Sanofi (SAN) Earnings Call Transcript & Summary

Hello, everyone. This is Thomas Kudsk Larsen from the Sanofi IR team. Welcome to the Q1 2025 Conference Call for investors and analysts. As usual, you can find the slides on sanofi.com. Please turn to Slide #3, please. Here, we have the usual forward-looking statements. We would like to remind you that information presented in this call contains forward-looking statements, which are subject to substantial risks and uncertainties that may cause actual results to differ materially. We encourage you to read the disclaimer in our slide presentation. In addition, we refer you to our new Form 20-F on file with the U.S. SEC and our French registration document for description of these risk factors. As last quarter, financials reported are under the new reporting scope that excludes the Opella, Consumer Health business. As usual, we will be making comments on our performance using constant exchange rates, and other non-IFRS measures. Numbers used are in millions of euros and for Q1 2025, unless stated otherwise. Now please turn to Slide #4. First, we have a presentation, then we'll take your questions. We have kept the presentation as short as in the past as other companies report today, and we aim at keeping the call to maximum 1 hour. For Q&A, we have Brian, Olivier, Thomas, to cover our global businesses as well as Roy, our General Counsel and Brendan, Head of Manufacturing and Supply. [Operator Instructions] With this, I'll hand you over to Paul.

Well, thank you, Thomas, nicely done, and hello, everyone, on the call. We had a strong start to 2025 with a 9.7% sales growth in the first quarter. Our strategic focus on innovation continues to deliver, driven by pharma launches, Dupixent and Beyfortus in our vaccines portfolio. Let me highlight our performance of new launches on Slide 6. In Q1, our launches generated EUR 1.1 billion in sales, contributing 11% of the total. This performance was driven by an element of Beyfortus phasing and expansion in Europe and rest of world. ALTUVIIIO benefited from continued patient switches and has the potential to become our next blockbuster this year. Of note, on March 28, we obtained FDA approval for Qfitlia in hemophilia, 1 of 3 potential launches this year, with initial prescriptions already recorded in early Q2. Moving to Slide 7, Dupixent. Dupixent delivered strong growth of 20% in Q1, driven by broad-based demand and reached EUR 3.5 billion of sales. In the U.S., sales were EUR 2.5 billion in the quarter, up 18%. Dupixent now also leads total prescription share across all approved indications. As usual, in the first quarter, U.S. sales reflected the impact from the annual reset of insurance deductibles, driving higher utilization of co-pay assistance. Outside the U.S., Dupixent sales exceeded EUR 1 billion for the first time, supported by the contribution from Japan, China and Germany. Looking at the remainder of the year, we will continue to drive Dupixent's growth across our markets and in all approved indications. As a reminder, bio penetration still remains quite low. We are excited about the U.S. approval for CSU last week and the upcoming regulatory decision in the U.S. for bullous pemphigoid. These additional indications continue to expand our leadership across Type 2 inflammatory diseases. On Slide 8, let me briefly remind you of the high unmet need among people with uncontrolled COPD, many of whom have resign themselves to their condition. Dupixent is the first biologic medicine approved in this disease. We have already launched COPD in 8 countries, including the U.S., Germany, China and Japan. Dupixent's value is being recognized by payers in key countries, ensuring access for all patients. To improve adoption, we focus on 2 main objectives. First, we continue to educate pulmonologists about Dupixent's benefits, the role of Type 2 inflammation and the urgency to treat patients. Second, to drive patient awareness. In April, we just launched our DTC campaign in the U.S. Moving to Slide 9. Our vaccine business delivered double-digit growth in Q1. This performance was driven by favorable Beyfortus phasing and new country launches. In the U.S., we are focused on improving the immunization rate to ensure infants born in late season are also immunized and protected. Turning to flu. Our manufacturing is progressing as planned following the WHO and FDA strain selection. As the world leader in flu vaccines, we continue to focus on improving the vaccination rate by increasing awareness of the benefits of our differentiated flu vaccines. On our vaccines pipeline, we continue to push the boundaries of innovation, pioneering the development of a vaccine candidate for the prevention of chlamydia. In March, the U.S. FDA granted fast track designation and recognition of our commitment to improving public health and addressing high unmet medical needs. On Slide 10, I'd like to introduce you to our updated sustainability strategy focused on aligning health outcomes with environmental and social responsibility. Environmental challenges and human health, an estimated 3.6 billion people are living in climate-sensitive areas with 6 million deaths reported annually from air pollution alone. That makes it clear, people's health and environment are deeply linked. Our new AIR strategy focuses our efforts on 3 strategic imperatives: access to health care, environmental impact and the resilience of health care systems. With over 70% of our portfolio and more than 75% of our pipeline involved in climate-related diseases, Sanofi has a key role to play. And through AIR, we are furthering Sanofi's commitment to global health by working to break the cycle of the environmental decline and declining public health. Thank you. I'll now hand over to François, our CFO, for more details on the financials.

