Sanofi (SAN) Earnings Call Transcript & Summary

Hello, everyone. This is Thomas Kudsk Larsen from the Sanofi IR team. Welcome to the third Quarter 2026 Results and Strategy Update for Investors and Analysts. Slides can be found on sanofi.com. Please turn to Slide #2. Here are the 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 the presentation. We also refer you to our Form 20-F on file with the U.S. SEC and our French Universal Registration Document. We'll make comments on our performance using constant exchange rates and other non-IFRS measures Numbers used in millions of euros and for the third quarter of 2026, unless stated otherwise. Turning to our agenda on Slide #3. Our CEO, Belen, will provide an update on third quarter progress and strategy followed by the business results; our CF Francois will review our financials for the quarter. followed by our new Head of R&D Powder, who will share first reflections and thoughts over the past 2 months and also cover the pipeline. For the Q&A, we have the support of Manuela and [indiscernible] Thomas, to cover our global businesses as well as Jamie, our new General Counsel. You can participate in the Q&A in 2 ways, either raise your hand and soon also meet your question using the Q&A feature. Now I'll hand you over to Belen.

Thank you, Thomas. Hello, everyone, and thank you so much for joining us today. First of all, a very warm welcome to Palo Contura, our new Head of R&D, who is eager to share initial reflections and priorities later on this call. I'm now on Slide #5, to start with the progress of our strategy and to signal the progress on execution during the quarter. When we last connected in July, we set out a number of priorities. Today, I can confirm we have made meaningful progress with the support of our Board. After completing a rigorous diagnosis of our starting point, we are progressing well towards defining our road map for the future. We have confirmed our commitment to 3 focus areas: immunology, rare diseases and vaccines where we are highly competitive, we see robust growth opportunities as well as the potential for differentiation. The new leadership team, including R&D, is driving sharper decision-making, including through new governance. Together, we made already our first bold choices regarding pipeline optimization deciding to discontinue amlitelimab and aducanumab. In parallel, we continue to execute on our simplification agenda. The partnership with [indiscernible] that we announced last month, allow us to exit a growth dilutive business while ensuring these mature medicines will continue to reach patients. Planning for Dupixent's loss of exclusivity is our top priority, and we have taken the first step in this direction. We expanded our alliance with Regeneron and hence, gain access to 4 new immunology compounds. This is simply start and we will also turn to be an M&A to secure growth. More to come on this later. While we continue to advance our transformation agenda we stay very focused on maximizing our performance as illustrated by the strong quarter where we delivered both robust commercial and financial results. Moving forward, our journey will be catalyzed by a culture of greater accountability, increasing discipline and rigorous execution, as I already mentioned during our Q2 call. On Slide #6 now, as previously said, our top priority is to secure growth through and beyond Dupixent's LOE. We will build on our strength, notably commercial execution, create value through BD and M&A, leveraging our strong balance sheet and financial resources, and Francois will share more details on these points later on. Between now and 2013, we expect Dupixent's sustained leadership, the momentum of our recently launched medicines and our resilient vaccine business to continue to expand our revenue base. While we reset R&D, external innovation will in parallel play a very significant role. We intend to leverage business development and M&A, including later stage and commercial medicines with a center and shared focus on our 3 therapeutic areas. Disciplined bolt-on acquisitions will continue to further support the development of our early stage pipeline. And additionally, we plan to source innovation globally, including from China, which, as you know, is a driving hub for scientific advancement. Beyond 2030, we expect a stronger and more productive R&D engine to become a larger source of innovation than today, and this will complement external opportunities and help propel our growth trajectory. On Slide #7, I'll share with you in Q2 that our alliance with Regeneron was a strategic priority for me and the leadership team. Since then, we have delivered on our objective to define the next chapter of this partnership in a matter of a few weeks. This relationship has already been recognized as one of the strong and success stories in the pharma industry with Dupixent, and that is the foundation from which we are building for the future. Benefits from Sanofi, as you see on the slide, span well beyond the next 3 years. This is no doubt a win-win where both companies are equally incentivized to succeed with focused investment and payouts linked to milestones, driving disciplined value creation. [indiscernible] the long-acting IL13 in atopic dermatitis strengthens our leadership in the large and growing AD market capitalizing on physician and patient preference for sustained efficacy and safety with less