Sanofi - Earnings Call - Q1 2020

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by. Welcome to the Sanofi's First Quarter twenty twenty Earnings Conference Call. I would now like to turn the call over to Felix Loescher from Sanofi Investor Relations. Please go ahead, sir.

Speaker 1

Thank you. Good morning and good afternoon to everyone on the call. Thank you for joining us to review Sanofi's first quarter results. I hope everyone is safe and remaining healthy during these unprecedented times. As usual, you can find the slides to this call on the Investors page of our website at sanofi.com.

Moving to Slide two, I would like to remind you that information presented in this call contain forward looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20 F document on file with the SEC and also our Document de On Registement Universelle for a description of these factors. With that, please advance to Slide three. Our speakers on the call today are Paul Hudson, Chief Executive Officer Bill Sibold, Executive Vice President, Specialty Care Sanofi Genzyme and Jean Baptiste de Chatillon, Executive Vice President and Chief Financial Officer. Paul will review the first quarter business performance.

Bill will provide an update on Dupixent in the quarter and Jean Baptiste will then review the financials. After concluding remarks, we will close with a Q and A session, during which we will be joined by the members of the Executive Committee. With that, I'd like to turn the call over to Paul.

Speaker 2

Well, good morning and good afternoon to everybody. Let's take a moment to look at, how we're dealing, with COVID-nineteen as an organization first. One of the most overused words, is unprecedented, and, it is certainly overused, but these are very, complicated times. And I think we are responding incredibly incredibly as an organization. I couldn't be more proud actually of the response of each and every one of Sanofi's more than a 100,000 employees.

Everybody stepped up to the plate. Everybody's putting the patient at the heart of everything we do despite the challenges. We have, clearly, like most companies, reinvented how we work during this q '1. And strangely, that's almost perfectly aligned with what we outlined at the Play to Win Strategy meeting back in December at Capital Markets Day. We're fully remote.

We continue to function. We're recruiting patients for studies. We're delivering on our objectives. We've let go of some of old behaviors, which as a new CEO in a wonderful organization that I've described as a hidden gem, it's been a privilege to see how we've blown away the politics and are just focusing on trying to do our very best across the business and in COVID nineteen. As for manufacturing and supply, we've mobilized our unit strengths and kept 100% of our sites operational and leveraged our global sourcing in order to avoid any product shortage.

We've, had careful and meticulous business continuity plan planning, which has allowed us to continue with our studies and enabled our field force to be fully digitally engaged and with physicians and with health care professionals in general. In fact, just to add, our own organization has completed over half a million hours of digital training, which has been a good use of their time during this crisis and will stand us in good stead as we modernize the company going forward. We've done this, whilst, offering our gratitude and our support for the safety effectiveness of over 20,000 employees who work every day on our industrial sites across the world. We've added to that, a premium to thank them for their, for their work in providing these essential medicines through difficult times. So COVID nineteen has allowed everybody in the organization to focus on the behaviors that are essential for our strategy.

And it's clearly not the setting we would like to have chosen to accelerate the culture change in the company, but we must take advantage of that to do the best for those patients who need our medicines now and those that we think will need our medicines in the future. So what about our fight right now? We take on this responsibility to fight COVID nineteen by investigating therapies for patients right now. Now clearly, both Kevzara and hydroxychloroquine were medicines that weren't specifically intended to fight COVID nineteen. And whilst they don't form a large part of our future in terms of any benefit from doing this, the critical thing was mobilizing the organization to make sure that if they did have some application that they were, inventories were built, and we were ready to do our part.

You know, we will, do our best to protect the public in the future with two vaccines. I'll come to those in a moment. But right up front, you know, we're looking, for Kevzara to work in patients hospitalized with severe respiratory complications, and we'll get the data on that, imminently. Whilst it's a long shot, it's the very least we can do to try and follow the biology and other experiences across the world from investigators. Also supporting the WHO with their solidarity trial in addition to the two Sanofi sponsored trials evaluating the antiviral effect of hydroxychloroquine.

And we'll we've offered already a 100,000,000 doses to around 50 countries pending at demonstrating that we have an effect. And last week, we announced that we would, partner with Luminostics on a home diagnostic for COVID nineteen, and we hope that could even be available as soon as quarter four this year. Why do that? Well, there's a lot of, companies and academics working on COVID nineteen testing, very few working on at home. We think that the new normal in 2021 will require people to be, able to test at home if they get symptoms, they're unsure, or they just want to, overcome any type of anxiety.

We hope a test that takes somewhere between five and thirty minutes will enable that. So developing two complementary vaccine approaches, is a huge opportunity for our organization. I wanna try and outline, where we are and what it could mean for helping, the globe get back to a new normal, later next year. You know, as early as I think it was February 18, we announced a collaboration with BARDA on, to develop a protein antigen vaccine candidate. And in late March, we added a second program to develop an mRNA vaccine candidate for our collaboration with Translate Bio.

Now there is a lot of activity in the vaccine sector, and I think the WHO last count was 76 active COVID nineteen vaccine projects. Let's be really honest. Very few of the sponsors of those 76 programs have the expertise or the capacity to produce a vaccine at the required scale. Sanofi Pasteur is one of the world leaders vaccine, is probably one of the very few companies with significant expertise and scale. Well, unprecedented challenges also require us to think even bigger, and, therefore, we entered into a collaboration with, our partner GSK, an unprecedented alliance of two vaccine giants.

And, you know, it's it's interesting to partner with what has been on many times a competitor, but we need to do this together. Our protein antigen approach is based on Sanofi's licensed baculovirus expression platform that's the basis for flu block, so it's proven. In addition to our proven technology and experience, we'll also leverage prior development work on a SARS vaccine that has demonstrated encouraging immunogenicity in animals. GSK, for their part, will contribute the approved pandemic a s o three adjuvant, which they will be able to manufacture at a large scale. That in itself is incredibly important.

Existing manufacturing capacity in place today for up to 600,000,000 doses and looking to double this aiming to have over a billion doses available by mid twenty twenty one. We're planning to initiate clinical studies in q four twenty twenty and aiming for approval in, mid half 2021. Our mRNA vaccine approach provides a second shot on goal based on innovative technology with the potential for accelerated development. Now others have moved into the clinic with mRNA vaccines faster, but even with significant funding from BARDA, it's unclear how soon other mRNA vaccines can be produced at an industrial scale required to protect the public. Our collaboration partner, Translate Bio, has significant investment in mRNA capacity in place today already that can be applied towards the vaccine.

And we're scaling up from a current capacity up to 360,000,000 doses by h one twenty twenty one. And we target initial clinical studies q four twenty aiming for approval in late twenty one. I can't stress enough on that point. The debate has been about vaccines. We're confident that we will get there.

There hasn't been enough debate about ability to make billions of doses. And for the record, we have 10,000 people producing over a billion doses right now of our own vaccine portfolio. This is not easy to do, but we do it to an incredible standard. And I think we're gonna play a major part in one of these two approaches, if not both, to get us back to the new normal next year. Let's move, to Dupixent.

I've said it many times. It's an absolute privilege to be involved with this medicine even in challenging times. You know, we've seen incredible performance right across the board. In q one, we're a 130% up, 776,000,000. And, you know, that is almost entirely demand driven.

Bill Seubold will go on later to talk about TRx and NBRx development to give you some confidence in that number. But that number is in great position on a stable business offering absolutely fantastic benefit to patients, and it's again a real privilege to see it continue to grow. On a constant exchange rate basis, our sales and business EPS grew by 6.615.6%, respectively. About half of our first quarter sales and profit growth was driven by COVID impact, patients stocked up on chronic meds and our trusted consumer health plans. We do expect, however, most of that to unwind during quarter two.

Our focus on efficiencies also delivered strongly with OpEx down 2.9 versus Q1 twenty nineteen. So overall, in terms of the fundamentals to take us to where we need to go on our commitments post Capital Markets Day, we are in good shape. Our new GBU structure delivered in q one. We're settling into the new rhythm. Of course, we've done a lot of it remotely and virtually, which again, a great learning for us going forward.