Thank you, Paul, and hello to everyone. As highlighted by Paul earlier, net sales increased by 9.7% at constant exchange rates to EUR 9.9 billion. This growth was primarily driven by our -- by Dupixent, by our new product launches and by favorable phasing in vaccines. Gross margin improved significantly to 78%, up 2.3 percentage points from the previous year, driven primarily by an improved product mix and by efficiencies. Our Q1 effective tax rate was 22.3% linked to a one-off item this quarter. We maintain our full year indication of a broadly stable effective tax rate versus 2024, which means around 20% for this current year. Business EPS was EUR 1.79, up 15.7%, reflecting our strong sales performance, our improved gross margin and our operating leverage. This Q1 growth confirms our expected strong EPS rebound in 2025. Moving to Opella. We expect to close the transaction in the coming days. Sanofi will receive about EUR 10 billion while retaining a significant stake in Opella to support the company in its journey to independence and to participate in its future value creation. The expected proceeds from this sale will be reallocated in accordance with our capital allocation policy presented on the right-hand side of this slide. First, our primary focus is to invest in our business to drive organic growth, which means investing in R&D, sales and marketing, industrial assets, AI and talent, just to name a few. Second, we continue to explore external growth opportunities through bolt-on acquisitions. In March, for example, we agreed to acquire DR-0201 from Dren Bio. This promising molecule strengthens our early pipeline in immunology. Third, we maintained our progressive dividend policy and 2025 will mark our 30th consecutive year of dividend increase. Fourth, regarding value-enhancing share repurchases, we are executing our EUR 5 billion share buyback program in 2025 with 76% already completed as of yesterday. We have repurchased 37.7 million shares at an average price of EUR 11.5, all for the purpose of cancellation. This underscores our commitment to delivering long-term shareholder value and partially mitigating the dilution from the Opella transaction. Looking ahead to the balance of 2025, I would like to remind you of some anticipated key business dynamics, which may be helpful for modeling purposes. For Q2, please note that Lantus U.S. sales started to increase materially in Q2 2024 due to the unavailability of a competitor's product, representing a higher base of comparison for the next few quarters. Despite this higher baseline, we expect stable sales for Lantus in 2025 as we continue to capitalize on favorable market dynamics and competitive opportunities. In R&D, we remind you that we received in Q2 2024, a one-off payment from Sobi of about EUR 200 million for the development of Altuvoct at the time of approval in Europe. For the full year 2025, foreign exchange impact is moving against us, and it is now estimated to be around minus 1.5% on sales and around minus 2% on EPS. All other business dynamics remain unchanged compared to what we communicated at the beginning of the year. I now hand over to Houman to provide an update on the progress of our innovative pipeline.

Thank you, François. During the first quarter, we obtained 6 approvals, including Qfitlia, the first antithrombin-lowering prophylaxis therapy for patients with hemophilia A or B regardless of inhibitors and additional approvals for Dupixent in COPD in Japan and CSU in the U.S. and Sarclisa across different lines in several countries. Moreover, as Paul has already alluded to, Dupixent was granted priority review in bullous pemphigoid with a PDUFA date of June 20. This was followed by regulatory acceptance of tolebrutinib, which is now set for a PDUFA date of September 28, complemented by 2 recent New England Journal paper publications. As François said, last month, we announced the acquisition of DR-0201 from Dren Bio, a potential first-in-class CD20-directed bispecific antibody targeting and engaging myeloid cells with a potentially favorable and superior safety profile compared to T-cell engagers, which may carry a risk of cytokine release syndrome and other immunological risk. DR-0201 has the potential to induce deep B-cell depletion via phagocytosis, enabling sustained treatment-free remission in autoimmune diseases such as lupus and where significant unmet medical need remains. Next slide, please. Last week, we shared advances from our mid- and late-stage respiratory pipeline for amlitelimab, lunsekimig and itepekimab across several indications. The clinical evidence supporting the OX40-Ligand inhibition across 3 major diseases, namely asthma, HS and AD is compelling. Furthermore, the efficacy of our medicines targeting this pathway with different modalities is supported by the following data. Preliminary efficacy results showed that the treatment with amlitelimab led to clinically meaningful and durable efficacy on exacerbations, lung function and symptoms in patients with moderate to severe asthma, including in, but not limited to those with heterogenous inflammation. This limited Phase II 4-arm dose-finding study did not reach statistical significance, the primary endpoint of reductions in exacerbations at the highest dose level in the ITT population. As a result, all the endpoints are highly biologically plausible but exploratory. In certain groups, including the subgroup of patients with high eosinophils and elevated neutrophils, amlitelimab showed a robust reduction of more than 70% in the annualized rate of severe exacerbations of asthma. Amlitelimab was generally well tolerated with no new safety concerns. We and members of some of the KOL community feel that they are very excited by this result. With the relevant statistical caveats that I've already mentioned, amlitelimab appears to have a differentiated efficacy profile in selected asthma patients, potentially representing a breakthrough for this underserved population if this result is confirmed in future Phase III studies we are -- for which we are in the midst of designing. As our early R&D pipeline continues to develop pleasingly, I'd like to take this opportunity to shine a light on our versatile Nanobody platform. Not only has this produced the potentially best-in-class in asthma drug, lunsekimig, but now has continued to deliver with brivekimig, our anti-TNF anti-OX40 bispecific in HS. Brivekimig achieved its primary objective with clinically meaningful improvements of both HiSCR50, the primary endpoint and other endpoints in patients with moderate to severe HS that are naive to biologics. I'm delighted to observe that the treatment benefit has a competitive efficacy profile when compared to currently approved and emerging medicines in HS with a safety profile in line with expectations and no new safety concerns. These results show the potential to increase efficacy by targeting OX40-Ligand on top of the conventional anti-TNF treatment in HS through this dual targeting mechanism is effective. We have, therefore, decided to prioritize brivekimig for further development in HS. Finally, amlitelimab recruitment is progressing ahead of plans in atopic dermatitis for the Phase III study. The OCEANA program is anticipated to read out in its entirety in 2026 and will provide the foundation for future regulatory submissions. As a result of the accelerated recruitment, the initial results from COAST 1 and SHORE studies might emerge earlier than anticipated. Turning to balinatunfib, preliminary results -- preliminary safety results showed that the treatment was generally well tolerated across multiple doses with no new safety concerns being identified. Most significantly, the study confirmed its differentiated safety profile. While the primary endpoint of PASI-75 compared to placebo amongst the highest treatment dose evaluated in patients with naive to biologics, moderate to severe plaque psoriasis did not meet the statistical significance due to the nature of this limited Phase II study, lower doses across naive and experienced patients showed clinically relevant PASI-75 responses, which are comparable to other medicines previously assessed in psoriasis. Our additional Phase II in RA is anticipated to read out later in the latter part of this year. If successful, we will combine our oral TNFR1 signaling inhibitor and innovative standard of care therapies with a view to increasing the efficacy ceiling. As we've always considered one potential application of this molecule in combinations, including fixed dose combinations, we are assessing combination options with internal assets. In addition, we're at various stages of discussion with major pharma and biotech partners to generate novel combinations for multiple immune-mediated diseases. For example, with Eli Lilly and Company, we're exploring the potential to combine incretins with Sanofi immunology pipeline medicines such as Balinatunfib. The updates on the progress of our pipeline to date support our ongoing commitment to bringing innovative medicines to all patients. It is acknowledged that the study design and previous strategy were not optimized in all cases. However, the incorporation of this knowledge to enhance productivity is underway. Furthermore, the progress of new studies exploring lunsekimig for potentially broader use in high-risk asthma, COPD and atopic dermatitis and itepekimab in CRS with and without nasal polyps continue to reinforce our pipeline. The FDA's recent approval of Qfitlia as a prophylaxis for patients with hemophilia A and B irrespective of inhibitors, underpins a significant milestone for this community of patients with a unique mechanism of action. Qfitlia is a small interfering ribonucleic acid therapy that targets antithrombin, requiring only 6 small volume subcutaneous injections per year. This approval is expected to contribute to a redefinition of the standard of care with a reduced treatment burden resulting from optimized dosing complemented by AT levels monitored by Siemens' companion diagnostic available at no cost with Sanofi Labcorp's support program. A regulatory decision in China is anticipated by the end of the year with submissions in the EU and Japan expected next year once pediatric data are available. I'd like to conclude with my usual news flow slide for 2025 and for next year. We plan 11 Phase III readouts, 15 regulatory submissions and 14 regulatory decisions in multiple jurisdictions, increasingly capturing the improving value of our pipeline. I would mostly highlight 2 upcoming Phase III results for this year that will be significant, tolebrutinib in PPMS and itepekimab in COPD with some with the aim of launching next year depending on the data. Next year, I'm looking forward to seeing the results of the Phase III data for riliprubart, our subcutaneous C1s pathway inhibitor. Our objective is to improve the journey of CIDP patients with riliprubart as a potential treatment option for those who are inadequately responding or have failed standard of care therapies. We very much look forward to updating you on this progress. As I frequently emphasize, we adopt a humble stance in the face of disease, acknowledging that not all of our efforts will be successful. It is nevertheless anticipated that the synergy of skilled science-focused teams in conjunction with our augmented exposure to cutting-edge digital technologies will facilitate the advancement of this unique pipeline within our core therapeutic areas with the objective of benefiting patients. I would like to thank all of my brilliant R&D team members and colleagues across the company for the positive progress made this year. We're chasing the miracles of science to improve people's lives. With this, I hand back to Paul for Q&A.

