💊 Will Sanofi Find Its Next Growth Area?

Ford to cut 3K jobs globally.

Hey Global Investor! Here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Monday’s Close) 4,137.99 -90.49 (2.14%)

NASDAQ (Monday’s Close) 12,381.57 -323.64 (2.55%)

FTSE 100 (4:30 PM IST) 7,504.26 -29.53 (0.39%)

NIFTY 50 (Today’s Close) 17,577.50 +86.80 (0.50%)

USDINR (4:30 PM IST) 79.86 (1 Year +7.48%)

🔥 Top Movers

SGFY +32.20%
CANO +15.15%
CINT +11.97%

AMC -41.95%
PHVS -34.32%
CYXT -21.28%

💊 Sanofi: Drugged Out?

French drugmaker Sanofi (SNY) has closed studies on a key cancer drug, touted to have immense commercial potential. The move leaves the company in a lurch and even more dependent on its inflammatory drug Dupixent for growth. With shares at a 10-month low and investor patience running thin, what will be Sanofi’s next move?

All Talk, No Action

Sanofi and Regeneron jointly developed a drug called Dupixent to treat moderate-to-severe Atopic Dermatitis. The USFDA granted the “Breakthrough Therapy” designation to the drug, making it the first for a dermatological disease drug.

The regulators approved Dupixent injection in 2017 and extended the approval to adults with moderate-to-severe asthma a year later and for chronic rhinosinusitis in June 2019. Dupixent has become Sanofi’s best-performing drug, contributing to ~20% of overall sales.

Paul Hudson abandoned traditional research areas within three months of becoming Sanofi CEO in 2019. He wanted the company to focus on areas like Oncology that were ripe for innovation instead of looking for new diabetes and heart disease drugs, helping save $2B in costs.

In December 2019, Sanofi highlighted six therapies that it categorized as “potentially transformative.” It also laid out plans for Dupixent to achieve €10B in peak sales.

Among the transformative therapies, two that caught the eye of investors and analysts alike were used to treat a form of breast cancer and multiple sclerosis, respectively. As part of the plan, Sanofi also announced a $2.5B all-cash deal for Synthorx to boost its immuno-oncology pipeline.

Last week, Sanofi announced that it will end the development of the same breast cancer medicine that it earlier classified as “potentially transformative.” The move follows an analysis of late-stage data, evaluating the drug in patients with that form of breast cancer. The drug fell short of the pre-specified bar for continuation, prompting the independent data monitoring committee to recommend stopping the trial.

Hopes for amcenestrant took a hit in March this year when its phase 2 trial failed. Despite this, Sanofi pushed ahead with two more clinical trials of the drug, one of which failed last week. With this failure, Sanofi has abandoned not only the AMEERA-5 study but also the AMEERA-6 clinical trial in early-stage breast cancer and all other work on amcenestrant.

Defiance Or Cockyness?

So, where does another failed trial leave Sanofi in the oncology space and its overall future pipeline?

After going all out on oncology during Paul Hudson’s initial days, Sanofi appears to be putting the section on the back burner. It recently returned the rights of Libtayo to Regeneron, just a year after claiming that the drug can challenge Merck’s blockbuster drug Keytruda in first-line non-small cell lung cancer.

Sanofi’s $2.5B deal with Synthrox is also in jeopardy after initial data from its IL-2 project disappointed. It also does not appear to be as bullish on the project as earlier. During Q1 results, Hudson spoke of the drug, named ‘245, as having the “best-in-class” potential. However, come Q2, Sanofi’s statements only mention that a decision on phase 3 trials for ‘245 is due by the end of 2022.

Oncology is now absent from Sanofi’s late-stage pipeline. The only project of note is the anti-Ceacam 5 anti-body drug conjugate, tusamitamab ravtansine, used to treat non-small cell lung cancer. Consensus forecasts point to low hopes for this drug as well.