frequent dosing. Importantly, we aim to launch this medicine ahead of Dupixent biosimilars. The ability to leverage our commercial infrastructure, grounded on specialty-rich differentiated payer access and world-class patient services is expected to drive faster uptake. The expanded alliance shows our ability to execute swiftly on our priorities, driven by transparent discussions and building trust as shown by the settlement of previous litigations. In summary, this transaction is an important first step to replenishing our earlier stage pipeline. But beyond this alliance with Regeneron, we will continue to build on our immunology leadership, both through external and internal innovation to secure sustainable growth well into the next decade, and this includes other important partnership, for example, the 1 with Teva for [indiscernible]. Let me now summarize how we are preparing for the next decade on Slide #8. Between 2026 and 2030, our strategy will be focused on disease areas within immunology, rare diseases and vaccines. We will continue to drive profitable growth through strong commercial execution and cost discipline, alongside robust cash flow generation to fund business development and M&A transactions, in particular with a focus on late stage and/or commercial opportunities. In parallel, our R&D transformation is already underway with the aim of enhancing our pipeline and our R&D productivity. Beyond 2030, we aim to further capitalize on internal pipeline contributions to diversify our sources of growth. We expect total revenue at group level to be impacted only moderately by Dupixent's LOE with our focus being on preserving earnings and cash flow. Once this is achieved, we will focus on accelerating earnings growth. As our progress since Q2 shows, we are fully committed to executing on our plan and moving with the necessary sense of urgency. We intend to keep moving at the same pace and look forward to providing greater granularity on our priorities and mid- to long-term road map during a strategic update before the year-end. Now turning to the Q3 business performance on Slide #10. Q3 was another quarter of strong growth. Our total sales reached EUR 14.4 billion, up 14.3% versus last year. Our pharma launches grew over 31%, driven mainly by ALTUVIIIO, [indiscernible] and [indiscernible]. Vaccine sales were impacted by respiratory vaccines facing this quarter. The increase in other medicines was driven by the diabetes portfolio, partially offset by divestments and legacy medicines. Dupixent again delivered a strong performance, surpassing EUR 5 billion for the second consecutive quarter, with the growth coming primarily from increasing demand. Overall, this quarter reflected the strength of our core growth drivers. Moving on to Slide 11. The momentum of our portfolio of newly launched medicines and vaccines is providing a meaningful contribution already to our top line. In Q3, we welcomed a new medicine into this portfolio and [indiscernible] globaliticinib, the first [indiscernible] inhibitor for patients with myelofibrosis in China. Sales of new launches reached approximately EUR 2.2 billion in Q3, a growth of 19.2%. This portfolio now accounts for roughly 15% of total company sales, showing the ongoing diversification of our business growth. Turning to immunology on Slide #12. Dupixent sales reached EUR 5.7 billion in the quarter, and more than 1.5 million patients are currently under treatment globally. U.S. growth was driven by a strong demand, as I already mentioned, and by an extended benefit from operational improvement, which resulted in favorable gross to net price adjustments. In the U.S., Dupixent remains the #1 prescribed biologic among key prescriber groups. Outside the U.S., strong growth was driven primarily by demand from market expansion across major indications in Germany, France, in Japan, Canada and China. On Slide #13, we see rare diseases, and our rare disease portfolio reached EUR 1.9 billion in sales, up by 12.6%. Mast cell and other performance was driven by baked with increasing number of patients starting therapy. This category also includes 3 new medicines, [indiscernible], [indiscernible] and [indiscernible] now available to Chinese patients. Rare blood performance was supported by ALTUVIIIO's continued growth momentum, complemented by recently launched medicine, [indiscernible]. Lastly, sales from medicines for lysosomal storage disorders remained resilient despite short-term supply constraints for some of our [indiscernible] medicines. Overall, rare diseases delivered another strong quarter of growth. Moving to vaccines on Slide #14. Remember that at Q2, we have indicated the potential for a low to mid-teens sales decline in Q3, reflecting the [indiscernible] of our respiratory vaccines. While flu was down as expected, the franchise declined by 7% versus Q3 of last year, which is better than indicated in Q2, thanks to more favorable buying patterns than anticipated for Beyfortus late in the quarter. On PPH, [indiscernible] grew by 60% on a pro forma basis to EUR 125 million, well ahead of our initial acquisition plans. Overall, the franchise of vaccines demonstrated strong resilience in a dynamic market environment and for the full year we expect vaccine sales to be down by a low single-digit percentage. And with this, I'm now going to hand it over to Francios, our CFO, who will take you through our financials in more detail.

