Sanofi Q3 FY2026 earnings call

• Strategic Focus: Confirmed commitment to three core areas: Immunology, Rare Diseases, and Vaccines. Prioritizing growth beyond Dupixent's loss of exclusivity (LOE) through commercial execution, business development, and M&A.
• R&D Transformation: Discontinued AMLI-Telemap and Itepecimab to optimize pipeline. Expanded alliance with Regeneron to access four new immunology compounds, including a long-acting anti-IL-13 aimed at launching ahead of biosimilars. Emphasized integration of AI in drug discovery and leveraging innovation from China.
• Operational Excellence: Implemented data-driven gross-to-net management tools, resulting in favorable pricing adjustments and improved gross margins (+2.1 percentage points). Executed cost discipline programs, keeping operating expenses stable despite growth.
• Capital Allocation: Maintained strong cash flow generation to fund BD/M&A while preserving investment-grade credit rating. Committed to dividend increases for 31 consecutive years. Exited margin-dilutive businesses via partnerships/divestments (e.g., Teplafarm, Medley Brazil).

Total net sales reached €14.4 billion, up 14.3% year-over-year. The Pharmaceutical segment grew over 31%, driven by new launches including Altuvio, Ixifi Kit, and Resuro. Dupixent sales surpassed €5 billion for the second consecutive quarter, reaching €5.7 billion in Q3, with growth driven by demand and favorable gross-to-net adjustments. Rare Disease portfolio sales rose 12.6% to €1.9 billion, supported by Ixifi Kit and Altuveer. Vaccine sales declined due to unfavorable respiratory vaccine phasing, though EpHIBa B exceeded expectations. New launches contributed approximately €2.2 billion (19.2% growth), accounting for roughly 15% of total company sales.

• Upgraded 2026 full-year sales growth guidance to low teens (13%-15%), reflecting strong business momentum.
• Upgraded 2026 Business EPS growth guidance to mid-teens (15%-17%).
• Expected vaccine sales decline for full year 2026 is limited to low single digits.
• For 2027, expect sales growth driven primarily by demand, but with pricing returning to historical patterns (slightly negative contribution).
• Projected profit share increase with Regeneron and end of R&D reimbursement will create a BOI headwind of ~€500 million in H2 2026/H1 2027.
• Capital gains for 2026 expected to be lower (~€250 million).
• Legacy portfolio divestments (Teplafarm, Medley) will reduce 2027 sales by ~€1.3 billion but improve focus.

• Dupixent LOE: Significant revenue impact anticipated post-2030; strategy focuses on mitigating this through new launches and external innovation.
• Competitive Landscape: Increasing competition in immunology (e.g., Ebglis DTC campaigns) and biosimilar threats to Dupixent.
• Regulatory/Legal: Ongoing 340B litigation risks in the US could impact future pricing structures and net revenues.
• R&D Execution: Risk associated with R&D turnaround timeline; need to prove internal pipeline productivity and successful integration of AI/China innovations.
• Macro/Exchange Rates: Revenue and earnings sensitive to foreign exchange fluctuations and global economic conditions.

Q: Analyst asked about 2027 formulary risks for Dupixent amid competitor DTC campaigns and whether Q1 price adjustments are seasonal.

A: Management stated that advanced therapy penetration remains low (~20%), so increased competitor activity helps grow the overall market and awareness, benefiting Sanofi's dominant share. They expect demand growth to continue strongly in 2027, with typical Q1 gross-to-net adjustments occurring but not undermining sustained volume growth.

Q: Analyst inquired if the Regeneron alliance allows acquiring late-stage/commercial assets from them and how M&A differs now.

A: CEO confirmed flexibility to pursue deals inside or outside the alliance independently or jointly. CFO emphasized a disciplined approach focused on strategic relevance and financial returns, maintaining investment-grade ratings and dividend commitments, rather than just deal size.

Q: Analyst asked about R&D spend trajectory given shorter late-stage pipeline and excitement over specific assets like Prenalima and Frexalima.

A: R&D spend expected to remain stable, shifting focus to earlier-stage research and AI. CEO highlighted excitement for Prenalima (convenience/efficacy) and Frexalima (new MoA for MS/T1D). Clarified that capital will concentrate on Immunology, Rare Diseases, and Vaccines, potentially leading to out-licensing or divestment of non-core assets.

Q: Analyst questioned the magnitude of one-off gross-to-net benefits in Q3 and sustainability into 2027.

A: CFO noted underlying sales growth was ~12% vs 14% reported, meaning >85% of growth is sustainable/demand-driven. One-off improvements from data/AI tools provided exceptional Q3 results but are not expected to replicate significantly in future quarters.

Q: Analyst asked about R&D culture changes and talent strategy in China/Europe.

A: Head of R&D described implementing rigorous scientific reviews and technical governance to improve decision-making speed and quality. Highlighted China as a key source for rapid translational science and chemical matter creation, aiming to integrate local biotech ecosystems to boost pipeline diversity and speed.