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Sanofi (SNY) Beats on Q3 Earnings, to Spin-Off Consumer Unit
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Sanofi (SNY - Free Report) reported third-quarter 2023 adjusted earnings of $1.39 per American depositary share, which beat the Zacks Consensus Estimate of $1.37 per share. Earnings declined 11.5% on a reported basis and 2.1% on a constant currency rate (“CER”) basis.
Net sales declined 4.1% on a reported basis to $13.02 billion (€11.96 billion). Exchange rate movements hurt sales by 7.3 percentage points in the quarter. Sales rose 3.2% on a CER basis. Sales missed the Zacks Consensus Estimate of $13.61 billion.
Sales rose 1% at CER in the United States, 5.9% in the Rest of the World (including China, Japan, Brazil and Russia) and 4.5% in Europe.
All growth rates mentioned below are on a year-on-year basis and at CER.
Segment Performance
Sanofi’s Biopharma segment includes Global Business Units (GBUs) Specialty Care, General Medicine and Vaccines. Biopharma sales rose 3.1% in the quarter to €10.72 billion.
Sanofi Specialty Care GBU sales increased 13.5% to €4.64 billion, mainly driven by Dupixent and new products. Specialty Care GBU sales beat our estimates of €4.43 billion.
Dupixent generated sales of €2.85 billion in the quarter, up 32.8% year over year. Dupixent sales beat our estimates of €2.62 billion.
Sales of the drug in the United States rose 29.7%, driven by strong demand for its approved indications, atopic dermatitis, asthma and chronic rhinosinusitis with nasal polyposis indications, eosinophilic esophagitis and prurigo nodularis. In the United States, Dupixent’s new prescription share and total prescription share rose 34% and 30%, respectively.
Dupixent sales rose 28.6% in Europe and 56.7% in the Rest of the World, driven mainly by sales in Japan and China.
Among the immunology and neurology medicines, Aubagio sales declined 60.5% to €199 million due to generic competition in the United States. Aubagio generics were launched in the United States in March 2023, while in Europe, generics were launched at the end of September. Kevzara recorded sales of €87 million in the quarter, up 5.7%.
Sanofi markets Dupixent and Kevzara in partnership with Regeneron (REGN - Free Report) . While sales are recorded by Sanofi, Regeneron records its share of profits/losses in connection with global sales of Dupixent and Kevzara.
Among the rare disease drugs in the Pompe franchise, Myozyme sales declined 22.4% to €187 million due to patients switching to Nexviazyme. The new drug Nexviazyme/Nexviadzyme recorded sales of €110 million in the third quarter compared with €103 million in the second quarter. Fabrazyme sales were €253 million, up 14.2% due to strong new patient accruals across all regions. In the Gaucher franchise, Cerezyme sales rose 7.2% to €176 million.
Newly launched rare disease drug Xenpozyme recorded sales of €27 million in the quarter compared with €20 million in the previous quarter, mainly driven by its uptake in Europe.
In Oncology, Sarclisa sales rose 34.2% to €97 million, reflecting growth in all three geographic regions. Jevtana’s sales declined 27.7% to €67 million due to the entry of generic competition in Europe and increased competitive pressure in the United States.
Among the rare blood disorder drugs, Alprolix sales rose 19.8% to €138 million. Eloctate sales declined 13.2% to €120 million in the quarter due to patients switching to the new drug Altuviiio and increased competition. New drug Enjaymo recorded sales of €16 million in the quarter compared with €17 million in the previous quarter.
Sanofi’s newest rare blood disorder drug, Altuviiio, a once-weekly new class of factor VIII therapy for hemophilia A, was launched at the end of March in the United States. The drug recorded sales of €46 million in the third quarter compared with €18 million in the second quarter. Altuviiio was approved in Japan in August end.
Cablivi (caplacizumab), for the treatment of a rare blood disorder called acquired thrombotic thrombocytopenic purpura, recorded sales of €56 million, up 11.5% year over year.
Sales in General Medicines GBU declined 6.6% to €2.99 billion as the growth of core drugs (like Multaq, Toujeo, Praluent and Rezurock) was more than offset by lower sales of non-core drugs (like Lantus and Aprovel). Sales in General Medicines missed our estimates of €3.3 billion.