Specialty care performed particularly strongly led by Dupixent, but we also saw good growth across other key franchises. In general medicine, we saw moderation in sales decline, notably in diabetes, and vaccines delivered solid growth despite a tough comparator from prior year. We can comment on that later. Consumer health unit saw consumer stocking more than offset anticipated headwinds. So let's go a little bit into specialty care, up 31% with growth across the franchises.

We expect roughly a 3% three percentage point contribution from COVID overall. I'll give you some more detail on that now. Dupixent, again, was a star performer, continued to grow well in excess of a 100% year on year. As Bill will describe in a second, Dupixent growth was almost entirely due to demand and not related to COVID buying. Maybe a word on Sunclisa.

You know, we launched in The US just before the lockdown occurred. Full launch is expected after the crisis. So we're being, you know, appropriately conservative with our deployment, between now and then. Aubagio was disproportionately affected by COVID buying. Specialty pharmacies relaxed restrictions a little, and we're allowing MS patients to stock up or refill early.

We would expect this to to this effect to unwind in quarter two. Rare disease, tends to see order phasing impacting individual quarters, This quarter was no exception also with some contribution from COVID buying in Europe. Maybe now I'll hand, to Bill because it's important, I think, to get, you know, a deeper understanding of why we're confident in where Dupixent is through Q1 and why we're confident in where we go from here. Bill, over to you.

Speaker 3

Great. Thanks, Paul. As you said, Dupixent performance was strong in Q1, adding again nearly EUR 100,000,000 in sales versus the prior quarter. And this was despite the impact from pay assistance programs in The U. S.

That typically affects Q1 sales each year. As you can imagine, we have analyzed our July sales performance very carefully for any COVID related stocking impact, including longer scripts. And our assessment is that for Dupixent, the impact is negligible. So I'm pleased to say that global growth of 130 versus Q1 twenty nineteen reflects underlying demand. This strong global demand was seen across all three main indications of AD, asthma, nasal polyps.

And we're also pleased with our ex US performance now contributing greater than 20% of worldwide DUPIKENT sales. Obtaining approvals of new indications and widening the addressable age group is implicit in our €10,000,000,000 sales goal, and we're pleased to report that all key regulatory milestones are on track. The most near term milestone is the FDA action date at the May for six to 11 year olds with moderate to severe AD. In a moment, I will share the data we recently presented from the supporting study. Looking a little further ahead, we expect the part a readout from the pivotal phase three study in eosinophilic esophagitis in the second or third quarter, followed by the pivotal asthma readout six to eleven year olds in the fourth quarter.

And lastly, for our line extensions we discussed last quarter or are underway. Next slide. This slide shows the supporting pediatric data I mentioned on the previous slide, which we believe supports DUPIXENT's best in class profile. On April 5 at the Revolutionizing Atopic Dermatitis Virtual Conference, or RAD, we presented data from our pediatric study in the six to eleven year old group. This data further reinforces Dupixent's safety profile, which is already established in adults and adolescents.

The children studied in the trial had suffered with AD for most of their life with the majority of their body covered by lesions. After sixteen weeks, about three times as many children on Dupixent and topical corticosteroids achieved skin clearance and reduction in pruritus or itch compared with topical corticosteroid alone. We believe this data really matters to prescribers, and we look forward to the FDA regulatory decision in this age group with a PDUFA date of May 26. Next slide, please. I know you all will wanna hear about how the COVID crisis is impacting Dupixent, and I'll try to address this for you on the next couple slides here.

Let let me remind you that the type two pathway is not involved in viral defense mechanisms, and the selective blockade of IL-four and IL-thirteen, which drive the efficacy and safety profile of Dupixent, does not suppress the immune system. Importantly, this is increasingly recognized by HCPs, and recent market research indicates that DUPIXENT's MOA is a preferred systemic option by prescribers in the challenging current environment. The data shown here supports that HCPs are comfortable not only to maintain, but also to initiate patients on Dupixent during the COVID crisis. This data refers specifically to AD therapies. When you look more broadly across dermatology, others other surveys such as the CERiX Global Insights Wave three dermatology report from 04/06/2020 shows that dermatologists assess the risk benefit profile of DUPIXENT favorably when compared to type one agents or JAK inhibitors, especially during the COVID crisis.

We believe this is due to DUPIXENT's differentiated safety profile. Next slide. So what does this mean for DUPIXENT in the coming months? This is an unprecedented situation for all of us, so forecasting is challenging. But I'll share our thinking on the dynamics for DUPIXENT in the coming months based on our market research and the data and trends that we've been observing in recent weeks and days.

DUPIXENT total prescriptions have been resilient, and there are several factors that give us confidence that this will continue to be the case. At home administration and no requirement for lab monitoring are clearly an advantage in the current situation. Around eighty percent of dermatologists are extremely comfortable continuing patients on Dupixent therapy via telemedicine, and we are seeing no change to length of prescriptions. So the TRx dynamics are unchanged and not inflated by patient stocking. Inevitably, COVID nineteen has resulted in slower new patient additions in recent weeks.

Overall, we see about a sixty percent reduction for in person doctor visits, and this is only partly compensated by increased tele telemedicine. This is expected to result in a slower rate of new patient starts. Importantly, we are still gaining new patients, and MVRXs are currently running at eighty six percent of what they were between February 14 and March 6, reflecting preconfinement levels. So in other words, MVRXs are down 14% versus preconfinement levels. Looking forward, we're confident that patient additions will normalize, once patients are, being seen more regularly by HCTs.

So to conclude, patients are continuing to receive Dupixent during this unprecedented time. And as the situation eventually eases, we expect new patients starts to normalize. Paul?

Speaker 2

Thanks, Bill. Thank you very much. You know, it's incredible. I mean, it is a super medicine, of course. But to see MBRX just down, what was it, fourteen percent versus preconfinement?

I think IQVIA just released some data that it was minus forty two percent, if I remember correctly, on average across therapeutic areas. So Dupixent continues to defy, the, you know, the normal thinking, testing each of its efficacy and safety profile. So, so thanks, Bill, for giving us the the for the details. Let's, let's move now to general medicine. You know, the sales decline moderated to below 4%, and I think this speaks to the resilience of our portfolio, incidence, of course, chronic therapies globally.

I would, assume we would assume that GenMed saw about a two percentage point contribution from COVID related buying, you know, many established medicines, so a little bit extra stocking. Diabetes saw a year on year decline moderate to one point two percent, the lowest level in more than three years. And whilst I accept that there may have been some additional buying, it's great to see that we are starting to see what we, outlined at the end of last year. It would be the beginning of the trough of our business, and we can start to to think about, bottoming out and coming back. Established products showed modest growth outside of China.

China, of course, was impacted by the VBP. I'll come to this in a moment. And looking ahead, we expect inventory build to reverse in q two, as Jean Baptiste will discuss later. We also made good progress on our play to win strategy, streamlining and simplifying our portfolio through divestment of Seprafilm and the restructuring, of the Praluent agreement, which was executed. Maybe a little more detail on China.

You know, overall sales declined 14% impacted by, VBP. So let's start with the VBP impact. You know, as we guided you, Plavix and Aprovel family sales declined as a consequence of VBP by 545433% in the quarter at constant exchange rate. The good news, and this is really important, I think, the good news is the volume uplift we predicted is materializing. Plavix and Caproval shipments were up 69% despite the very tough base in what was a high q one in 2019.

Encouraging, especially as we look into next year and price impacts will wash out. The COVID impact in China has been mixed. Chronic disease treatments up strongly on longer prescriptions and patients stop billed, whereas hospital drugs have been a little bit more negatively affected. The non VBP part of our China business, including vaccines, grew at 15%, which speaks again to the resilience of the current portfolio. And the future of our business in China is building a specialty franchise, and it's on track.