Okay. Thank you. We'll now open the call to questions. [Operator Instructions] Now we'll take the first question. Please go ahead.

Yes. The first question is from Emily Field from Barclays. Emily?

Okay. You should take the next question, track them out to Emily if she -- if we can.

Okay. So next question is from Richard Vosser from JPMorgan.

It certainly is. I'll be very quick as well. I think I'll go back to work, hopefully. So a couple of questions, please. Firstly, maybe one just on the amlitelimab asthma data. Obviously, efficacy in these type 2 low patients. Just thinking more deeply how you think that efficacy compares to Dupi and really how you think that will read to the efficacy in AD relative to Dupixent from what you can see? And then a second question, just on this novel combination, which I think I heard was with incretins and your oral anti-TNF, just thinking through that combination, are we -- should we be thinking about that in HS? Obviously, there's a disease overlap with obesity there. Struggling to think beyond that in terms of the combinability. So just thoughts on how we should think about that combination that you're thinking there.

Thanks, Richard. Three little sneaky questions dropped in there, and I'll address all 3 very quickly. Firstly, on Amli in asthma, let me start by saying that as we said at the top of this call, we remain hugely committed to Dupixent with our partner, Regeneron, and we will continue driving that in pulmonology, both in asthma, in CRS with NP, et cetera, and of course, in [indiscernible] so I absolutely would not take a comparison between Amli and dupilumab. Let me answer your question though promptly, we're very excited by the results we've seen with Amli in asthma. We've been very clear and cautious that it missed its primary endpoint. But I have to say from where I'm sitting and when you see the data, I feel that in multiple subgroups, we have really very compelling data, which has driven our commitment to going straight to Phase III in subgroups with substantial unmet medical need. You talked about the high eosinophil group and indeed, the heterogeneous inflammation group. And in those populations, amlitelimab has a distinct place for the treatment of patients, both because of the efficacy in those groups, but also its Q12 dosing. So I hope that answers your first question. The second question was related to Balinatunfib and combination therapies. As I said very clearly, actually, we said this early on, there would be a small number of indications in which we would go with monotherapy, but we always plan to combine this in combination. Indeed, even in rheumatoid arthritis today, anti-TNFs are combined with methotrexate, which is a synthetic DMARD. So our strategy is indeed to go into combination therapies, including fixed-dose combinations. We are in discussions with multiple big pharma and biotech companies for the appropriate rational conversations and of course, with our internal pipeline. And your direct question about incretins, actually, there is a substantial body of literature across multiple inflammatory disorders, and we could list them, but I won't do that here, where metabolic contributions to disease are extremely substantial. You'll appreciate that for the sake of disclosures, we won't go into these disorders now, but you'll also appreciate we're exploring multiple opportunities.

Yes. Next question is from Luisa Hector from Berenberg. Luisa?

My question is still on amlitelimab in asthma, but maybe to go a little bit more broadly because you have other assets in development for asthma. So how do you see sort of more broadly a respiratory franchise developing within your pipeline lunsekimig, et cetera? And then perhaps I could just check on Dupixent, again, respiratory. So a little bit more color on that COPD launch reimbursement status of COPD and how we should think about that phasing through 2025?