Vaccines GBU sales declined 0.6% to €3.1 billion in the quarter, mainly due to lower sales of flu vaccines. Total vaccine sales missed our estimates of €3.5 billion.
While sales of flu vaccines declined 6.2%, sales of PPH vaccines declined 3.4% in the quarter. Sales of meningitis, travel and other endemic vaccines declined 7.6% in the quarter. Booster vaccine sales rose 10.1% in the quarter.
In July, the FDA approved Sanofi and partner AstraZeneca’s (AZN - Free Report) respiratory syncytial virus (“RSV”) antibody Beyfortus (nirsevimab) to protect newborns and infants. AstraZeneca partnered Beyfortus recorded sales of €137 million in the third quarter. Beyfortus was launched in the United States and Europe toward the end of September. Sales of $137 million reflected the strong uptake of the new vaccine due to infant protection programs implemented in the United States, Spain and France.
The Consumer Healthcare (CHC) standalone unit generated sales of €1.25 billion, up 4.6%, supported by growth in Europe and the Rest of World region.
Along with the earnings release, Sanofi announced that it intends to separate its CHC unit by creating a separate publicly listed entity (headquartered in France). Sanofi said the separation is not expected to happen before the fourth quarter of 2024. We remind investors that in December 2019, Sanofi re-structured its CHC unit as a standalone Global Business Unit to focus on specialty medicines. The decision to spin off its CHC unit will allow it to focus on its innovative medicines and vaccines businesses.
2023 Guidance
Sanofi expects adjusted earnings to grow at a mid-single-digit rate at CER. It anticipates a negative currency impact in the range of 6%-7% on earnings versus the prior expectation of 6.5%-7.5%. The guidance continues to include approximately €400 million, expected to be generated from one-off COVID-19 vaccine revenues in the fourth quarter.
Preliminary Outlook for 2024 and 2025
Sanofi provided a preliminary outlook for 2024 and 2025. Sanofi expects 2024 adjusted EPS to remain roughly stable compared with 2023 levels due to increased R&D costs. However, the effective tax rate is expected to increase from 19% in 2023 to 21% in 2024 due to changes in global tax regulations. Including the impact of a higher tax rate, adjusted earnings are expected to decline in a low-single-digit range in 2024.
Sanofi expects business EPS growth to rebound in 2025, driven by improved sales growth and relatively stable R&D expenses year on year. Importantly, the company said it is scrapping its previously issued 32% adjusted operating margin target for 2025 for longer term gain.
Sanofi targets cost savings of up to €2 billion in the 2024-2025 period, which will mostly fund innovation and growth.
Our Take
Sanofi’s quarterly results were mixed as it beat estimates for earnings but missed the same for sales. Higher sales of Dupixent and contribution from new products like AstraZeneca partnered Beyfortus and Altuviiio were partially offset by the impact of Aubagio generic competition in the United States and lower sales from mature products in the General Medicines segment.
The company maintained its 2023 earnings growth expectations at CER despite reduced potential negative impact from currency. However, it expects profits to decline in 2024 due to higher R&D costs and taxes. Though profits are expected to improve in 2025, it will not be enough to sustain the previous 32% margin target.
Shares were down almost 18% in pre-market trading on Friday due to the mixed results, unimpressive profit outlook for 2024 and 2025 and news of the spin-off of its CHC unit.
Sanofi’s stock has risen 10.2% year-to-date compared with the industry’s rise of 5%.
Image Source: Zacks Investment Research
Nonetheless, Sanofi expects its new products, Beyfortus RSV vaccine, Altuviiio (hemophilia A), and Tzield (an innovative therapy for type 1 diabetes added from the April 2023 acquisition Provention Bio) to boost revenue growth, making up for the potential impact from generic competition on Aubagio.
It also regularly enters into strategic business development deals. Earlier this month, Sanofi announced a collaboration with TevaPharmaceuticals (TEVA - Free Report) to jointly develop and commercialize the latter’s inflammatory bowel disease candidate, TEV’574.
TEV’574, a novel anti-TL1A therapy, is presently being evaluated in a phase IIb study for ulcerative colitis and Crohn's disease, which are two types of inflammatory bowel disease. Initial data from the studies are expected in 2024. Teva and Sanofi will equally share the development costs globally and net profits and losses in major markets.