Praluent launched in March, Dupixent under review for AD, and additional launches planned this year, including Fabrazyme and Aldurazyme in rare disease. Switching gears to vaccines, which delivered solid growth despite a tough year on year comparison. In Q1, we saw growth of 3.7% against exceptionally strong q one last year where sales were up 20%. And let's not forget that included a 450 basis point contribution from phasing in Japan. So, the 3.7% is just the beginning, and we're excited about the rest of the year, for vaccine.

Marginal impact of COVID, almost neutral, to be honest, as uptick in flu demand was offset predictably by a reduction in travel vaccines as restrictions came into effect. Overall, very pleased with the performance, which puts vaccines on track to deliver. Pentaxim up 32% in China as, inventory buildup ahead of the reopening of points of vaccination centers at the February and, seeing rapid recovery post lockdown and include ready for expected higher demand in second half based on greater public awareness of vaccination benefits. So, there is also a little bit, we think, maybe an opportunity as early or accelerating availability in flu zone high dose for the elderly following an expected q two approval. We're getting some very positive signals there.

Onto consumer health. So, sales up 4.2%, and this includes approximately a six percentage point contribution from COVID related pantry loading as customers trust our over the counter medicines when dealing with the crisis situation. Now the main benefit from our customer stocking is seen in the cough and cold and pain categories driven by especially strong demand in Europe. Of course, we don't have the scale of that business in The US, so it's European driven, notably, the household name brand Doleprair in France. Our Q1 performance reflects the anticipated headwinds, including the effect from the Zantac voluntary recall in the fall of last year and the portfolio cleanup.

You won't see on the like for like the unwind as until we get closer to q three, the Zantac piece. To provide the promised update on our switch opportunities, we held meetings with the FDA on Cialis and Tamiflu. And whilst we can't divulge details, of course, these areas remain somewhat competitive, our development plan is on track, and there are no changes to the timelines that we previously communicated. Meanwhile, we continue to transition to a stand alone business, and we're on track here too. Remember going back to Capital Markets Day, we said our real focus for consumer health was to unencumbered, to put the agility back into it, and to be accelerating our growth through the remainder of 2020 with the expectation of being close to our on market growth before the end of the year, if possible.

With that recap, I will hand over to Jean Baptiste to give the financial update. Jean Baptiste?

Speaker 4

Thank you. Thank you, Paul. Good morning, good afternoon to you all. Well, on Slide 22, as Paul said, we delivered 6.6% growth in the first quarter, around half of it being related to the COVID impact with inventory building in channels. If we strip this out, sales growth would have been in line with our expectations, driven mainly by Dupixent.

We expect the incremental COVID impact to reverse mainly in the second quarter. When we move further down the P and L, we again delivered P and L leverage helped by the incremental revenue impact and by our efficiency initiatives. As a consequence, BOI grew by around 16% in the quarter and our BOI margin increased by two twenty basis points. Similar to sales, you should consider that broadly half of the increase in BOI margin resulted from the various impacts due to the COVID crisis. Importantly, we delivered on our savings in the quarter as we continue to work towards our target of €2,000,000,000 savings by 2022.

As a result, our SG and A and R and D line reflect efficiencies of two point one percent and four point three percent respectively in the quarter. Among the other lines, I would draw to your attention the operating income and expense on the associate line, both of which increased significantly versus the prior period. OI reflects our accounting for the Regeneron monoclonal antibody alliance. Here, the outflow in the quarter increased to $243,000,000 versus $75,000,000 in Q1 twenty nineteen, as the collaboration further improved profitability. I remind you, the net figure includes three components of share of profit of own loss to Regeneron, reimbursement of commercialization expenses incurred by Regeneron and the reimbursement by Regeneron of our development cost.

Regarding the associates line, the increase reflects our equity accounting share of Regeneron's profit, including a true up in Q1 twenty nineteen for actual reported results. Slide 23 takes a closer look at our cost line. Beginning with gross margin, we saw a decline of 80 basis points at constant exchange rates despite productivity gains on the strong growth of Specialty Care. The decline was mainly due to price reduction in China on PLEBEX and approval as a result of VBP. This impact will continue through 2020.

On OpEx, combined SG and A and R and D declined by 2.9. The reduction in expense was driven by savings from our prioritization on smart spending initiatives. COVID impact was broadly neutral as some expense reduction was balanced by extra costs associated with COVID. On Slide 24, we delivered a strong increase in free cash flow in the quarter with the help of some phasing benefits, but also one off divestments. In total, cash flow more than doubled against the same period in 2018.

Excluding one time factors, we continue to make progress against the mid term drivers of free cash flow we have previously highlighted, that is we increased sales and margin, we improved our working capital and we prioritized investments. Based on our underlying progress and the change in mindset across the organization, I'm increasingly confident we will meet our target to improve free cash flow by 50% by 2022. On Slide 25, I want to give you a sense of the likely business dynamics in the second quarter. Company sales are expected to decline at a low single digit rate versus Q2 twenty nineteen as the first quarter impacts of COVID reverse. When we look at this at the first, at the level of our different businesses, well, in pharmaceuticals, we expect to see a reduction of in channel inventory build.

In vaccines, the recovery in China on global demand for flu vaccine should continue, but we will see a significant adverse impact from reduced travel vaccination on the postponement of pediatric vaccinations on boosters. In CHE, we expect to see significant negative impacts from the unwinding of consumer stock timing on the reduced consumer traffic in pharmacy. We also expect to deliver further OpEx efficiencies in Q2. The net impact if we take the first and second quarters together is that we expect our first half performance to be on track to achieve our full year guidance. On my last slide, I confirm our full year guidance for '20 20 business EPS to grow by around 5% at CER.

The impact of ForEx is expected to be negative by minus 1% to minus 2% based on April average exchange rate. Finally, I would like to say that we remain confident on delivering the financial target that we set out at our Capital Market Day. With that, I return the call back to Paul.

Speaker 2

So thank you, Jean Baptiste. I think I think we are ahead in q one. We do expect some of it to unwind in q two. We will be on track to deliver our guidance. I don't want anybody to to not fully appreciate that.

So, you know, it's in moments like this that we have to stand back and take a look at our entire portfolio and see how we're positioned because this is not clearly a short term event, and it will move through 2021 and will play our part there as you know. So just taking a quick look, I mean, we we have a portfolio that's diverse and also resilient with opportunity to deal with this. This isn't just about us keeping moving in challenging times. This is about making sure we have the right balance. At the same time, like I said earlier, it's not the way I would have liked to have learned it, but it's clear that we have the capabilities, the skills, the people to execute on our strategy.

I would also add that the speed element, which is, we're gonna keep after, things return to some type of normal, I think will be an advantage because of the you know, we have a backbone of entrepreneurial, DNA that I think is unique and hard to replicate in other places. Dupixent, of course, in specialty is gonna be, the pillar, deliver major benefit across a range of inflammatory mediated diseases. You know? And I think Bill mentioned without suppressing the immune system. Whilst that was always the case, it's gonna become an increasingly more competitive advantage given new entrants that can't make that claim.

We have also Kevzara, and we would love to see some benefits. You know, again, to remind everybody, we've increased the manufacturing so that we're there if the studies read out positively. We haven't built it into our financial modeling, but we certainly would love to play a part in helping patients if we can. As for GenMeds, you know, we have this broad range of chronic disease treatments and a global portfolio of essential medicines, which will help lift the standard of care in emerging countries, and we think will be essential. And vaccines, what can I say, a world leader with a differentiated flu portfolio, and we're leveraging our know how and manufacturing capacity?

I can't repeat it enough. Our ability to manufacture at scale will ultimately be the the winning criteria to who can help the most, people, when we actually come to delivering vaccines. Consumer, while we supply the medicines needed by patients to cope with the milder symptoms, paracetamol, for example, dolopram. And and as and when this pandemic, eventually subsides, we think we have a compelling strategy right across each of our, GBUs, which is why we set them up this way. Dupixent is really a great example that shows it's critical to understand the driver pathways of disease, and our unique understanding of T2 biology allows a precise intervention where you do not trade off efficacy and safety.