Besides oncology, Sanofi’s late-stage drug pipeline is nothing to write about either. There are safety concerns regarding its multiple sclerosis treatments, tolebrutinib. It has also paused global recruitment for drug trials after recommendations from the independent data monitoring committee over concerns about a potential liver injury.

Sanofi acquired marketing rights for heartburn medicine Zantac in 2017 from Boehringer Ingelheim. The USFDA withdrew the drug from the market in 2020 due to contamination with a likely carcinogen and now has to deal with subsequent litigations, further dampening investor confidence.

The drugmaker has been keen on using Artificial Intelligence for drug discovery. It signed a $1.2B research collaboration with San Francisco-based Atomwise. It will pay $20M upfront for this deal and leverage the company’s AtomNet platform to research small molecules.

Sanofi extended its five-year relationship with AI drug discovery shop Exscientia in January this year to the tune of $100M. Over the next three years, it has committed $270M in equity and payments to Owkin. The company aims to reduce drug development timelines, thereby reducing costs through these partnerships.

The oncology disaster has left Sanofi at the mercy of Dupixent, which continues to support the company’s growth. The company raised peak annual sales of Dupixent to €13B from €10B earlier. Based on this, Sanofi expects 2022 EPS growth of 15% from low double-digits earlier.

Shares of Sanofi have been down 15% over the last five years. The company’s CFO calls the price decline “strongly exaggerated,” posing a buying opportunity for savvy investors. But even the savviest investors would be wary of seeing red against their investment after five years of patience. Sanofi needs a drug, both literally and figuratively, to resurrect itself and restore some investor confidence.

Market Reaction
SNY ended at $40.96, down 0.75%.

Company Snapshot 📈

SNY 41.00 -0.27 (0.65%)

Analyst Ratings (25 Analysts) BUY 68%  HOLD 28%  SELL 4%

Newsworthy 📰

Trouble: Zoom pares back annual forecast as revenue growth slows to single digits (ZM -11.14%) (Premarket)

U-Turn: Ford confirms layoffs, says it is cutting about 3,000 jobs globally (F -0.04%) (Premarket)

Opportunity Or Warning?: AMC shares fall after Regal Cinemas owner warns of potential bankruptcy, APE units begin trading (AMC -41.95%)

Later Today 🕒

  • Macy’s Inc. Earnings (M)
  • Dick’s Sporting Goods Inc. Earnings (DKS)
  • Advance Auto Parts Inc. Earnings (AAP)
  • Intuit Inc. Earnings (INTU)
  • JD.com Inc. Earnings (JD)
  • Medtronic Plc Earnings (MDT)
  • Nordstrom Inc. Earnings (JWN)
  • The JM Smucker Company (SJM)
  • Toll Brothers Inc. Earnings (TOL)

Today’s Fun Fact

Johnson & Johnson products were used on the first hospital ship, the Solace, a Navy ambulance ship during the Spanish-American War in 1898

Disclaimer: The content of this article has been created and published by Winvesta India Technologies Pvt. Ltd., in order to ease the reader’s understanding of the subject matter. The information and/or content (collectively “Information”) provided herein is general information sourced through various news reports and does not constitute a research report or a research analysis. The Information is not intended to offer advice, target or solicit any particular customer or group of customers to buy or sell securities. 

Winvesta does not render any research or advisory services and provides a more detailed description of its services on its website and mobile application along with the terms and conditions published therein from time to time. While reasonable care has been exercised to ensure that the Information is adequate and reliable, no representation is made by Winvesta as to its accuracy or completeness and Winvesta, its affiliates, subsidiaries and employees accept no liability of whatsoever nature for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this Information. Neither Winvesta nor any of its affiliates are acting as an investment adviser, research analyst or in any other fiduciary capacity. Accordingly, reader’s are expected to undertake their own due diligence in consultation with their own advisors and are advised not to solely rely on the Information. Any such reliance shall be at the reader’s own risk. 

All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.

Start Building Your Global Portfolio Today

Download Winvesta App now to Get Started