Thanks, Luisa. So I'll take the first part just to set up and then hand to you for the second part, which was -- we've said all along that we wanted multiple different mechanisms addressing different parts of the patient journey. It's clear that biologic penetration even after all these years, is still in the high teens in asthma. And of course, we'll get to COPD. And so we need to have different offerings. You mentioned lunsekimig. I think we showed data back in '23 at ATS on the FeNO drop, which was radically different. And you can see us starting to shape up how the market could look with high efficacy approaches for those that needed more, longer interval for those that want less needle burden. And then, of course, safety and other elements of efficacy. We think we're very well positioned given the low penetration and the very different offerings for each patient. It's I think quite a novel approach that we've taken, and we've done this in multiple diseases. I think it's going to play out quite successfully for us. Houman, anything to add on the second part of the question?

Yes. And I'm going to hand over to Brian for the launch piece. Just very clearly, and what Paul said. Remember, in lunsekimig, we have multiple respiratory populations, including high-risk asthma and patients with severe asthma. And we really, really, Luisa, as you know, with the combination of credentialed target TSLP, IL-13, shooting for breaking the efficacy ceiling. It's pretty straightforward. The TPP for that is really very straightforward. I won't repeat the other things that Paul said because I think we -- our commitment from the very beginning was to take franchise areas, to take whole areas and to provide patients in those areas with the very best treatment we could do and to really begin to tease out substrata, and that's what we've done. Brian?

Thank you so much for the question. I love that we keep getting asked the questions on COPD. This is a really important disease state, it's very heterogeneous like asthma, as a matter of fact, that we're just articulating. And we've got a couple of shots on goal, I think, here from a COPD standpoint. But let me first start off with Dupixent. We anticipated always that it would continue to gain momentum. We launched it at the end of last year. We saw a really good progress at the end of last year, but it's gaining momentum even as we started into this year when we still see the inflection point will be in 2025. Actually, we've seen early data suggest that we have a record-setting pace so far as it relates to Medicare and Medicaid coverage -- or Medicare and commercial coverage, about 90% Medicare coverage. And at this point, 88% commercial lives are covered. So that's really record-setting for the indications that we've had. Additionally, as you look at our initiations, we're seeing it's our most rapid respiratory initiation launch so far. Again, but these are initiations. They need to turn into NBRx, they need to turn into TRxs and that's what we're out there doing now. So we feel that this is continuing to strengthen our position in the pulmonologist offices and having -- it's having a nice play as well with asthma. But again, as we said before, Luisa, we expect 2025 to be the inflection year for COPD and for it to continue to be a part of many indications now, our seventh indication recently approved in CSU, but a part of the overall growth that we anticipate it will drive double-digit CAGR growth from '23 to '30, generating roughly EUR 22 billion or so by 2030 time frame.

Yes. Let's try again, Emily Field, please?

I'm sorry for the mix up before. Anyways, okay. So on Beyfortus, I was just wondering if you could help us kind of understand the -- or quantify the phasing impact. Was there any incentivizing for stocking ahead of a potential competitor launch? And then in the slides, you also mentioned that you're focusing on increasing the next season immunization rate. Particularly in the U.S., what was the penetration of Beyfortus over last season? And how far do you see yourselves being able to take that up this year? And then a question on brivekimig. I was just wondering if you could give us a little more color on the synergistic component of the MoA given that we know the TNFs alone look inferior to the IL-17s and then the OX40-Ligand your own monotherapy didn't succeed. So I was just sort of curious why you think that the combination there will look better than each on its own.

Okay. Thomas?

Yes. Thank you, Emily. Happy to provide a bit of color there. So just to get started, I want to reassure you or anybody that no, there is no incentive, there was no incentives during the season to stock up Beyfortus ahead of any competitor entry, absolutely not. Now the color is more specifically indeed, as you have pointed out on the U.S. market. I'll give you a couple of numbers and I think that can help. If you look at the overall RSV prevention vaccination coverage rate during the 2024, 2025 season, so let's say, the month of October to February, March, roughly in the U.S., there's a vaccination coverage rate, which is around 55% to 60%, all products included. Of course, the lion's share of that was Beyfortus, which is great. And therefore, it means that we have more to go because above 60%. You know that we expect IgG VCR to be close to the traditional vaccination coverage rate for infants. So there's room to grow, and that's why we're saying that we have a job to do. We need to work on increasing the immunization rate in '25 and '26 to grow and needs to be because all babies need to be protected against RSV. And to give you a bit of color exactly on what we're going to do, I think the qualitative part is important. When we look at the immunization over the past winter, what we saw is that the health community gathered and did a great job at doing preventive measures early on, so let's say, in the month of October, November, where the right interventions were in place. But it got a little bit fading out when you look at the month of January, February and March. And I think that shows that people have not yet fully understood that it's a full season protection, but babies are at risk when they are born in January, March and -- February and March, and that's the job we're going to do this season and the next season. So that's why we're focusing on this, room to grow there. As for Beyfortus for the full year, we've told you last year that our intention is to grow 2025 sales of Beyfortus versus 2024. We're still on that trajectory, and we are focusing on protecting as many babies as possible moving forward.

Okay. Thank you. Houman, do you want to make a comment on...

Yes, brivekimig.

Yes.

Certainly, thank you for the question on brivekimig. I'll structure the answer briefly in 3 parts. One is this is a demonstration of our continuing commitment to internal research at Sanofi. I'm reflective of the comments people have historically made about research and development at Sanofi. And it's a source of particular pride for me to bring in innovation from the outside, but especially do work internally. And these bispecifics are beginning to demonstrate the muscle we have in research as well as development in Sanofi. Point two is you asked the question why would there be combination value in those 2 targets. Remember, of course, that OX40-Ligand is a member of the TNF superfamily as is TNF. The -- we specifically designed the exploratory studies to be able to see whether OX40-Ligand alone or in combination with TNF would make a difference posing the question that you asked in exactly the same way, and I'm really delighted to be able to provide, albeit early with all the caveats that go with early studies and patients, particularly biologic naive patients that, that combination works. The reason it probably works is that TNF itself induces OX40-Ligand on cells. OX40-Ligand licenses multiple cells, particularly T cells by dendritic cells. So I really do feel that we -- the double punch has a precedented biology for synergy. And I've got to say the fact that it really is competitive with best-in-class molecules out there for HS gives me a great aspiration as we move forward with these studies.