So I just wanna move a little bit to to the BTK. You know, we hosted a call yesterday, first time for us to do something on that scale. We put it out there to present some balanced scientific reflection on our phase two data in MS for the BTK 168, but over a thousand people connect. It just shows us when we move towards these new tools courageously, you know, we can move incredibly quickly. We also know that we think we have this unique unique dual mechanism of action, not only just on the periphery, but inside the CNS.

And I think we went a long way to demonstrating that yesterday. Of course, we have to have the phase three programs, and we'll have somewhere in the region of 4,000 patients involved in those. And that's gonna be significant, itself. You know, there was an expression used for those that were on the call yesterday that this may end up being best in disease, not just best, in class. And and, we can see that being a real possibility, you know, after even a short period of time, a ninety percent reduction in lesions phase two.

And if our phase three data looks good, I think we will be more than competitive for the injectable infused, anti CD twenties. We know almost without exception that when efficacy is as good as patients will always choose oral. How BTKi, one six eight, potentially impacts underlying mechanism, I've touched on this a little bit, but I think we have a chance to go after, being the first real treatment truly effective in progressive forms of the disease and more to follow on that. So, I think, perhaps I'll move to just a little bit of pipeline momentum, to finish, my last slide. You know, there is excellent momentum building in R and D.

You know, I can feel it. I feel it in the conversations. I can see where we're accelerating. You know, we've touched on it already, but we delivered on our promise with the POC data for the BTK. We have delivered the virtual presentation of our pediatric Dupixent data and, of course, the Sarclisa US approval.

And in the upcoming quarter, you know, you can expect multiple approvals across specialty care and vaccines. You know, look out in particular the Dupixent in pediatric AD, of course, and the expansion of our differentiated flu portfolio in Europe and the EU approval of Sarclisa. Also expect several important pivotal trial readouts including the ANCHEMA study for Sarclisa and the avoglucosidase alpha in POMP and cemiplimab in basal cell carcinoma. By way of a final word, I'm looking forward to our R and D Day event on June 23 where, you know, the headline should be nice and clear for everybody. We aim to tell you what makes Sanofi R and D unique.

It'll be a virtual event, of course, because of what we face, but I think once again an opportunity to show you some of our bench strength of some of our science to get connected to more people from R and D because of the virtue of being virtual, and we're already becoming increasingly more proud of what they're working on. So to close, the message you've heard today is, I think, a clear one. We are absolutely executing on our play to win strategy. We're taking a leadership position in managing and combating the COVID pandemic. We are on track to deliver our financial targets for 2020 and beyond.

And with that, Felix, over to you to start the Q and A.

Speaker 1

Thank you, Paul. We will now open the call to your questions. As a reminder, we would ask you to limit your questions to two each. Thank you. Operator?

Speaker 0

We will now begin the question and answer session. The first question from the phone is from the line of Graham Perry from Bank of America. Please go ahead.

Speaker 5

Great. Thanks for taking my questions. So firstly, on vaccines, you alluded to the fact that you're preparing flu capacity for a second half increase in demand. Could you help quantify that a little bit? And what sort of step up do you think you've got?

What kind of level of capacity expansion can you perhaps engage in for this twenty twenty, twenty twenty one season? And then secondly, on your COVID vaccine, the SARS-one vaccines that were originally developed that were targeting spike protein did see some in vitro and animal evidence of antibody induced or vaccine induced enhancement. And that's obviously a risk which Sanofi is familiar with from the dengue vaccine. So can you just talk us through in those COVID programs, what it is you're actually doing to, avoid enhancement issues, animal models that you're going be having to provide to regulators, etcetera? Thank you.

Speaker 2

Thank you, Graham. Appreciate it. I'm going to hand to David. Just maybe on your first question about, our capacity, to deal with, perhaps increase in flu in 2021. I think it's probably easy to say that we're not oversharing because clearly it's a competitive situation.

David may feel comfortable adding a little bit more, but I wouldn't go there. And then, David, if you could reflect a little bit on the SARS learning and and what perhaps about the vaccine induced enhancement piece.

Speaker 6

Yeah. Thanks. Hey, Graham. On the flu capacity, so we have ordered more eggs for this season because we anticipated that the market is gonna grow, and that's actually turning out to have been a very good decision. So it gives us some leeway even on all egg based vaccines.

And then we have also short term some upside on flu block. We are limited only by the filling capacity. So this means that we think midterm, the flu market is actually also going to increase probably substantially because you really want to prevent that people are having flu while you have COVID still circulating, especially in the winter months because once they start to overlap, that becomes very dangerous, and it's gonna fill up hospitals. We we were kind of escaping the flu season on this COVID now in Europe and in The United States. So we just came out of the flu season, and that's why the health care systems have not noticed it.

But for the for the next winter, that's gonna be a significant issue. On your second question on COVID and the SARS vaccine, the ADE effect is an effect that you can see potentially with any vaccine. So I think all the companies will have to watch out for that, and there are, of course, discussions with the regulators ongoing on this one.

Speaker 2

Okay. Thank you, David. Next question, please.

Speaker 0

The next question from the phone is from the line of Richard Foster from JPMorgan. Please go ahead.

Speaker 7

Hi. Thanks for taking my question. Maybe a a follow-up question on vaccine capacity. Just, I think into The US market, a 169,000,000 doses of vaccine are shipped. Do you have any idea how many actually get into patients?

You know, CDC seems to think a third of patients are getting vaccinated. So is there a potential uplift from, more people actually taking on, what is already in the market, placed from you and others? Second question, just on consumer, and just thinking about continued demand. We see flu season generate boost to consumer businesses during their ability, particularly cough and cold, but but other things like vitamins. So just just your thought in actually, clearly, there's a bit of a bonus, but could this be a benefit for for most of the rest of this year as well?

Thanks very much.

Speaker 2

Okay, Richard. Thank you so much. David, to you again on, the capacity and the the doses that perhaps are still in the system and not being used and whether that's still whether that's still in play.

Speaker 6

Yeah. Hey, Richard. You have seen that we have doubled the sales in Q1, and that is clearly an effect of people having vaccinated longer and more people, in fact. We have seen that there were more shots in arm in the script data or in the claims data. So we expect indeed that this is going to continue for the upcoming flu season.

We also see in the summer, Southern Hemisphere, that we are also seeing an uplift of injection.

Speaker 2

Alan, CHC beyond pantry loading, do we see any of the momentum continuing?

Speaker 8

So thanks for the question, Richard. At this stage, we are not anticipating to see a significant uplift across the various categories. There may be one or two very specialist areas, for example, in the the vitamins immune space where you might actually have seen a new habit, created during this crisis. But most of the OTC products that have seen pantry loading as we described it, are treatment products. So of course, if they're not used for treatment during that period, they will stay in the medicine cabinet.

So the current projection is that we will see the uplift kind of ease out over the next quarter or two with no significant uplift. Just in terms of the seasonality you talked about, we did see a it was a very good cough and cold season in January, February in The U. S. It was not a very good cough and cold season for the manufacturers in Europe. But of course, the marked sales significantly increased as a result of COVID epidemic.

Speaker 2

Thank you. Felix, next question.

Speaker 0

Next question from the phone is from the line of Verdult Peter from Citi. Please go ahead.

Speaker 9

Hi. It's Peter Virgil here from Citi. Two questions, please. Strategy, and Dupixent. For Paul, you called out some key internal projects you were focused on earlier this year, benchmarking the most important roles in Sanofi to the industry and defining a go forward strategy for gene therapy in rare diseases, both in terms of the vector technology going back and whether you go organic, inorganic, hybrid.

Wondering if you would be willing to provide an update here and comment on your on the size or ability to pursue BD in the current environment. And then much quicker for Bill. Correct me

Speaker 2

if I'm wrong, but I

Speaker 9

think Sanofi's payer split for The US pharma is roughly 40% commercial, 40% Medicare, 20% Medicaid. Just given the importance of Dupixent to the Sanofi growth story near term, and the risk to the commercial book of business from rising unemployment, could

Speaker 4

you perhaps just spend a

Speaker 9

little bit of time talking about the relative exposure for Dupixent to commercial and just what you're trying to do over and above what you you said in your comments to minimize the disruption to future initiations of therapy? Thank you.

