Sanofi (SNY.US) Q3 profit far exceeds expectations as strong Dupixent demand cannot offset looming patent cliff concerns

According to information from Zhihu Finance APP, driven by increasing demand for its bestselling skin and asthma drug Dupixent (dupilumab), Sanofi has raised its full-year sales and profit forecasts for the second consecutive quarter. The French pharmaceutical company announced on Friday that, at constant exchange rates, this year’s sales are expected to achieve low double-digit percentage growth, higher than the previous forecast of 10%; earnings per share, excluding certain items, are projected to see mid double-digit percentage growth.

Data shows that Sanofi’s net sales in the third quarter reached €14.444 billion, an increase of 16.2% year-on-year and up 14.3% at constant exchange rates. Among them, Dupixent sales hit €5.7 billion (approximately $6.4 billion), soaring by 34.8% year-on-year and marking the second time in history that quarterly sales surpassed €5 billion. This also exceeded analysts’ expectations of €5.2 billion and drove profits above forecasts. Earnings per share after excluding certain items were €3.55, far exceeding analysts’ forecast of €2.80.

Dupixent’s robust performance offset the impact of declining vaccine sales. The vaccine business was weak due to pressure on flu vaccines and the respiratory syncytial virus (RSV) drug Beyfortus in the US market. In addition, Sanofi’s expenses related to drug sales and promotion were lower than expected.

Highly dependent on a single drug — the “post-Dupixent era” comes into focus

However, Dupixent’s sales performance also highlights Sanofi’s deep reliance on this drug. The drug will begin to lose patent protection in the early 2030s, and Sanofi has yet to find a credible alternative revenue source. Dupixent is jointly developed by Sanofi and Regeneron Pharmaceuticals.

New CEO Belén Garijo stated in a press release: “The entire organization is focused on managing Sanofi’s development trajectory in the next decade — the ‘post-Dupixent era.’ Our top priority is to protect profitability through Dupixent’s patent expiry.”

Belén Garijo has halted the development of several drugs she deemed to have poor prospects and plans to build the R&D pipeline in a more rigorous manner. She also replaced R&D head Houman Ashrafian with former Roche executive Paulo Fontoura.

Investors await major acquisitions; new drugs start to drive incremental growth

Investors are waiting for a major acquisition, most likely targeting assets in late-stage development, in order to get them to market in time to offset some of the Dupixent sales loss. Earlier this year, Sanofi and Regeneron announced plans to expand their partnership, in a deal that could bring the US pharmaceutical company up to $8 billion.

Chief Financial Officer François-Xavier Roger stated that the sales contribution from newly launched products is now higher than before. The new drug Altuviiio, for treating type A hemophilia, and Rezurock, for chronic graft-versus-host disease, both exceeded expectations in sales last quarter.

Roger also noted that Sanofi is looking for larger transactions than before, and the main risk of the targeted assets lies in commercialization. “The amount of capital involved is greater than what we have sought in the past,” he said during a call with reporters.

Roger said Sanofi is expected to update its strategic priorities by the end of the year.

Concerns about growth prospects have weighed on Sanofi’s share price, which has dropped about 8% so far this year. Previous clinical trial results have been disappointing, including for the experimental atopic dermatitis drug amlitelimab and a drug for the treatment of rare autoimmune diseases.