And maybe I could add. I mean I think Houman touched on it in terms of this cool work we're doing with bispecifics and things. Let's not forget, I mentioned ATS earlier from '23, IL-13 and TSLP FeNO drop was in excess of the individual mono components. Let's also remember, I think -- and Brian, you correct me if I'm wrong, IL-13 didn't work in asthma on its own. So it's a red herring to think that because you get good or mixed data on one, you don't get a synergistic effect. And there is very definitely something in targeting 2 pathways that 1 plus 1 equals 3. It's the next sort of exploratory battleground for us. I think we're excited about what we've seen.

Yes. Next question is from Seamus Fernandez from Guggenheim. Seamus? Okay. So yes, Seamus.

This is Colleen on for Seamus. Is there anything you can share to help us -- to help us get a sense of your level of tariff exposure to transfer pricing and on Dupixent? And any strategy and steps you're considering that may limit this exposure?

Okay. Thank you very much. François, over to you.

Yes. At this stage, we have no specifics to share regarding U.S. tariffs. That said, we have run through all scenarios, and we will communicate any development if need be, when the time is right. I would really like to help you, but it's difficult to comment on the occurrence of possible future events that are still unknown or speculative at this stage. So there is no certainty beyond what has been announced and what has been announced so far has been fully included in our confirmed guidance for the full year 2025. But to go beyond that would be a little bit complicated because we don't know which country would apply to, which products would be impacted, which rate would be applied, when would it start? So it's extremely difficult for us to comment on a certain number of scenarios, but just be aware of the fact that we are ready and we have fully -- if anything else happened, and we have fully factored whatever has been officially confirmed and announced so far.

Yes, next question is from Ben Jackson from Jefferies.

Just 2 quick ones from me today. First, just a little bit more on the OX40-L TNF approach. With the results that you've seen in HS, does this bridge any kind of confidence that there are additional indications that this combination could be useful for? And does that change the relative positioning that you're thinking about with regards to the broader portfolio? Obviously, we've just mentioned the OX40-L stand-alone there and potentially seeing a synergistic effect. But has this changed how you view any other assets in your portfolio? And then secondly, just on the TNFR1 as well, with regards to the psoriasis readout, has the data that you've seen changed any expectations for the rheumatoid arthritis readout coming up? And then with regard to the combo strategy, I appreciate that you've said that the monotherapy was only a small part of the actual opportunity that you were seeing in the first place, but perhaps could you provide a little bit more color around that and what you see the biggest potential there is for?

Okay. Thanks, Ben. Houman?

Let me start with brivekimig. You're entirely right that the combination of OX40-Ligand TNF is super interesting. What I won't talk about today is the molecular data we got out of those studies, there the molecular data from those studies give us a number of increased leads in what we do. I think it's an unspoken part of being an emerging immunology powerhouse that we have enough internal network strength that we observed from human experiments that we do, and it guides us as to where we can drive these molecules through life cycle management. Short answer to your question is, yes, asymmetric contrarian insights that emerge from our own data allow us to develop further as an immunology powerhouse. And then to your 2 direct questions on TNF small molecule, TNFR1 small molecule signaling inhibitor. The answer to your question is we always knew the psoriasis was a pathfinder indication. What I mean by that is allowed us to identify the differentiated safety profile, tick, it allowed us to establish dosing very straightforwardly, tick. And it allowed us to really understand where we would go in combination therapy. There are a number of disorders, you'll appreciate disorders like RA and ankylosing spondylitis that are very TNF responsive, and we may well end up there in monotherapy. And then there are a variety of conditions that naturally lend themselves to combination therapy. I won't disclose those now, but the biology of those is well precedented.

Yes. Thanks, Houman. I mean it's exciting actually in terms of the opportunities, white space for us, it really was HS. So I think we're very interested to see what the 1 plus 1 equals 3 is and I personally having been involved with TNF for most of my career, the safety piece in the psoriasis study was the piece we were looking out for first, followed by efficacy. As Houman said, that was never our target. But the combinations with TNF as backbone, it's interesting the number of conversations we're having externally. There's a great level of interest in raising the efficacy of other adjacent orals to make sure that we can break new efficacy standards for different diseases. And that was sort of always the goal, and that's now playing out a little bit like that. So of course, lots of work to do to get there, but I think we're feeling pretty positive. Okay. Next question, please.

Yes. Next one is from Peter Verdult from BNP Exane. Peter?

It's Pete here from BNP. Just 2 questions. I'm surprised this one has been asked already. Paul, the letter you and [indiscernible] penned in the FT does make valid and fair points, but we know governments have big commitments to defense spending increases and not unlimited budget. So the simple question for me is, have you had any recent interactions with European politicians that give you hope or should we remain cynical about their appetite to better reward innovation in Europe? And then Houman, sorry, just to sort of labor the point. I know you can't talk about the data, but HS is a big focus for everyone. You know why. So when you are expressing excitement for brivekimig, when we finally see that Phase II data, we're all going to do cross-trial comparisons to the IL-17. So I just want to be clear, are you saying that you feel the data is competitive to the data sets we've seen from the IL-17As and A/Fs?

Why don't you go first and then I'll mention the letter to the FT.

Yes. So you may know I was at a cameo role, maybe a bit more of it than a cameo role in the early days of BIMZELX when I was at UCB and have an intimate knowledge of that molecule in multiple indications. Suffice it to say that brivekimig, in my mind, albeit early with all the caveats that you make about small early exploratory studies is certainly competitive in relation to BIMZELX. And I'm excited to see how it goes forward in Phase IIb and III in due course.