Speaker 2

Thanks, Peter. I'll come to Bill in a moment on that. As for the gene therapy question, yes, we said that we would look in those buckets. I'll I'll be frank. My contractual, agreement with my previous employer did not allow me to be involved in anything to do with gene therapy until the end of at the very February, March.

So we've been accelerating that work. Now I can play a more active role. We are starting to get to the decision points on how we want to deploy. I can tell you there's a lot of excitement and enthusiasm. There's also some very good, in house projects that need, you know, augmenting, and some capabilities that need adding.

Our plan is to provide a more detailed look as we get to the half year results, but you'll have to forgive me. I was not allowed really to be involved until just a number of weeks ago. Bill, over to you for, the commercial, book of business, which is higher, I think, than than Peter was suggesting certainly, and then, and what are the implications with unemployment?

Speaker 3

Yeah. Peter, thanks for the question. And as Paul said, it is it is a little higher. So the Dupixent is really a commercial, story for the most part. You're looking at over 70% of it is commercial.

So, you know, higher than across the rest of the portfolio that we have. And, you know, I think not knowing where unemployment's going, obviously, it's up. We see that that is going to have an impact across, you know, the industry on on Dupixent. You know, the the the dynamics that you'll see is a a shift in patients perhaps towards Medicaid or health exchange marketplace or any of the uninsured programs. Now we have in place very strong programs that help patients if they are at any risk of missing doses, etcetera.

We have strong patient assistance programs, etcetera. So we feel that from a coverage of ensuring, first of all, that patients have access to therapy that we're in good shape. I think, you know, it's a, at this point, too early to tell how many patients are gonna end up making that shift. And we know it's not a real efficient shift at this point. So if somebody's going from commercial to Medicaid just in general across the industry, because of the unemployment, it's not an instant it's not an instant effect that takes place.

So, you know, that that that will, we'll we'll have a little bit better view of in time. The comment I would make just in general is about Dupixent and weathering this weathering the storm, so to speak, is we've seen, you know, real resilient TRxs. Hearing from the physicians, they are very comfortable in maintaining and even starting patients on Dupixent during this. And I think a lot of that has to do with their, broad experience with it today and the strong safety profile. So, you know, we think that, as far as products go during this COVID crisis, you know, we continue to see the strong interest in Dupixent.

The numbers are holding up well. As I talked about some of the impact on MBRX, but TRX is there And all their survey work that we're doing are suggesting that physicians are really continuing to turn to this. So maybe I'll leave it leave it at that.

Speaker 2

Thank you, Bill. Next question.

Speaker 0

The next question from the phone is from the line of Laura Sutcliffe from UBS. Please go ahead.

Speaker 7

Hello. Thank you for taking my questions. I've got, one on Dupixent and

Speaker 10

then one on, sort

Speaker 7

of recovery, more generally. Firstly, I think you mentioned in your material today that you see strong uptake for, Dupixent in asthma. So my question is whether you think that's going to be more challenging or less challenging to maintain that momentum than the trajectory you see in atopic dermatitis given these sort of hopefully unique circumstances that we're in in 2020? And then secondly, do you expect any geographic differences in the way that any parts of your business might recover later on? Thanks very much.

Speaker 2

Okay. Thank you. Thank you, Laura. So maybe, Bill, I'll take a stab. I mean, my my and and then throw it to you.

The you know, the Dupixent's resilience is is very specific. It is, it is easy to initiate, and there's a high degree of confidence, not least in pulmonologists. I think the competitive set, is a little bit more complicated to get started. So there is a a high degree of comfort in initiating, with, with Dupixent. I think the, I think the additional thing to consider is what is the new norm going to be like?

Because most of these offices that planned, you know, two and three year migrations to a blend of telemedicine and face to face to maximize capacity, you know, they're rushing to that now. And I I I wonder whether the new norm for medicines like Dupixent and beyond have an opportunity to access a much greater eligible population than they would have done pre because of the leverage of digital tools. Bill, do you wanna make any additional comment or look at any geographical differences?

Speaker 3

No. Look. Regarding, with asthma, we've seen that, there's been more continued patient visits to pulmonologist office during this time. You know, we think that, we've got coming out of this and through this, the profile of Dupixent is really what is going to, continue to make it a product for physicians to turn to. So, you know, the competitive dynamic is still gonna be there.

Dupixent, we think, has the best profile in the space. So, you know, I think that I I think that it is just going to be kind of business as usual from a competition perspective. And but pulmonology seems to be a little bit further ahead than dermatology in maintaining office visits.

Speaker 2

As for geography then, just a more wild wide sort of look. You know, it is really very much dependent on the type of restrictions that are being imposed and then lifted on what time scale. You know, we're seeing China come back and start to come back quite strongly in general, but it's not a 100% back. It's continuing to add opportunity every day and open up more places. I don't think we're any different in terms of the scale of that opening up.

I don't think we've had any medicine that is disproportionately subject geographically versus the what we expect them to achieve. I am optimistic that when we come back, the new normal will have more opportunity in it for patients, eligible patients to get access for the right medicine. I think Dupixent will sit, as the leader in that group. Next question.

Speaker 0

The next question from the phone is from the line of Florent from Societe Generale. Please go ahead.

Speaker 11

Good afternoon. Florent Cespedes from Societe Generale. Two quick questions. First of all, on your clinical trial program, could you tell us if the trials which are expected to readout in H2 are still on track or if you may experience some delay notably in your hemophilia portfolio or your cancer portfolio notably the third? And my second question, maybe for Jean Baptiste, just to double check regarding your full year guidance.

Do we have to understand, so after the softer Q2 that you have highlighted in your slides, do you anticipate a kind of a recovery in Q3 and then kind of back to normal in Q4, just to double check?

Speaker 1

Thank you.

Speaker 2

Okay. Thank you, Florent. So John Reed, maybe you could give an update on sort of regulatory milestones and whether they have moved or not and what are what we're doing to deploy both in the COVID studies and our and and the ongoing studies.

Speaker 12

Yeah. Thanks, Paul, and thanks, Lauren, for the question. Well, I would say, you know, this has been sort of certainly a a moment of pride for me as the head of r and d to see how our team has stepped up. Our clinical development team has done a heroic job to both start randomized clinical trials for purpose of exploring drug repurposing opportunities for combating COVID nineteen as well as to keep patients on study where pipeline molecules are concerned. And, you know, just to give some examples.

First, I would mention the speed with which the clinical development and ops team have executed on the COVID nineteen studies. They've started three randomized clinical trials, one for Kedsara, two for hydroxychloroquine with record speed from concept to first patient randomized in just three weeks. Then, you know, second with respect to the ongoing pipeline, we've been using a variety of digital tools and adopting new ways of working. And our team have managed to keep more than ninety percent of patients on study, and they've managed to continue recruiting patients to ongoing studies. The the methods used to achieve this progress, of course, have included there've been a diversity of things, but they've included direct to patient shipping of investigational products, organizing in home infusion of IV drugs to avoid visits to medical centers, using telemedicine for patient assessments, conducting site visits virtually using video conferencing, conducting remote site inspections using smart glasses, and just shifting with agility to clinical sites located in geographies that are less impacted by the pipeline.

I would also say that supplying the trials with investigational product, we've managed to keep our CMC teams working on-site. And thanks to their heroic efforts by the CMC team, no Sanofi studies have suffered an interruption of investigational product supply. Our drug supply chain staff have also worked overtime to package, label, and successfully ship the products to this study. So altogether, you know, we're, we're in pretty good shape. There are some studies where the ability to recruit new patients has been slowed.

But with few exceptions, we're on track to deliver, the programs that we featured in the Capital Market Days. Paul, if we have time, I can hit a few of the milestones of the first quarter in terms of the pipeline's progress.

Speaker 2

Yes. I think you might I think if I remember correctly, the question also include tetusiran component. Maybe you could just mention where we're at on that.