Thank you, Belen, and hello, everyone. Starting with Slide 16. Net sales grew strongly again in Q3, up by 14% to EUR 14.4 billion. Dupixent continued to see strong growth, driven by demand and by favorable gross to net adjustments. We have also made operational improvements last quarter that have had a positive impact on pricing, for example, controlling the inappropriate use of 340B rebates in the U.S. and enhancing our growth to net provision management with data-driven tools. Our pharma launches maintained solid momentum and vaccines were impacted by unfavorable sales phasing in Q3 versus last year. If you exclude the items that are more one-off in nature, the underlying group sales growth during the quarter is estimated at around 12% in Q3. Gross margin improved by 2.1 percentage points. This was driven by a favorable product mix as well as by the pricing impact highlighted earlier. Operating expenses were basically stable as OpEx of acquired businesses were almost fully factored into our cost base last year, and more importantly, as we execute very strongly our cost discipline programs including R&D prioritization. BOI increased by 19.7% in Q3. BOI margin expanded by 1.9 percentage points, driven by operating leverage. This was partly offset by higher profit sharing with Regeneron, reflecting Dupixent strong growth, and our Q3 BOI was also impacted by the end of the Regeneron development cost reimbursement that took place at the end of Q2. Overall, business EPS grew by 19.6%, delivering profitable growth once again this quarter. Turning to business dynamics on Slide 17. As Belen highlighted, we expect vaccine sales growth to decrease by low single digit in 2026. We also expect other operating income and expenses to increase in Q4 versus the prior year, driven by the net impact of 2 opposite factors. On the 1 hand, Regeneron profit sharing has steadily increased reflecting Dupixent strong growth, and in addition, the reimbursement of the Regeneron development balance indeed Q2, resulting in a BOI headwind of about EUR 500 million in H2 2026, evenly distributed between Q3 and Q4. On the other hand, capital gains for the full year 2026 are now expected to be lower this year at around EUR 250 million, with most of it already booked to date. The end of the R&D reimbursement by Regeneron will be fully offset by the increase of [indiscernible] royalties for the full year 2026. We are upgrading our 2026 guidance to reflect the strong business momentum to date. We now expect sales to grow at low teens percentage which usually means a range of 13% to 15%, and we expect EPS -- business EPS to grow at a mid-teen percentage, which usually means between 15% and 17%. Now a quick word on 2027. While I do not intend to provide the formal guidance today, it's too early, I would like to flag a few items for early consideration. In previous years, our sales growth has been driven by demand with a slightly negative price component. This year, sales growth is also driven mainly by demand, but as highlighted before, we also experienced several positive price effects. Some of these are creating a new price base, while others are one-offs. While we expect our growth to be driven by demand again next year, we also expect pricing to return to its historical pattern in 2027, which means a slightly negative pricing contribution to our global sales growth. As announced earlier this year, we are continuing to actively manage our legacy portfolio as evidenced by some business contribution and asset contribution to [indiscernible] and as evidenced by the sale of Medley, our generic business in Brazil. Both transactions will reduce our sales next year by around EUR 1.3 billion, but they allow us to focus on science and to exit margin-dilutive businesses. Turning to Slide 18, which echoes the strategic priorities Belen outlined earlier. We have a very strong cash flow generation, which enables us for capital -- for disciplined capital allocation, including BD and M&A. We expect industry-leading growth until 2030, driven by continued momentum for Dupixent, new launches and vaccines alongside our resilient base business. We are accelerating profitable growth with steady gross margin expansion as well as continued operational excellence and strict cost discipline. Lastly, strong balance sheet and low leverage allow us to access external financing for BBN M&A while retaining a strong investment-grade credit rating. We confirm our commitment to our dividend policy as reflected with 31 consecutive years of dividend increases in absolute value in Europe. I now hand over to Paolo, our new Head of R&D, who will share the latest development of our pipeline.