Image: Bigstock
Sanofi (SNY) Beats on Q3 Earnings, to Spin-Off Consumer Unit
Sanofi (SNY - Free Report) reported third-quarter 2023 adjusted earnings of $1.39 per American depositary share, which beat the Zacks Consensus Estimate of $1.37 per share. Earnings declined 11.5% on a reported basis and 2.1% on a constant currency rate (“CER”) basis.
Net sales declined 4.1% on a reported basis to $13.02 billion (€11.96 billion). Exchange rate movements hurt sales by 7.3 percentage points in the quarter. Sales rose 3.2% on a CER basis. Sales missed the Zacks Consensus Estimate of $13.61 billion.
Sales rose 1% at CER in the United States, 5.9% in the Rest of the World (including China, Japan, Brazil and Russia) and 4.5% in Europe.
All growth rates mentioned below are on a year-on-year basis and at CER.
Segment Performance
Sanofi’s Biopharma segment includes Global Business Units (GBUs) Specialty Care, General Medicine and Vaccines. Biopharma sales rose 3.1% in the quarter to €10.72 billion.
Sanofi Specialty Care GBU sales increased 13.5% to €4.64 billion, mainly driven by Dupixent and new products. Specialty Care GBU sales beat our estimates of €4.43 billion.
Dupixent generated sales of €2.85 billion in the quarter, up 32.8% year over year. Dupixent sales beat our estimates of €2.62 billion.
Sales of the drug in the United States rose 29.7%, driven by strong demand for its approved indications, atopic dermatitis, asthma and chronic rhinosinusitis with nasal polyposis indications, eosinophilic esophagitis and prurigo nodularis. In the United States, Dupixent’s new prescription share and total prescription share rose 34% and 30%, respectively.
Dupixent sales rose 28.6% in Europe and 56.7% in the Rest of the World, driven mainly by sales in Japan and China.
Among the immunology and neurology medicines, Aubagio sales declined 60.5% to €199 million due to generic competition in the United States. Aubagio generics were launched in the United States in March 2023, while in Europe, generics were launched at the end of September. Kevzara recorded sales of €87 million in the quarter, up 5.7%.
Sanofi markets Dupixent and Kevzara in partnership with Regeneron (REGN - Free Report) . While sales are recorded by Sanofi, Regeneron records its share of profits/losses in connection with global sales of Dupixent and Kevzara.
Among the rare disease drugs in the Pompe franchise, Myozyme sales declined 22.4% to €187 million due to patients switching to Nexviazyme. The new drug Nexviazyme/Nexviadzyme recorded sales of €110 million in the third quarter compared with €103 million in the second quarter. Fabrazyme sales were €253 million, up 14.2% due to strong new patient accruals across all regions. In the Gaucher franchise, Cerezyme sales rose 7.2% to €176 million.
Newly launched rare disease drug Xenpozyme recorded sales of €27 million in the quarter compared with €20 million in the previous quarter, mainly driven by its uptake in Europe.
In Oncology, Sarclisa sales rose 34.2% to €97 million, reflecting growth in all three geographic regions. Jevtana’s sales declined 27.7% to €67 million due to the entry of generic competition in Europe and increased competitive pressure in the United States.
Among the rare blood disorder drugs, Alprolix sales rose 19.8% to €138 million. Eloctate sales declined 13.2% to €120 million in the quarter due to patients switching to the new drug Altuviiio and increased competition. New drug Enjaymo recorded sales of €16 million in the quarter compared with €17 million in the previous quarter.
Sanofi’s newest rare blood disorder drug, Altuviiio, a once-weekly new class of factor VIII therapy for hemophilia A, was launched at the end of March in the United States. The drug recorded sales of €46 million in the third quarter compared with €18 million in the second quarter. Altuviiio was approved in Japan in August end.
Cablivi (caplacizumab), for the treatment of a rare blood disorder called acquired thrombotic thrombocytopenic purpura, recorded sales of €56 million, up 11.5% year over year.
Sales in General Medicines GBU declined 6.6% to €2.99 billion as the growth of core drugs (like Multaq, Toujeo, Praluent and Rezurock) was more than offset by lower sales of non-core drugs (like Lantus and Aprovel). Sales in General Medicines missed our estimates of €3.3 billion.
Vaccines GBU sales declined 0.6% to €3.1 billion in the quarter, mainly due to lower sales of flu vaccines. Total vaccine sales missed our estimates of €3.5 billion.