Okay. Thank you. And as for the latter, we've been I think very poised given China, U.S., Europe and the state of things in terms of our expectations. I think for a long time, even before the conversations over the last weeks with the change of administration in the U.S., there's been a long-time campaign to really help Europe understand the value of medicines and investing in them and the quality of jobs and the impact. Very few people fully appreciate that the #1 exporter from the EU is, in fact, pharmaceuticals, of $300 billion plus. We've been public about that. That's been well documented. And I think we have had conversations with the presidency of the EU over the last over the last weeks, just to try and remind everybody of the role that Europe can play in the global pharmaceutical industry and that this is a good moment to express some commitments. Of course, these things have to be said. They don't always materialize in changes in stances. But I think it has to be no regrets from us to try and make sure people understand what we bring to patients while we do it, what it means for countries and for Europe in particular and be very composed with where Europe sits between the U.S. and China. It's delicate as would have mentioned.

Yes, next question from Jo Walton from UBS.

I've got one, I guess, slightly philosophical question about R&D and then one about the situation in the U.S. So the philosophical one is we've seen a couple of what looked like failed results or at least not particularly good results, which have been blamed on very small sizes of studies. So we can't get to increase our probabilities of success until perhaps the studies are bigger. Are there any other of your Phase II studies that are coming out that we may also find just perhaps a little bit too small to give us the answer that we want. And I'm thinking the OX40-Ligand, the data wasn't statistically significant. I mean you're very convinced it's going to be competitive with BIMZELX, for example, in HS, but we can't see that data yet. And the oral TNF, that also seems to be too small a study to be really very clear about it. Could you perhaps tell us whether you think there is still a decent chance of an oral-only indication for something like RA or whether this is really going to always now be perceived as a combination product? And my second question is just in the U.S. And Paul, I'm asking you this as your role in pharma more than from a Sanofi perspective. But if you do get the opportunity to renegotiate the IRA and go from 9 to 13 years for everything, which everybody thinks is -- appears to be what Trump is encouraging Congress to do. Do you think there will be a significant pay away that you will have to give in exchange for that? Because clearly, the CBO would say, well, that's going to cost us much more money. So should we see that still as a net benefit for the industry?

Okay. Thanks, Jo. One of the fastest to connect. Thank you, Jo, Houman?

Yes. So Jo, thank you for the philosophical question. Let me be very direct. I've been very reflective about the comments we've received after disclosure of our results. In an effort to demonstrate an abundance of caution in an effort to be extremely statistically rigorous, I think we may have not conveyed the clarity of the message about the value and success of these trials. And I'm just going to say these very directly and you will see the data, but with the Amli asthma data, we've been very clear that we missed the primary endpoint. But I've been abundantly clear that there is no equivocation in my mind that this is a drug. It will go through Phase III. And with a reasonable wind behind us as with all Phase IIIs, I have significant confidence that it will be successful. So this isn't a function of a small trial. There are always in new exploratory dose-finding studies, a bit of statistical wobble, but my confidence in Amli asthma is unequivocal. Secondly, in brivekimig, the study did not miss its primary endpoint. We went to some pains to craft the language about not missing its primary endpoint. Just to be super clear, the study statistical approach was a Bayesian approach, which we didn't invent actually. It's a Bayesian approach that is very similar to the first in-human for BIMZELX published by Sophie Glatt as the first author and my old friend, Steve Shaw, as the final author. I was there when that study was delivered. It's very straightforward, and I won't explain it here, Bayesian study. The credibility intervals on that molecule did not pass the null point. I won't talk about the exact numbers, but the level of confidence by which we know this is better than placebo, albeit in a super early study, is not just compelling. It's not highly compelling. It's exquisitely highly compelling, right? So we didn't miss the primary endpoint, but we've been really very diligent about not making claims that we might be criticized for later. And then the final question was on this small molecule TNFR1 signaling inhibitor. We have to be humble in the face of disease. We tried this molecule in a disease that isn't exquisitely anti-TNF responsive. We did it because you can judge PASIs on the skin very quickly. We needed to make sure the molecule is safe. We needed to make sure, as Paul has said, had a differentiated safety profile. But we also needed to make sure that we could judge the dose appropriately and skin is a very good way to assess dose response. I think that a disorder like rheumatoid arthritis that is more exquisitely TNF responsive may show a greater relative efficacy profile. But we said from the very beginning that as well as treatment in rheumatoid arthritis and other TNF responsive disorders, we would go into combination therapy. And I feel that the conversations with multiple large pharma partners who have significant provenance in this space is unequivocal, in my mind, validation of the value of this as a combination therapy for those kind of disorders. So philosophically, I think we're in good shape.

Yes. Thanks, Houman. It's a good question because you mentioned could we have had bigger populations. I think you touched on it. I don't want to repeat myself or repeat what you said too much, but it was about safety at least and showing some efficacy in psoriasis before we go in for RA. I think back to the monotherapy question, it would be great to deliver a primary endpoint in RA in -- later in the year. But we'll wait and see because the safety meant that we're combinable. And that was always the subtext. I thought we've been quite explicit, but we will see. There was efficacy. I've been in psoriasis for a very long time, the efficacy bar has already been set. There was really no way to overachieve that. But our alternative was to do -- really start with the RA study, and that would have taken too long. So I think perhaps we took some risk in terms of not delivering the primary endpoint in psoriasis, but I think we sort of understood that. To be clear, we're pretty much at the end of the Phase IIs now in immunology. So in answer to the first part of your question, are we really -- what else might we see or even miss on? I don't really think that's a question at this point. As for the pharma piece, and I think François answered it very eloquently. There's really scan detail in terms of the numbers to be able to make any type of predictions. However, the executive order from last week was reasonably explicit in its intensity. It stepped back a little bit from most favored nation, stepped forward a little bit into what it means for patients and what it could mean for out-of-pocket, and importantly, brought in 340B and PBMs into that narrative. So I would imagine there'll be a pay for because clearly, if you're moving from 9 to 13, there would be. And we'd be delighted as an industry because I think some small molecule innovation was lost in that mistake first time around. I think it looks to me, at least from the executive order and subsequent conversations that it may be a shared responsibility in how we get there to do that. I would hope that's the case. Again, with the administration, we take nothing for granted. We read the executive order, we reflect on it, and we'll see what it means in practical application.

Yes, next question from Graham Parry from BofA.