Thank you, Francois, and hello, everyone. I am delighted to join Sanofi at this pivotal moment as we tackle the industry-wide challenge of sustaining R&D productivity. Tackling this problem requires addressing multiple interconnected factor, a bit like treating a complex chronic disease. R&D is really no different from that. There's no one simple solution. Success depends not only on strong science and individual capabilities, but on how well we connect and make sound decisions and align around shared goals. We are building on our strengths, deepening collaboration. We can create a more integrated, agile R&D organization that translates scientific innovation into meaningful benefits for patients. On Slide 20, let me share some initial reflections from our first 8 weeks. In research, we intend to leverage our platforms better, accelerate the integration of AI in drug discovery and expand access to external innovation. In development, we will put rigorous evaluation of data and science first, continue to expand the use of adaptive study designs and build a balanced risk pipeline with few high-risk, high-return opportunities at a manageable overall risk profile with disciplined execution. Across R&D, globally, we intend to sharpen our portfolio focus around our core areas while pursuing selected moonshots, further strengthening governance through technical reviews and increased talent density overall. Above all, we will act decisively to build a sustainable pipeline. Now on Slide 21, turning to our pipeline status in key focus areas. Our pipeline comprises 61 development projects across pharma and vaccines, including 36 new molecules. While we lack peers, we have complete actions to close this gap. AI will be a key lever across the R&D value chain. We are going to use it to accelerate discovery through target identification, screening for combinations and AI design candidates while enabling faster data-driven decisions and higher clinical success rates, ultimately shortening development cycles. Our ambition is to deploy integrated AI agents company-wide and to expand strategic partnerships in this area. China is another important source of innovation with an ecosystem that reaches translational efficiency faster. We intend to leverage these capabilities to shorten clinical time lines, reduce costs and accelerate patient access to innovative treatments. We will keep on building strong relationships with the local biotech environment. On the appendix slide, we highlight some of our China deals, including the commercial agreements for [indiscernible] and [indiscernible] clinical development collaboration with Anshu. On Slide 22, let me go through some of the Q3 highlights. We received the Ayvakit 50-milligram U.S. label expansion in indolent systemic mastocytosis and then quad fee in the EU from hinge cockle disease from 6 weeks of age. Wayrilz was accepted for review in the EU for Stage 2 type 1 diabetes in children age 1 to 7. We also received 2 regulatory designations the Fortis priority review in China for the second RSV season and SP-0289EU prime designation for pandemic H5 influenza. On Slide 23, and building on Belen's remarks, we've expanded our alliance with Regeneron to bring 4 next-generation long-acting monoclonal antibodies targeting type 2 inflammation from the VelocImmune platform. The first is an anti-IL13, which is already in Phase I for atopic dermatitis with potential dosing every 3 to 6 months. Registrational studies are expected to start in late 2027 or early 2028, positioning it as a potential follow-on to Dupixent as early as the beginning of the next decade. The other 3 are set to enter Phase I studies in 2027. We have an anti-IL4 receptor alpha antibody with potential to succeed Dupixent with the improved properties on higher affinity in longer half-life, an anti-IL4 antibody for combination use and a bispecific IL4, IL13 antibody blocking both pathways in a single molecule. Separately, Sanofi will complete the ongoing lunsekimig COPD program with readouts expected in 2029. And Upon completion of the 2 Phase III studies, there will be the option for Regeneron to bring this [indiscernible] into the alliance portfolio. On Slide 24, let me talk about our research platform. where we are doubling down on replenishing internal innovation. We have approximately 2,000 colleagues across pharma and vaccines research with main sites in France, Germany, the U.S. and China whose role will continue to grow. Our capabilities currently span biologics, synthetics and genomics and our priorities are to build a sustainable, high-quality portfolio in our focus areas while selectively exploring wide spaces and moonshots in areas of emerging science. We aim for a balanced, lower risk portfolio with a 50-50 internal/external sourcing split, increasing contribution from China and upper quartile speed and cost performance. As the chart shows, we are ramping up output across pharma and vaccines with the ambition to start [indiscernible] 15 first-in-human studies each year while maintaining the highest quality standards. Turning to Slide 25. Our approach in development is guided by robust data-driven decisions. when the evidence supports advancing the program we invest when it doesn't, we reallocate resources. Following a thorough and ongoing benefit risk review, we decided not to pursue global regulatory submissions for amlitelimab in atopic dermatitis, and we also discontinued itepekimab development in COPD and chronic rhinosinusitis, reflecting the available data and competitive landscape in these areas. [indiscernible] continues with Phase III studies in COPD and Phase II study in high-risk asthma that the Phase III results in moderate-to-severe asthma were encouraging, but differentiation remains to be established. For [indiscernible], we are exploring potential additional indications while focusing on execution, differentiation and generally expanding options for patients with IBD. In neurology, the frxelimab Phase III program across multiple sclerosis is ongoing with study adjustment for longer observational period to capture sufficient events and strengthen statistical power. Finally, [indiscernible] has had a limited launch in Germany under strict risk management program with encouraging initial feedback, but we do not plan to expand this development program. On Slide 26, let me share our key mid- and late-stage development portfolio. While the strategic assessment of our pipeline is ongoing, we continue to advance a portfolio of important medicines and vaccines for patients with several key data readouts expected in the coming months that I will highlight on the next slide. Let me now turn to Slide 27, and our expected news flow. Next year, we expect Phase II data for lunsekimig in high-risk asthma and [indiscernible] in hydrogenative, followed by multiple Phase III readouts, including really proactive CIDP versus IVIG and our pneumococcal and yellow fever vaccines. Including any weight, we expect Phase III readouts for duvacatab in ulcerative colitis, railways, life cycle indications and fixelimab in multiple sclerosis. Beyond these clinical milestones, we also anticipate multiple regulatory submissions and decisions for medicines and vaccines already under review. Before I conclude, I want to thank all our colleagues across Sanofi R&D for the continued commission throughout this period of change and for their unwavering focus on bringing new medicines and vaccines to patients.