Speaker 12

Yeah. So, so in hematology, fitusiran, we have four ongoing phase three studies. Two of those are now fully enrolled. The other two are very close to being enrolled. We're down to just a handful of patients.

I think it's two for one and eight for the other, something like that. The team have been, you know, pushing that forward. With BIV double o one, we have the study is eighty five percent. The moving into the phase three is eighty five percent recruited. We have not yet started treating patients with the investigational product.

We're extending the run-in period where you establish a baseline annualized bleeding rate before starting the new therapy. Because of the of the COVID pandemic, we've decided to postpone that by a couple months. We hope to be dosing patients, who've already been randomized and recruited to the study, by, middle of the year. And I would also say with, continuing to theme while we're on hematology and JMO, our complement pathway antibody, sutimlimab. The BLA has been submitted for cold and gluten disease or hemolytic anemia with the FDA.

It's also been filed in Japan. And, we also have achieved the recruitment fully we fully recruited the follow on randomized study, for that same indication. So, you know, overall in hematology, you know, we're progressing well.

Speaker 2

Thanks, John. So we're we're not really expecting to miss, any of our pre stated deadlines where and if the situation continues and we slow down a little using the new tools, we expect to accelerate and catch up to be on or ahead. I think John used the word heroic, and it is indeed that. I think between our industrial affairs group and our ongoing clinical development team, it's really quite exceptional. Jean Baptiste, I think there was a part of question for you, which was around the, unwinding in Q2 and trying to describe the four quarters.

Do you want to make

Speaker 4

a quick comment? Yes. Yes, Florent, thank you very much. I think two aspects. First, that we have an incredible portfolio in Sanofi to navigate this crisis because we see that we have a very good response on the right mix for the situation.

So second one is the mindset of efficiency that is now well rooted in Sanofi and the PLAY2WIN plan that give us flexibility to reinvest, to accelerate growth or to modulate the way we navigate with our OpEx savings. So yes, I don't have an insight more than you what will be the context in H2. But what I'm convinced is that the teams are really in the right mindset to navigate this crisis meet the expectations we have expressed in our guidance.

Speaker 6

You. Thank you.

Speaker 2

Next question.

Speaker 0

The next question is from the line of Steve Scala from Cowen. Please go ahead.

Speaker 13

Thank you. I have two questions. What specifically is your manufacturing capacity for KEVZARA in units? And how quickly can this be delivered should trials show benefit? So that's the first question.

And second question, Paul, superb marketing is one of your many skills. How do you assess the effectiveness of virtual marketing versus face to face marketing? For instance, is virtual marketing only half as likely to generate a prescription, three quarters as likely? And how does it differ for a new product versus an existing product? Thank you.

Speaker 2

Okay. Thank you. Philippe, I'm not is, is Philippe connected? I think we we have a question around, Kevzara manufacturing. Again, I'm not quite sure how much we share, but if you're on the line, would you like to answer?

Okay. So Philippe is not on the line. Okay. I apologize. So, you know, we we had worked extensively, of course, providing enough treatment, for the rheumatoid arthritis population and beyond.

And, you know, we finished the medicine, here in Europe taking drug substance from The US. We stepped up as soon as we knew that this may or may not play a part. So, we took all our manufacturing to the maximum. Now this is the biologic course, so we would be in the hundreds of thousands of people that could be treated, and and not in the millions. But we would be in a good position, I think, for critical patients if that is what, indeed the evidence says.

We'll have to wait and see what the outcomes are to see whether we have, the right, efficacy and then look at the type of patient and know what the needs, would be, whether we can match the needs. Your other question is into one, Steve, about about marketing and digital marketing. There's sort of two aspects for it, I guess. The first one is, you know, we there was always an underappreciation for digital marketing, but, it was basically on on both sides. Remember, physicians were not always craving it, at least we thought in in that moment too.

And I think we all sort of come around to realize in this new world that the appetite for, health care professionals to get information digitally has also increased exponentially. I think we've always waited, if that's the right word, the digital, contact at a lower, impact ratio to the face to face. I think we all believe that the ideal is a blended, mixture of high touch, what we call high touch and high-tech, digital and face to face over time, which should allow us, by the way, if these practices stick with us, to be more efficient to lower the overall cost to serve, a health care professional or to broaden our reach at the same cost. And I think we're optimistic about what that could mean for us delivering on our BOI objective and yet still maintaining a world class, service to those that, require it from us. Okay.

So next question.

Speaker 0

The next question from the call is from Thibault Wotrin from Morgan Stanley. Please go ahead.

Speaker 14

Yeah. Thank you for taking my questions. I have a couple. First one on capital allocation and, in particular, on the consumer health care space. So we are seeing a consider in con consolidation in consumer health care, and we are seeing a streamlining of conglomerates.

Would you consider acquisitions in the space, in particular, of mid last last size acquisition? Or would you consider that this would be too disruptive in the context where you are carrying out this business and given the need you have to invest in the pharma pipeline? Second question is on the operating costs. There is an assumption that the COVID-nineteen situation, lockdowns and travel restrictions will lead to some level of cost savings across organizations. So based on what you are seeing so far, do you expect this cost saving to be material?

And are there other areas where costs have had to increase due to the pandemic and that we may be overlooking? And is there any aspect of your policy contingency that could be accelerated, delayed, or eventually canceled because of COVID nineteen?

Speaker 2

Okay. I missed the last question, Thibault. Sorry. I you I couldn't hear you the last part of your question.

Speaker 14

Oh, okay. Sorry. The last question was on just operating costs and, basically, the positive impact potential from COVID nineteen due to the lockdown restrictions on. Yeah. Okay.

And and there are any potential additional costs because of COVID that we are missing.

Speaker 2

Okay. Alright. Got it. So so maybe I'll just give you a short, sharp answer to the consumer health question. You sort of asked it then answered it yourself, I think.

You know, we outlined at Capital Markets Day that we that we wanted to unencumbered the business, make it standalone, put the agility back into it, let it make its own decisions, and, to move at a higher speed with an ambition of getting, back to and then beyond, industry growth rates, hopefully, by the end of the year. I think our focus is really on that. And I think, you know, that takes enough energy, and we think we have enough in hand to do that and to get to a very good place. Jean Matisse, in terms of OpEx opportunity savings, anything that you want to add that you didn't mention earlier?

Speaker 4

Yes. I just can add some colors to what I was saying. We have, of course, some less cost because of traveling or maybe in country because sales reps are not traveling either, but the bulk of the cost is still there. And by the way, the first quarter, a lot of our, for instance, plane transportation was already booked without possibility to be canceled. So and it was balanced by extra cost of trials, mask, reimbursement to employees to go to work, help for their children to be looked after.

So there were plus or minuses, but it's not really material in the Q1. Looking forward, I think your point is very interesting because I see a lot of opportunities to boost our plan to achieve the €2,000,000,000 by 2022, and that's what we are working on.

Speaker 2

Thank you, Jean Baptiste. Next question, Felix.

Speaker 0

The next question from the phone is from Geoffrey Porte from SVB Leerink. Please go ahead.

Speaker 15

Thank you very much for taking the question. A couple. First on Dupixent, very strong quarter, congratulations, but perhaps a few delays in the NBRxs. So could you tell us how you are tracking to your $10,000,000,000 target €10,000,000,000 target given that trajectory? And then secondly, on the r and d side, just a couple of logistics questions.

Is the IL-thirty three still ongoing in asthma? Second, have you thought about Cablivi or for that matter, cetimlimab in as a treatment for COVID given what we're learning about this the inflammatory syndrome? Thanks.

Speaker 2

Okay. Thank you, Jeff. So, John, I'll continue on the cablivirsutimlimab piece. I'll take a stab at the first part, Bill. We haven't drawn a direct line from Q1 NBRx to 10,000,000,000.

I think what we would say is, that at 776,000,000 in the twelfth quarter from launch, I think, you know, anybody would have to accept that this is an outstanding performance. And, you know, if we continue to amass, albeit a slightly lower rate right now, but better than industry and better than almost any other meds and NBRx, TRx are strong growth. You know, you'll have seen the data already in April, that it is, also holding up. So, you know, our 10,000,000,000, aspiration is built on that, of course, and having a best in class profile safety and efficacy. We're adding the data to that, as you can see in the indications.