Great. So I just wanted to go back to the question on tariffs and just sort of push François-Xavier a little bit on that. So based on the administration comments, they have talked about 25% pharma tariffs. It's obviously going to Section 232. And there's a lot of discussion around whether that goes on to transfer prices into the U.S. So perhaps you could just help us by if that's the most likely scenario, what sort of impact could that have on Sanofi, a 25% tariff on transfer prices into the U.S.? How easily could you mitigate that either with prices at one end or with just lowering transfer prices? And with is there a material impact on Sanofi tax rate? And also perhaps on Dupixent, just help us understand where the U.S. supply is coming from? Is it all Regeneron, Ireland and U.S. plants? Or is there a Sanofi impact from Sanofi's European plants as well? And then just following up on the brivekimig question around being competitive. When you say competitive with existing assets, do you mean it's sort of same ballpark? Or are you looking for something here that is better than what's there already?

Okay. Thank you. I mean François show what you are able to?

No. No, no. I wish I could help you, Graham. But once again, I mean, I don't want to start discussing about various scenarios because it's very speculative by nature. Once again, we have -- we are aware of some of the tariffs that are impacting, for example, trade between the U.S. and China, for example, which we have factored in fully in our confirmed guidance for the full year 2025. After that, I don't want to enter into scenario. You are talking about 25% because we could run scenarios at 5%, 10%, whatever it is, on which product does it apply to which country, from which country. Very, very difficult to comment on what is once again relatively speculative as of now. Let me just help you a bit, though on our industrial footprint in the U.S. So regarding our presence and production footprint in the U.S., Sanofi has been even prior to these discussions about tariff, actively increasing its share of manufacturing in the U.S. and specifically biologics drug substance. So we continue to assess our future capacity requirements, and we are considering additional measures, potentially including investment in the U.S. aligning our industrial footprint to the needs of our pipeline and to our expected future growth. So just as we did, for example, our Modulus investment in Europe and in Asia, as we do as well the modernization of our Frankfurt insulin site, we are always exploring opportunities to expand our industrial footprint, including in the U.S. to meet both our production needs and the needs of our patients.

Thank you. Houman?

Thanks for the question, Graham. I think let's just very briefly start with the caveat, which is, as I said to Jo, we exercise an abundance of caution. We don't over-interpret our small studies. We convey the messages very clearly to the outside world because I believe we've attained the level of credibility in R&D that we need to obviously protect. With that said and the caveat that we used, precedented statistical approach that, in fact, bimekizumab used. I think that this molecule has a chance to fall somewhere between the 2 bookends that you provided. And we will find out when we run it in a broader group of patients. I still think, by the way, that, a, it's competitive and the unmet medical need, as we found with psoriasis with this extremely severe skin disorder will continue to progress and emerge. And that's what we're hearing from all the conferences of [indiscernible].

Next question is from Florent Cespedes from Bernstein. Florent?

Okay, we should perhaps move on.

Florent? No, okay. Next question is from James Quigley from Goldman Sachs.

I've got 2, please. So first, on amlitelimab in asthma, apologies if I may have missed that, but you've highlighted your confidence in moving to Phase III given the potential benefits demonstrated. But would you be able to share if you're planning to move into Phase III with the broad population or a selected population or multiple Phase IIIs across different populations? It would be good to get your thoughts there. And how quickly do you expect to move here? And what could be the next steps since starting the Phase III? And secondly, on the gross margin, the impact was pretty strong this quarter with COGS declining slightly year-on-year versus the increase in revenue. So could you give us a little bit more color over the drivers of the gross margin? To what extent is this partly driven by some of the benefits from the new Dupixent manufacturing process? And how would you expect the gross margin to progress through the rest of '25 and into '26?

Thanks, James. Houman, Amli.

So thanks for the question, James. The first point is that it's important to say we've just got this data. We've recently received the data, are in deep consultations with significant KOLs in the space who, by the way, thus far, seem excited by the data. We'll continue that work to define the Phase III protocol fully. We need to make sure the community is with us. But the short answer to your question is that we have unequivocally identified in our Phase II population with high unmet medical need, and we will ensure that, that population is overrepresented in any Phase III study we do.

Maybe I'll add a little bit to that because, of course, we have the benefit of seeing the data. We would never want to put at risk any publications or anything like that. But the population I think Houman's alluding to is a significant percentage of the biologic eligibles, just to be clear. So that's very, very important for us. And I think people need to realize that when we originally went to take on the OX40-Ligand, it was targeted at AD originally. That was the original acquisition. Our base case in AD, not that anybody has asked is that we meet the primary endpoint. That is where we would like to be. And that's our base case. Of course, the science will tell us whether we are right or not. Asthma, the data in asthma is actually very encouraging in terms of safety and efficacy. So we'll wait and see. The thing you turn these cards over, but I think we feel very positive. Gross margin?

Yes. Gross margin, James, if you look at it 5 years ago, we were significantly behind our peers in terms of gross margin, almost 5 percentage points. Today, we are almost at par with our peers in terms of average gross margin. You saw a significant increase in Q1, 2 percentage points from last year. About 1/3 of it is linked to inventory revaluation that happens traditionally up or down, but in that case, it's up in Q1. But beyond that, you have 2/3 of it is linked to essentially product mix and efficiencies. As you know, we have significantly worked in order to improve the efficiency of our industrial footprint over the last couple of years, and we are starting to get the benefits now. And the product mix is happening across the board. It's not only Dupixent. You were mentioning the new Dupixent process. It is one factor, among others. By the way, this one has been spread over a few years. So it's not specific to Q1. And it started already 2 years ago, and it's not completed yet. So it's over a relative long period. Going forward, we do expect to see some further increase in gross margin, not necessarily significant for the remainder of 2025. But over the next couple of years, we will continue to see our gross margin improving.

Okay. Let's try again with Florent Cespedes from Bernstein.

Can you hear me?

Yes, we got you.