[Operator Instructions]

The first question is for Matthew Weston from UBS.

Two questions, please. The first, I think, probably for Manuela. Looking into 2027, your Dupixent competitor is getting much more vocal on Egleston stepping up DTC. Given we're solidly in PBM negotiating season, can you let us know whether you think there's any risk of major formulary changes next year or net price movements? Or are payers prepared to support all of the products like they did this year. And just quickly following up on the comments around more normal trends for Dupi in 2027? Should we expect the normal step down in gross to net price in Q1 that is just the traditional seasonality? And then a second quick 1 for Pablo. You used the term registrational-enabling studies for the long-acting IL13. Is that Phase III? And I asked because it triggers a milestone?

Very good. So thank you, Matthew. First of all, about your question on PLS DTC, I think, the first thing that I will say across all indications, and the same is true for atopic dermatitis, we're very pleased with Dupixent's performance in Q3, but also throughout the year. The vast majority of that performance is driven by demand. And that is true also for atopic dermatitis. What you will remember is that advanced therapy penetration in atopic dermatitis and almost all the other indications are still very low. We're talking about 20% advanced therapy penetration in AD and by [indiscernible] and other competitors, but also ourselves, educating patients through DTC and other means you're actually helping create more awareness for all products in this space, and that's what we need. We need more patients to come into advanced therapies, including Dupixent, and with us having the majority of the market share in this space, we will also have the majority of the benefit. But again, more players in this space is going to help actually create more awareness, more market growth, and that's ultimately what we want to see more benefits for patients. On your second question for 2027, we've had an amazing year this year. We obviously created a larger base than for comparison for next year. So we expect year-to-year growth to moderate. But we also expect that demand growth will continue. You will likely see the same Q1 adjustment that we see in the U.S. every single year. But again, demand growth will continue to stay strong also in 2027.

Thank you, Matthew. Just to clarify, currently, the status is that we started the Phase I studies in the Q2 of this year, and the studies are ongoing right now. We are looking forward to seeing the full Phase I data, which includes PK and safety. So far, the data looks good. And of course, we will -- if those data continue to be positive, accelerate towards Phase III studies.

The next question is from Luisa Hector from Berenberg.

A couple from me, please. So maybe just to remind us on M&A, business development, your capacity for deals now that you've struck the Regeneron with the payments there, so this capacity of the deals, perhaps a little bit more color on how this is different from before because M&A was a strategy previously? So how do you think about it differently to before? And then on the comments -- the slide that mentions reclimb and the optimization of those Phase III trials, can you explain anything what that optimization? And are there other trials which have been similarly optimized and thinking, for example, in [indiscernible] COPD, maybe some of the HS trials. So just keen to get any color there from Palo.