I think we have something like 89 launches of indications or in countries over the next twelve months. So very confident, remain very confident in that ambition. For the IL-thirty three, I think your question is it's in the pipeline update. You know, of course, we've explored it, in a few indications. I think, as we sit here, looking at COPD, there are very few, biologics, or no biologics in COPD.

I know the team is taking because it's such a heterogeneous patient population is taking a look at, some subgroup data to to decide when and if we push on because we can add some value. And I think if we can add some clinical value, we will, and that's that's, in the works. Bill, anything to add to those two points?

Speaker 3

Nope. Regarding the, Dupixent, absolutely confident in the ambition of this product.

Speaker 2

Great. Thanks. Yeah. Good. Well, Bill, I mean, name may be the best statement statement we've heard in the whole call.

Thank you for that. Me too. John Cablibi, tutimlimab, COVID nineteen.

Speaker 12

Yeah, Jeff. Thanks for the question. The, you know, I think more and more there's an appreciation that there's a vascular component to, the COVID story when at least it comes to patients who are experiencing the more severe forms of the, of the pathology. Whether those agents would be the right solution, however, I think, is to be debated, you know, at least what little I think the scientific community knows about it and then thinking about the specific mechanisms of Cablivi and Sutentlimab and Jymo. You know, we we don't we don't see necessarily a great fit there.

So we haven't just we we're not planning to conduct repurposing studies at this point. I think maybe a broader question is even for the for the general medicines project that we have that are antithrombotics, whether some of those might be considered in the medical management of some of these patients given the emerging appreciation for the vascular component.

Speaker 2

Right. Thanks very much for answering the Yeah. No. Thank you. Thanks, Jeff.

Next question.

Speaker 0

The next question from the phone is from the line of Bart Kair from Goldman Sachs. Please go ahead.

Speaker 16

Hi. Good afternoon. Two questions, please. First, I know you guys have spoken. You guys have been kind of a big conservative in talking about the flu capacity for the year.

But, Paul, if you could give us some magnitude of if the demand was there, could you do 50% more doses? Could you double your kind of number of flu vaccines you started getting getting a normal year? Any kind of magnitude would be helpful? And then secondly, Paul, in your opening remarks, you described the Kepzara opportunity as a long shot. This is for COVID nineteen, obviously.

Just wondering if that is based on any kind of early data you might have seen, or was it just being cautious given you haven't done a full kind of phase one for Kevzara in this indication? Thank you.

Speaker 2

Thank you, Kevzara. David,

Speaker 3

why don't

Speaker 2

we take another crack at flu capacity for this season?

Speaker 15

Okay. You might have missed it at

Speaker 2

the beginning, the question of Graham.

Speaker 6

It goes very much in the same direction. We do not give details on the flu capacity. What we can say is that we do have an upside on egg base, but also, of course, on flu block. The only limiting factor on flu block that we have to further scale it up is short term, the fill and pack capacity. We're working on this.

And then midterm, we have, of course, more capacity, especially also coming from flu block, but we are also opening up a new vaccine plan for fluzon high dose next year in The United States, and that factory can produce for the whole world. But we don't give details of it for competitive reasons.

Speaker 2

As for your second point in Kamsara, maybe it's just word choice. I mean, I I tried to say upfront that, you know you know, we are working on vaccines because we think that is very much within our control. Trying medicines that have previously approved for different indications, you know, is always going to be a little bit serendipitous. I think you have to accept that. You know, we watch like everybody else the emerging publications and the data and the anecdotes and the experiences.

And, you know, as we already have hydroxychloroquine in the mix, you know, I can tell you that that, you know, one day we get some encouraging news, another day we don't. All I can say is as a team, we try not to speculate. It's imminent, hopefully really imminent. We'll get some type of, readout from our own studies and know better where we stand. You know, I I can't tell you we you know, how much we'd love to have an effect.

Right? And but I'm just pragmatic. So, you know, it's a it's a fingers crossed, situation, and I'm sure it is for all the I l six manufacturers to try and work out what we can do. But, no, we are we're just waiting for the evidence and then and then, you know, I've said earlier, we rise to the challenge on manufacturing of both Plaquenil or hydroxychloroquine and and Kevzara and see where we can get to. Okay.

Next next question.

Speaker 0

The next question is from the line of Jean Jacques Leffer from Baier and Garnier. Please go ahead.

Speaker 17

Yes. Thank you for taking my question. The first one would be for Jean Baptiste and regarding OpEx. I remember you, Jean Baptiste, guiding us in the past for 1% OpEx decrease for this year and next year or two. In Q1, you realized minus 2.9%, and you alluded to extra saving you may realize in the future.

So is this all these 3% the new direction we have to take into account on a yearly basis? This is my first question. And the second question regarding COVID vaccine capacity, The up to 6,000,000 doses you added to, is it on top of your global capacity for all your vaccine business? Or would it be detrimental to some other vaccine? And if it's on top, how do you plan to have this vaccine manufacturing with flu increasing from H2 and probably the year after?

Thank you.

Speaker 2

Okay. Jean Jacques, thank you very much. Jean Baptiste, OpEx management, I think it's worth restating our philosophy on that and also that we take the opportunity where we can to invest in growth opportunities. But the fundamental underlying maturity of cost management is essential to our long term equity story. So Jean Baptiste, do want to comment?

Speaker 4

Yes. Thank you, Jean Jacques, for this question. To clarify completely, before PLE2WIN, we had a 1% growth, plus 1% growth guidance on average for the years to come, but this has been dropped with our since the Capital Market Day. And we just said that we would be delivering on our EUR 2,000,000,000 savings by 2022. So is the EUR 2,900,000,000.0 that you are seeing in Q1 a trend?

Not at all. As Paul has just explained, we are very happy to reinvest those savings to accelerate our growth engines in behind Dupixent and behind vaccines each time we can. So no, it's not a trend. We will be modulating our our spend, but we will be delivering on our savings to make sure we can fuel the growth and navigate any up and down of the of the market.

Speaker 2

Thank you. David, I'll I'll come to you. Just one observation from me as being a relative newcomer to vaccines. It's interesting how there are a lot of questions around, the opportunity cost of manufacturing COVID nineteen vaccines versus flu. We don't think that's the case for us.

David will give you more detail. But there are not enough questions about what I said upfront. There are 76 vaccines in in development, and there's almost no capacity for those to to do anything meaningful at scale, which is why it's so important where we stand in our relationship with GSK to probably be the only company that can get there significantly. David, do you want to comment on the, the opportunity cost on flu? Is it real?

Is it not?

Speaker 6

Yeah. Thanks. Thanks, Jean Jacques, for the question. A very good question. So it's not going to cannibalize our flu block capacity.

Why is that? We have large additional capacity that we can upscale in a very short amount of time, and we're already looking at doing that together with our partners. That's for the recombinant vaccine. So our ambition is to go from the current 100 to 600,000,000 that we have announced based on US territory to go beyond the 1,000,000,000 in twelve months, including also the capacity we have with Unigen in Japan. And then on the messenger RNA, in fact, Translate Bio has been working since quite some time on upscaling the production process, because their first candidate is on cystic fibrosis, which is inhaled, and you need larger amounts of messenger RNA on the cystic fibrosis candidate.

Therefore, for the vaccine candidate, they are already producing at one hundred gram batches. Now we are moving to two fifty gram batches, and it is assumed that towards the end of the year, beginning of the year, go kilogram batches, and that would allow us to significantly upscale to hundreds of millions of doses. So we are confident that we will be able to deliver on large scale. We are, of course, adding filling and packaging capacity as we speak, in our internal network, but also, investigating possibilities with CMOs.

Speaker 2

Thank you, David. I appreciate it. Okay. Maybe the last couple of questions.

