John Rountree, Managing Partner at Novaescta, was asked by Scrip to comment on Sanofi’s recently reported on-target Q4 results and their outlook for the future. While these results likely reassured investors and analysts that their strategic plan is on track, the real test for Sanofi is yet to come, with multiple critical catalysts expected in 2017. These include the launch of Dupixent (co-developed with Regeneron) in atopic dermatitis, as well as the conclusion of a patent infringement case filed by Amgen resulting in an injunction on sales of Sanofi’s Praluent. Additionally, after missing out on acquiring Medivation and Actelion, M&A is likely top-of-mind for Sanofi’s leadership.
John commented that Sanofi are “stable, profitable, but that said, their overall performance is flat, posing the question: where’s the growth going to come from? There’s a lot riding on Dupixent. And while Genzyme and vaccines are doing well, the bulk of the business, representing some 70% of it, aside from Genzyme and vaccines, is either flat or down from previous performances. That’s a big chunk of their business. And it needs to be rejuvenated. Sanofi’s R&D as a percentage of sales in 2016 was 13.6%. That’s pretty low compared with some of their peers. Compare it with AstraZeneca PLC, which okay it’s a pure-play pharma but they’re investing 26% of sales into R&D, while Celgene Corp. is investing 22% of sales into R&D, while GSK [GlaxoSmithKline PLC] ‘s proportion is 16.2%.”
On the M&A front, John added that Sanofi “should resist pressure to do M&A; I don’t think that’s what Sanofi need at the moment. M&A is very expensive, and Sanofi already have a lot of debt. It just increased by €3.7bn during the past year, bringing it now to just under €17bn.” He doesn’t think such a move would be consistent with investing for the future, which is what Sanofi needs. “They’ve really got to keep working on making their R&D engine deliver”.
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