Thank you, Louisa. Let me start with what is different from before and then I will ask Francois to speak about the capacity for deals. So as I mentioned, we are laser focused on ensuring growth beyond Dupixent LOE, ensuring that we mitigate our BOI impact. We know that the pipeline and the R&D resets will take a bit of time to materialize and bear fruits. So the reason why we are moving to later stage commercial assets will allow us to derisk scientifically and clinically, but also leverage our commercial capabilities much better. [indiscernible], I have to once again emphasize that we will stay extremely disciplined to ensure that any deal, regardless of the size, fits our strategic scientific and financial criteria. With this, I -- Francios, perhaps you can comment on capacity.

Thank you, Belen, and good afternoon, Louisa. I know that everybody is looking at an amount. So I'm not in a position to give you a matter I wish I could First of all, because we are looking at a different set of options in terms of BD M&A. It's not necessarily 1 asset 1 asset could be different deals and several deals and transactions as well. It's less a matter of value. It's exactly what Belen just said. First and foremost, it's about strategic intent and scientific relevance, and then obviously, from a financial point of view, first of all, we are conservative people. So we have a conservative financial policy. So it's driven by returns, obviously, and it's driven by outcome. And by outcome, what I mean is that we want to retain a strong rating anyway. So that puts a limit to a certain extent to what we can do because we do intend to retain a strong rating. And as you heard me saying earlier, we are totally committed as well to our dividend practice, where we have increased our dividend for 31 consecutive years.

Now turning to your question, Luisa. So first of all, thank you I would say this is very much 1 of my areas of focus in my first 8 weeks here, and we'll continue. We've gone through and I'm going through the whole pipeline and speaking with the teams looking at the ongoing studies and what else we can do or should be doing to increase probability of 6. So very specifically on the fexalimab program. This is a Phase III program that, as you know, is being studied both across relapsing and secondary progressive multiple sclerosis patients. The trials are fully enrolled right now. These are superiority studies, looking at analyzed relapse rate and firm visibility worsening at 6 months as a key endpoint. And the trials were designed as event-driven trials. So as part of what we've started since I came in, which is a very thorough technical review process of all of these studies, we continuously monitor how the trials are performing. And in this case, we feel that prolonging the observational period for that -- for those studies actually allows us to collect sufficient events that will sufficiently power the studies for the intended statistical analysis plan. I would say that's one of the, let's say, more impactful decisions in the short term, but this is certainly an ongoing process.

The next question is from Sachin Jain from BofA.

Sachin Jain, Bank of America. Two questions, please. Firstly, for Belen, I think in your intro commentary, you mentioned the potential for strategy event by year-end. I mean you previously indicated you would do that you had enough to say. So should we be hopeful of M&A by year-end? Or what would you think you could discuss over and above what you've talked about today? The second question is for Francois on margins. Obviously, the quarter is evidenced by very strong cost control. So maybe you can just update on your thoughts on margin development into '27? Prior comments have been, I think, flattish to where do you sit now. And if I can add an addendum to that, I know you use consensus for [indiscernible], but a substantial debate overnight on the Alnylam call regarding our '27 outlook. So just any thoughts there.

Thank you, Sachin. Look, our strategic event is aimed to bring additional clarity to you and your investors and our investors on the disease areas where we intend to play and not to play, how we aim to mitigate the Dupixent LOE and long-term ambitions, including how are we going to deal with the R&D turnaround. So Paulo shares and impressions, but I think it merits a bit more color so that you understand what we are going to be doing in coming months. And of course, showing to you our capital allocation strategy and framework, including the role of BD and M&A in our long-term trajectory. Of course, this is regardless of any potential event that can be communicated at any time before the end. I think that covers your question.