Speaker 0

The next question from the phone is from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Speaker 2

Oh, thanks so much for

Speaker 18

the question. So just hoping that on the vaccine side, you could help us understand a little bit of what the, you know, the science is suggesting in terms of the durability of immunity. And then just in terms of the efficacy dynamics, you know, whether we should be thinking more that the traditional vaccine versus the MR approach is is likely to be meaningfully different. And then the second is really on the BTK. One is it's one is a housekeeping question.

If possible, could you share the lesion count data, which I think was a secondary endpoint? I'm not sure if that was shared. And then, Paul, just finally, if you could just update us on your business development priorities in terms of, the size of transaction that you see and and just how you are thinking about the current environment. Is it more or less challenging or or or about the same? Thanks.

Speaker 2

Okay. Thank you. Well, finishing strongly there, Seamus, with a number of questions. So, David, maybe I'll come to you on the the first two. John, feel free to add if you'd like to, but, aspects on durability of immunity, and then likely winner between traditional approach and mRNA.

Speaker 6

So thanks for the question. It's really a very complex question to answer right now because we're just at the beginning of it. Having said that, I think what we can say is on the recombinant platform, the baculovirus platform, what we do know is on flu block, of course, which is a registered vaccine based on this platform, we have seen very good durability. So we hope, obviously, that this is going to be the case also for the COVID candidate. On messenger RNA, there are first candidates that have been developed by Moderna on CMV.

The durability also looks good. But, of course, we have to be careful on messenger RNA. There is no commercialized vaccine so far based on the platform. The platform is clearly very promising, there is no doubt. We have also, as I announced before, the collaboration with Translate Bio, but we just need to be stay humble, and and we need to see phase three data.

And the same applies to the efficacy, so it's too early to tell.

Speaker 2

Thanks, David. As for your second part of your question, the BTK eye lesion count, haven't shared that data yet. We will do in the future. There'll be, you know, quite a lot of news flow as we go through the next congresses, etcetera, whatever form they're in on that. What I can say, however, is, I like the enthusiasm of the question.

You know, we talked about it a little bit yesterday and a little bit in the opening today, but, you know, we really do think we're gonna have best in disease, and all of those things, lesion count, become important. You know, four thousand patients in phase three studies, I think you get to see, you know, you know, how seriously, we intend to go after this. As for BD priorities, you know, we are, as you would imagine, active in many fronts. Whilst it is, in challenging times from a pandemic, it doesn't change our strategic interest in a number of opportunities. You know, we'd like to think of adding some cool science to augment or amplify, existing pipeline assets, on his call as recently as yesterday about this.

So, you know, we'll continue to try and make progress and, and deliver that. You asked me sort of my own level of prioritization. It is more focused on adding to the science and, earlier, in in discovery and development, than later. I think we have enough, to navigate the next few years and to manage our, commitments through 2025 and then some. So really building out the pipeline earlier is gonna be, an area of priority.

It's not a surprise, but it's just the truth of it. Maybe last question, Felix, if you feel we have time. If not Yes. Yes. We just stop there.

Speaker 1

Yeah. Okay. Unfortunately, we are approaching the full hour. We know we have a lot of questions still on the line. But operator, last question, please.

Speaker 0

The last question from the phone is from the line of Limal Kapadia from Bernstein. Please go ahead.

Speaker 2

Hi. Thank you very much

Speaker 15

for taking my questions. Limal Kapadia from Bernstein. So just a couple for David, please. So just on the COVID nineteen vaccines, I just wanted to get your thoughts on which approach do you think would actually deliver more durable antibody response, either recombinant or mRNA. And then tied to this, you know, speaking with experts, it seems like optimizing mRNA, vaccines is bit of trial and error.

You know? So how how is Sanofi and Translate, actually approaching this optimization? And are you taking a little bit more time than some of your peers for a reason? And then my second question is just on the travel vaccines. So down twenty percent in one q.

So just wondering when did you actually start to see the main impact from COVID nineteen? Just trying to get a sense of the kind you could expect in 2Q and beyond. So any color you could provide there, you know, and what's incorporated into your guidance on travel. And then just and similarly for adult boosters, the same type of commentary will be great. Thank you.

Speaker 2

So, Dave, it looks like we're gonna be asking you to to bring us home on these questions. First of all, on durability again, if you have the, if you want to recap that. But the mRNA optimizing is an interesting one, you know, particularly when you look, you know, with the experience in the companies that have it and what the opportunity could be for us as a standout even if later.

Speaker 6

Yeah. Thanks, Wimal. On the optimizing, being a trial and error, of course, as I said before, messenger RNA is still a young technology in vaccines. So I think there is, like in all research, a little bit of a trial and error and there. Messenger RNA itself is not the whole recipe.

You also need the lipid nanoparticles, and that's something that we're trying to optimize as we speak. So, yes, we're taking a little bit of time to do that. Regarding the travel vaccines, clearly, the Q1, the impact was relatively soft because you remember that really travel restrictions started to hit, I would say, kind of March. So clearly, Q2 is going to be lower and Q3. Now, we all don't have a crystal ball when travel is going to start picking up again.

So that's a bit hard to say. But our assumption is that the upside we see on flu is probably gonna compensate for the downside that we have on travel and potentially on boosters because people see their doctors less. If the confinement measures are, being, you know, kind of lower than people can come back and go and see their doctors again, then, travel and boosters are gonna start normalize very quickly, and there might, for boosters, certainly be a catch up opportunity as well, like we we see already for pediatrics, where there's a lot of catch up ongoing already in China also be opening up again. So so that's where we are. So we we still stick to our guidance of mid to high single digit growth.

Speaker 15

Okay. Thank very much.

Speaker 2

Thank you. Thank you. If we have a last question, if it's a yes or no answer, we're happy to take it. If it's a short one, Felix?

Speaker 0

Yes. The next question is from Dominic Lan from Credit Suisse. Please go ahead.

Speaker 10

Hello. It's actually Jo Walton, and it's a broader question which you might, like to finish with. I'm just thinking of the legacy of, this coronavirus. Do you think, and given the fact that you've got an unusual, geographic mix, you've got much more exposure to emerging markets and rest of world than some of the other companies. Do you think as we exit, as we go through next year, we're going to see we should be thinking of governments with less money having to be more restrictive and more price pressures, rather like we had after the financial crisis in, post 02/2008, 02/2009?

Or do we think of health care as the new military spending and everybody actually wanting to spend more on health care and you benefiting? Thank you.

Speaker 2

Well, thanks, Joe. What a great question. To finish on a comparison to military spending. I, I can only give you a view at this point. Clearly, none of us have a crystal ball on that.

What I can tell you is that sentiment towards the company at least and perhaps even the industry has changed a little in terms of people coming to us relying on us quite heavily, in terms of trying to find solutions to repurpose medicines, to accelerate vaccines. I think and I think how we've responded has been a good a good moment to show that, you know, we are trying to do the right thing. We are purpose driven, and we do wanna collaborate. So I think some good will come out of that. How that sustains us given what for many countries will be some of the most difficult, you know, economic, circumstances they've ever faced, We will see.

I think we stand up for by the value we deliver of our medicines. I think I tried to touch on it earlier, but our portfolio is a good mix of resiliency and innovation, which we think is going to play a disproportionately positive role in returning life to normal. We think that will still be rewarded, so we're confident in our longer term guidance. With that, thank you to everybody. We confirm we're on track for 2020.

We've been as transparent as we can be about the upsides we've had from COVID nineteen, our underlying cost management, and our delivery of both vaccines and indeed of Dupixent's continued continues to impress. I think our mix is right, and and our people are showing themselves in a way that I've never had to actually see before in terms of commitment, energy, entrepreneurship, and tenacity, and we're gonna make sure that we keep a lot of that to keep moving and doing good things for patients and for those that invest in us. So thanks to all the team, and thanks to everybody that dialed in. And with that, Felix, we'll bring it to a conclusion.

Speaker 1

Thank you very much, everyone. Please don't hesitate to contact the IR team for further questions. Thank you. Operator, that concludes the call.

Speaker 0

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, thank you for participating in the conference. You may now disconnect your lines. Goodbye.