While sales of flu vaccines declined 6.2%, sales of PPH vaccines declined 3.4% in the quarter. Sales of meningitis, travel and other endemic vaccines declined 7.6% in the quarter. Booster vaccine sales rose 10.1% in the quarter.
In July, the FDA approved Sanofi and partner AstraZeneca’s (AZN - Free Report) respiratory syncytial virus (“RSV”) antibody Beyfortus (nirsevimab) to protect newborns and infants. AstraZeneca partnered Beyfortus recorded sales of €137 million in the third quarter. Beyfortus was launched in the United States and Europe toward the end of September. Sales of $137 million reflected the strong uptake of the new vaccine due to infant protection programs implemented in the United States, Spain and France.
The Consumer Healthcare (CHC) standalone unit generated sales of €1.25 billion, up 4.6%, supported by growth in Europe and the Rest of World region.
Along with the earnings release, Sanofi announced that it intends to separate its CHC unit by creating a separate publicly listed entity (headquartered in France). Sanofi said the separation is not expected to happen before the fourth quarter of 2024. We remind investors that in December 2019, Sanofi re-structured its CHC unit as a standalone Global Business Unit to focus on specialty medicines. The decision to spin off its CHC unit will allow it to focus on its innovative medicines and vaccines businesses.
2023 Guidance
Sanofi expects adjusted earnings to grow at a mid-single-digit rate at CER. It anticipates a negative currency impact in the range of 6%-7% on earnings versus the prior expectation of 6.5%-7.5%. The guidance continues to include approximately €400 million, expected to be generated from one-off COVID-19 vaccine revenues in the fourth quarter.
Preliminary Outlook for 2024 and 2025
Sanofi provided a preliminary outlook for 2024 and 2025. Sanofi expects 2024 adjusted EPS to remain roughly stable compared with 2023 levels due to increased R&D costs. However, the effective tax rate is expected to increase from 19% in 2023 to 21% in 2024 due to changes in global tax regulations. Including the impact of a higher tax rate, adjusted earnings are expected to decline in a low-single-digit range in 2024.
Sanofi expects business EPS growth to rebound in 2025, driven by improved sales growth and relatively stable R&D expenses year on year. Importantly, the company said it is scrapping its previously issued 32% adjusted operating margin target for 2025 for longer term gain.
Sanofi targets cost savings of up to €2 billion in the 2024-2025 period, which will mostly fund innovation and growth.
Our Take
Sanofi’s quarterly results were mixed as it beat estimates for earnings but missed the same for sales. Higher sales of Dupixent and contribution from new products like AstraZeneca partnered Beyfortus and Altuviiio were partially offset by the impact of Aubagio generic competition in the United States and lower sales from mature products in the General Medicines segment.
The company maintained its 2023 earnings growth expectations at CER despite reduced potential negative impact from currency. However, it expects profits to decline in 2024 due to higher R&D costs and taxes. Though profits are expected to improve in 2025, it will not be enough to sustain the previous 32% margin target.
Shares were down almost 18% in pre-market trading on Friday due to the mixed results, unimpressive profit outlook for 2024 and 2025 and news of the spin-off of its CHC unit.
Sanofi’s stock has risen 10.2% year-to-date compared with the industry’s rise of 5%.
Image Source: Zacks Investment Research
Nonetheless, Sanofi expects its new products, Beyfortus RSV vaccine, Altuviiio (hemophilia A), and Tzield (an innovative therapy for type 1 diabetes added from the April 2023 acquisition Provention Bio) to boost revenue growth, making up for the potential impact from generic competition on Aubagio.
It also regularly enters into strategic business development deals. Earlier this month, Sanofi announced a collaboration with Teva Pharmaceuticals (TEVA - Free Report) to jointly develop and commercialize the latter’s inflammatory bowel disease candidate, TEV’574.
TEV’574, a novel anti-TL1A therapy, is presently being evaluated in a phase IIb study for ulcerative colitis and Crohn's disease, which are two types of inflammatory bowel disease. Initial data from the studies are expected in 2024. Teva and Sanofi will equally share the development costs globally and net profits and losses in major markets.
Zacks Rank
Sanofi currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sanofi Price and Consensus
Sanofi price-consensus-chart | Sanofi Quote