There's a question on cost control. So Sachin, on cost control, Indeed, we are very pleased by what we have seen in Q4 -- in Q3, and you will see the same in Q4, which is strong growth. And alongside basically flat OpEx, which means that we get the fall-through into the bottom line and we get the benefit of the growth leverage. It's too early to give some guidance on '27, and this is not the right time to do it. But that being said, we expect probably something similar, which means profitable growth, which means that we will have a certain level of growth, which I don't want to comment at this stage, but our cost base will grow at a lower level than our sales. So we do confirm what we have confirmed in with what we have said for a few -- for some time already, which is, we will increase our BOI in absolute value next year as well as in BOI margin. And by the way, it's not only for '27, we expect to do that each and every single year between now and 2030. So profitable growth each and every single year. And that in spite of 2 things, in spite the for '27, the impact in H1 '27 of the end of the R&D reimbursement because we get the impact in H2 '26, but we will get the impact as well in H2. But in spite of that, we expect to grow our BOI in attribute value and in BOI margin. As far as [indiscernible] is concerned, we took note of what they announced yesterday. We don't see any impact for 2026. We're already well advanced. You can see anyway that we will get probably EUR 1 billion of royalties from Ambua this year in 2020. I don't see any change versus what we had in our plan. As far as '27 in the following years, it's concerned, I need a little bit of time to update our model because we are not speculating to a certain extent on the level of royalties going forward. We are taking the consensus from the market tracked from sales of as provided by analysts. So I wait a few days to see a little bit what that means for the medium term. It may have some moderate impact going forward for us from '27 to 2030, but it's still early for me to comment. I'm not necessarily worried. I don't think that this will be that material for us.

The next question is from Michael Leuchten from Jefferies.

Two questions, please. One, Francois, just going back to your comment just now when you talk about the OpEx growth below sales for 2027 and '28, is that purely organic? Or are you already leaving some wiggle room here for M&A/BD that may come into the equation? So if you did something that came in R&D, can be talked into your outlook? Or would that be incremental to what you just said? And then a question for Paolo. My understanding is you've joined with one remit to really focus a little bit more on research as opposed to development, which I think is what your slide was all about. Now managing for speed of execution it's all well and good. But can you talk a little bit about how you're going to think about getting assets into the organization that allow you to be quick with? Or is there enough there that you can go through? So like getting the stuff to work on that you then can speed up and deploy the staff that you outlined to? Like how do you think about that?

Michael, I would say difficult to answer to your question. My comment, obviously, for '27 is based on an organic growth next year, plus we always factor some bolt-on in terms of acquisition. After that, as long as we have not announced anything or done anything in terms of BD/M&A, if there was anything more significant than bolt-on, difficult for me to reflect and to comment on that because we have not announced anything. So let's see what the future will be made of. But once again, it's based on organic growth plus the traditional bolt-on that we have done traditionally over the last couple of years.

Yes. Thank you, Michael. Maybe 1 point before the full answer. My focus is not only on research. My focus is across the whole R&D value chain. And the research is definitely very much a part of that. But we're looking at development deeply as well as we speak even right now, and you saw the comments I made about the review of the pipeline and increasing the property of success for our ongoing study. So Again, the focus is very, very end-to-end. Regarding your question specifically, we do have some very good internal assets, both in research as well as in development, and we're going to maximize their use. We have the ongoing review for all of them. But again, if there's an opportunity to either increase their PTS, increase their speed, expand their use across more line extensions, et cetera., we're looking at all of those things as we speak. Internally, we have a number of partnerships that I'm particularly excited about. We -- I don't need to go into those details. But it's also clear from my comments that this is not going to be enough for us. So we are doing -- as we review the ongoing internal pipeline, we are looking at many opportunities to either strike collaborations, Belen and Francois already mentioned the opportunities for BD and for M&A. Obviously, the expansion of the alliance with Regeneron is something I'm very excited about. This is a great company with amazing scientists and the assets we're getting in from that collaboration are going to be really key for us in one of our core areas of strength. And then just to finalize what I want to make sure as well is that we are expanding not just in traditional biopharma, if you want, we're also incorporating AI technology very much in research but across research and development with 2 different intentions, if you want. On the research side to increase the research funnel, to have more targets, more drugs, more diversity of chemical space, and in development to do there to focus on speed, efficiency, delivery. But I would say this is a very encompassing end-to-end strategy right now.

The next question is from Richard Vosser from JPMorgan.

Two, please. Just on the back of Paolo's comments there, how should we think about the R&D spend going forward? There's not a lot of late-stage development at the moment. So should we anticipate even spend being slightly down in '27 before increasing again or a flat budget? Just thoughts on that. And then secondly, just going back to Dupixent. It sounded from the comments that we should anticipate volume growth with a little bit of price decline next year. I mean that sort of pushes towards almost the EUR 25 billion level even next year. So just wanted your thoughts on that sort of thinking.