So 2 quick questions, please. First, I would like to come back on amlitelimab. Could you maybe give a little bit more color on the percentage of the population with severe asthma that should respond the most to the product? You highlighted the eosinophil or neutrophil. What percentage of severe asthma population these people represent? And my second question is on Medicare Part D redesign. It was supposed to impact most likely the -- more heavily the first quarter and then the impact should ease during the course of the year. Could you maybe elaborate a bit and give some color on the impact from this measure on your accounts?

Thank you, Florent. In the interest of time, I'll just quickly answer the subpopulation question. We've not shared, and we're not trying to help calibrate that at the moment. We'll get into the Phase III, and we can get into more detail on that. Brian, Part D?

Yes. Medicare Part D, remember, there's 2 pieces to this. First piece, and actually, I'll cover Dupixent a little bit more specifically. Just to remind you, most of our business, more than 70% of our business is still on the commercial side, about 30% of it is on the government-based side. A percentage of that is actually Medicare quite specifically. And then there's 2 pieces as it relates to the Medicare Part D redesign. One is obviously the covering the gap there, and that is we've seen a slight impact of that, obviously, as we anticipated, and that was part of our plans. Actually, we originally knew this for quite some time. But the other part that actually is interesting to us is the cap of $2,000 out of pocket. And while we haven't seen an inflection of that yet, there are some early signs that actually there might be more patients up for grabs now with the fact that they have no more than $2,000 out-of-pocket expense. So we'll see how that progresses in 2025. But so far, we think that there'll be some positives and some offset of that actually for the Medicare Part D redesign.

Yes. Next question is from Sarita Kapila from Morgan Stanley.

Can you hear me?

Yes, we got you.

Just a quick one on your U.S. flu vaccine dynamics. I think you called out softer demand and intensifying pricing pressure. So is this baked into your guidance for this year and consensus is factoring 3% sales growth for flu this year. Should we be thinking about '25 as another year of potentially low single-digit declines? And then taking a step back on AD, you have multiple modalities, OX40, also bispecifics with lunsekimig. Some of your peers, Pfizer and J&J are pursuing trispecifics. So it would be interesting to get your thoughts here. Is this something you also plan to do? And any thoughts on trispecifics in AD, sorry, would be interesting.

Okay. Thomas?

Yes. Thank you, Sarita. On U.S. flu, a bit too early to be definitive there because we are still in pre-booking period right now for flu in the U.S. But we wanted to highlight what we observed in this process. You remember that last year, during the flu season, we observed in the U.S. a soft vaccination coverage rate, roughly minus 5% for the U.S. population last year. And that turns out to generate some price competition as we observe it today in the U.S. for the -- during the prebookings. A bit too early. Usually, I give more color on the Q2 earnings after the prebooking season. So stay tuned for the next quarter.

Thank you. Houman, trispecifics?

Yes, I'll be -- we're close to time, so I'll be super brief. Just to say, obviously, we are well aware of trispecifics. Our Nanobody platform allows us to generate tri or quadrispecifics, et cetera. It's an area we've looked at. Just a point of caution, it's very hard to calibrate the geometric interactions between each of the heads, and we don't expect repeated incremental additional value with adding additional biology. But the short answer to your question is, yes, of course, we've thought about trispecifics. And I should say when you talk about atopic dermatitis, I just want to remind everybody that it's a massively biologically underpenetrated marketplace, and there is substantial room for new molecules in that space. We remain committed to Dupixent.

Yes. And just before I move to the last question, I think this is -- we said this at the end of, I think it was '23 at R&D Day. I think it's still not fully appreciated that multiple mechanisms in diseases drive up biologic penetration. I think we're still at low double digit or high single digit, 14% in AD. So 86% of the patients that are biologic eligible don't get a biologic in AD. So we know that RA is closer to 50% at this point and we know that between then and there, there is so much opportunity. And it's new entrants, different approaches. I think this coexisting of different mechanisms is completely underrepresented in forecasting. Still, we see people thinking it's winners and losers. A good example would be the enthusiasm we have, I think Houman said it up top for amlitelimab and Dupixent to both grow very well all the way to the end of patent by taking up new patients and coexist with different approaches. And over time, people's confidence in this approach will play out. But for us, having seen a little bit more data than the rest of you, we're very confident in how that manifests.

Yes, last question from Simon Baker from Redburn.

Most of them have been picked off, so I can be pretty quick. Firstly, just going back to brivekimig. You gave us the p-value Houman. I just wonder, given it's Bayesian study, if you could give us the posterior probability in that study. And then moving back to the oral TNF and thinking about the internal combination candidates, the IRAK4 degrader springs to mind, are there any others that we should be thinking about that you may well combine the or TNF with?

Okay. Well, we'll finish on this, Houman over to you.

Simon, repeat your second question briefly for me.

The combinations. Other oral combinations, the internal and external.

Yes. Thank you. Okay. So Simon, thank you for asking the excellent Bayesian question. I can't give you the posterior probability nor did I give you the probability unless I was hallucinating. Apparently, the probability in the footnote, which is great. So no, I can't give...

You are hallucinating.

I'm hallucinating, I can't give you the posterior probability. But actually, based on the data in the public domain in HS, you could work it out. That's a little test for you. And the answer for you -- but you'll appreciate that based on the data in the footnote, it's compelling. And then the answer to the combos is there are multiple rational combinations. It would be unwise of me to disclose and prior art myself in this discussion. But I think that the natural combinations with the TNF are super clear to people in the art, and we will pursue many of them.

Yes. Maybe just to finish on that note, they're sort of obvious, I guess, based on whether you're trying to break new efficacy goals, could be an IBD, could be an RA, could be in different harder-to-treat diseases. I think the open question we asked ourselves some time ago was whereas TNF approved and indicated, where was it overtaken on injectables by other more selective approaches. And then if you're going into orals, what does that tell you about the combinations that would be ideal because either are likely to not make on efficacy on their own, but together, they would, and that's the magic. So we'll get into that over the coming months and hopefully have some things to share, and we'll do that as we go. But otherwise, thank you all for the call. Appreciate it, and we look forward to catching you in Q2.