. And plans are to move into Phase III. Time line is next year. Is that correct?

Yes, yes.

Talk about the Phase II data here, your confidence level and as we head into this important transition to Phase III?

Yes. Listen, Frexalimab, really, I thought the data looked great. I mean having looked at a lot of MS trials over the years, I think when you look at the imaging data, the Gad-enhancing lesions, you're talking about very robust effects that are at or above where you have CD20s right now. We set a really high bar for this program because what the world doesn't need is another [ me too ] MS product, right? It's got to be able to provide something, and we saw enough that we think that there is a real path forward there for it. The MS community that we've spoken with has actually been quite receptive. We were at the CMSC meeting a couple of weeks ago, where we presented the data. And there was a lot of positive enthusiasm. One of the things that you have to think about for the timing of when that would launch, CD20s are becoming kind of the leading class within MS. And it's actually -- I have to say I'm happy to see that it's moved to a high efficacy. It's taken years actually to get the MS community to be focused on high-efficacy products. There's going to be a question though about depleting B-cells chronically. And if there's an opportunity with other mechanisms that provide high efficacy to be options for people to switch to or to continue to grow the market in high efficacy. That's why we like the asset. And we also have the RIPK1 in MS as well. So we have 3 programs that are headed towards MS, and I don't think people all the time realize the commitment that we've made to the space. People think about, well, you're just coming off of Aubagio, what's next? Well, we do have what's next, and I think it's 3 quite exciting programs.

And say a little bit more about sort of like the importance of this non lymphocyte depleting aspect of the mechanism of action?

Yes. I mean, look, that's -- we think that's very important. We are trying to be exceptionally targeted. And it's this -- with CD40 ligand, we -- it is a blocker of this co-stimulatory mechanism that affect -- pardon me that affects, we think the fundamental cause of MS. It'll allow us to get both inside the brain and outside the brain in the periphery and in central. So we think that you need to have the profile that is going to be as least disruptive as possible to the bad players, if you will, in the disease.

Okay. Let's move on and talk about hemophilia, which I believe is also part of your net...

It is. Correct.

Altuviiio, fitusiran, very opportunely situated. There are some competitive advantages to Altuviiio. Talk about the hemophilia landscape and where you see this fitting in?

Yes. I mean, listen, we are in a great spot in hemophilia A and B. We obviously have a legacy of a product in, a, ELOCTATE, which has been really kind of a leader in the space. When you bring in HEMLIBRA -- pardon me, HEMLIBRA -- when HEMLIBRA came into the market, it was a big shock to, I think, all of hemophilia A. People weren't expecting, I don't think, as rapid an uptake as it had in it, lots of credit. There was -- there's a real niche of convenience being so important. The subcutaneous injection was very important to the market, especially with kids. It was quite traumatic for parents to have to hold a kid down and to do an IV of a factor. We now have with our portfolio, Altuviiio, which has been approved. The thing about Altuviiio, people talk about it being a weekly infusion. That's great. But what really matters is the new level of efficacy that it can provide. So with hemophilia, you measure factor levels and normal would be in that close to 50%. With Altuviiio, you get into over 40%, 45%. So you're in this normal to near-normal range for the majority of the week. Other factors by the end of the week are dipping down into low single digits and maybe flash up to greater than 30 briefly and then back down. So for a patient, what does that mean? That means in a once a week infusion, you have the majority of the week covered at a new level of factor protection that has never been available before. So the possibilities of what you can do from an activity level perspective, that begins to change. And that isn't just for factor patients. That's for any hemophilia A patient that is interested in having a better factor level throughout the week, closer to normal. Fitusiran is really very interesting in that, that is something where with as little as 6 injections per year. So every 2 months, you could have coverage across hemophilia A, B with inhibitors without inhibitors. So really the population. That between those 2, if you're looking at the high efficacy or you're looking at efficacy with very infrequent dosing gives hemophilia patients a lot of options within our portfolio.

And I think we're going to get for fitusiran, some pivotal readouts a second half of this year...

That is correct.

So your confidence there, and help us think about appropriately sizing the potential opportunity commercially?

Yes. Look, I think we also had the Lancet publications fairly recently. That was on the 80-milligram fitusiran. We subsequently have alternate dosing regimen. That's what we'll be reading out a little bit later this year. Now you think about the market, and it's about a $10 billion -- we're anticipating $10 billion hemophilia A noninhibitor marketplace as you project throughout the rest of the decade. And when you've got 2 products that are so well positioned, one for, I'd like to say, really super high efficacy and then another one that is kind of a completely new approach looking at antithrombin and certainly a very convenient profile. I think all of a sudden, when we look across the global opportunity, we're in a real position to lead. So we look at this as a multibillion franchise for us.

Great. And as we close special kudos to the Investor Relations team that works hard to create the special events. I think the immunology group had an event in Kendall, about a year plus ago that was tremendously informative here. And folks like Eva and Felix have been working very hard, let's you do a little bit of a commercial for the next upcoming event at the end of this month, focus on vaccines, which is also part of the...

Yes, June 29th.

What should we -- what's the teaser there? What are we going to [ learn ]?

Look, I think that we have a lot going on, obviously, with vaccines. We have the nirsevimab or Beyfortus for RSV. We had our advisory committee meeting last week with very, very positive feedback. I think that is something which is we anticipate for this RSV season will be available. So you're going to hear about that, and you're going to hear about just the other innovation that's taking place in the vaccine space. And I think it will be a great place to come and hear from [ Thomas Triomphe ] and his team. They've done a great job.

Yes. No, terrific. Vaccines, 10 years ago, we would have said, kind of the burdens of this business. Now so much happening there, real barriers to entry with those opportunities. Look forward to that meeting for sure.

That's right. And we're going to try to -- we'll have an R&D day as well a little bit later this year that we'll announce.

Excellent. Bill, thank you very much for coming to join us. I appreciate the conversation and thoughtful.

It was a real pleasure. Thank you very much.

Thank you, everyone.