Maybe I'll take that first part. So it's a great question. Sanofi already has a very significant investment in R&D. We don't expect it to really change much in the next year. The focus will change though. Because as you say, of course, the late-stage pipeline is now shorter. We are looking at existing molecules to see what else we can do with them. So you might see some additional trials, indications, et cetera, but where we're actually pivoting towards is the earlier stage in research. So we will increase definitely investment there, including in AI, as I mentioned. And of course, as we bring in these new molecules, including the regn molecules, we may increase investment there. But overall, our commitment to investing in R&D is the same as it was.

And on the Dupixent question, Richard, as I said earlier, we definitely expect that the strong demand growth will continue. But when you look at it on a comparable basis, the base, of course, increases, and therefore, the growth will moderate. But having said that, when we look at the EUR 25 billion, and that was a number that we gave at constant exchange rate, we're very confident that we will -- that we can confirm that by 2030. At this point, we're not prepared to talk about an acceleration here. But definitely, strong growth. We're very happy with the growth, and we're definitely confident that we will get there.

The next question is from Peter Verdult from BNP Paribas.

I'll be employed. And 2 questions on R&D and Dupixent, please. Paolo, given your own 2 months in, but just a bit more on how you're trying to improve R&D culture and scientific rigor at SNF given over and above what you laid out in your prepared remarks. And I'm asking that question given that I think 60% or over 60% of your majority of your head count is based in Europe. So is this about just upgrading talent? Is it bringing clinical trial operations more in-house? Is there a significant R&D reveal coming? And how do you keep your scientists at neurology and oncology motivate given that the focus is clearly going forward going to be rare disease and immunology? And then for Belen and/or France, if I could just build on the prior question around Dupixent. I mean your 5-year growth at least 5 years of growth left. You're annualizing at EUR 25 billion, what stops this franchise from topping EUR 30 billion, EUR 35 billion at peak? And just shorter term, anything around the 340B litigation so that the industry and Sanofi is an example, but across the industry, we're seeing better policing of the 340B discounts, but starting to push by litigations. Just want to make -- just check in on...

Peter, your line is breaking up. So let me -- can you repeat the questions? So just to confirm, R&D culture and scientific [indiscernible] geographical location. And the second one is what [indiscernible] EUR 30 billion to EUR 35 billion [indiscernible].

I'll take the first one. So what I mean by changing the culture and R&D, to have more scientific real part of it is, obviously, let's say, intangible, it has to do with having the right conversations through seeking behaviors, pushing on the data, the review of these programs. Part of it is actually now entrenching our new governance. So we have now established a thorough scientific review as a technical review governance that will act in parallel to the normal governance of all of our portfolio. These starts in the preclinical stage, continues in development all the way through, and it's an ongoing dial. So that is clearly a change for something which we didn't really have or didn't have institutional, as I would say now is very much core to our new ways of working. Regarding the organization, I think it's a bit premature now. One thing is clear, we want to have more of an end-to-end integrated therapeutic area focus to also be able to be deep in those areas where we are working to attract the right talent and also to ensure the right ownership of that pipeline. So that's already ongoing now. And in terms of location, et cetera, I think we're fortunate to have great talent in Germany, in France, in the U.S., in China. We don't really envision or I don't look at talent in the geopolitical lens. I know we have strong capabilities. I want to make sure that we create a system in which those people can thrive and do their best job. And then maybe finally, on one aspect, and I know I keep coming back to, but it is the integration of new types of talent as well, including if we want to be players in AI, we have to be open to new sorts of talent and where those talents are. It's a very competitive area, and we want to be leaders in it as well.

Peter, on Dupixent, we just upgraded our guidance to EUR 25 billion. As Manuela just said, we are very confident about it, especially so that the latest news on the foreign exchange seems to support anyway, the EUR 25 billion. Be assured that if we can go to beyond that, I mean, we are working on it on a daily basis, but I don't think this is the time to do it anyway. As I said earlier, we are conservative. When we give a guidance, it was the idea to meet or exceed this guidance. For the time being, we stick to the EUR 25 billion, but be assured that we are working towards -- I mean, even to get even more if we can. But this is not the right time to do it now anyway. We talk each every 3 months. So let's see how it goes in the next couple of quarters.