Sanofi - Q1 2024

Transcript

Paul Hudson (CEO)

Welcome to the Q1 2024 conference call. You can find the slides for this call on the Sanofi.com investors page. I'd like to remind you that the information presented in this call contains forward-looking statements, which are subject to substantial risks and uncertainties and may cause actual results to differ materially. I encourage you to read the disclaimer in our presentation. In addition, I refer you to our Form 20-F on file with the SEC and our Document d'Enregistrement Universel, for a description of these risk factors. I'm pleased to welcome our new CFO, François, to the presentation, and François will be followed by Houman, our head of R&D on the pipeline. For Q&A, we have Brian, Olivier, Thomas, and Julie to cover the global business units, and Roy, our GC.

For the Q&A, you have 2 options to participate in Zoom: raise your hand or submit your question using Q&A. This will be explained later on a slide. Let's turn to the business. We had an excellent start in 2024 with 7% sales growth in line with our fast-moving portfolio transformation. Our growth was driven by launches, including new and existing indications for Dupixent, and this performance fully underpins our 2024 EPS guidance at CER. Dupixent continued to increase penetration in all approved indications, and we saw performance diversify further across all geographies, plus, of course, the usual US reset of insurance plans. Pharma launches were led by Nexviazyme and Altuviiio, with more details to come a little later. Launches also boosted the performance in vaccines, with Beyfortus making further progress, including in countries in the southern hemispheres.

In consumer health, growth of 9% reflected the consolidation of the Qunol acquisition, as well, of course, as organic growth. We're progressing the plan to separate this business, as discussed in the past. Overall, we're pleased with the ongoing portfolio transformation, which is becoming more visible, also in our cost lines with more resources going into the pipeline and less into SG&A. This is exactly the development we set out last year when we announced the next chapter of our strategy. Before moving on, I'd like to extend my thanks to all the Sanofi colleagues for their dedicated work and their commitment to patience chasing the miracles of science to improve people's lives. Dupixent continues to perform with strong demand-driven growth, delivering sales of more than EUR 2.8 billion in the first quarter.

Sales of this unique medicine increased by 25% globally, fueled by the accelerated growth from indication expansions in the ex-US markets, where sales grew as much as 51%. With now more than 850,000 patients worldwide, the strong contribution from countries like Japan, China, and Germany highlights the tremendous growth potential for Dupixent across all indications and geographies. In the US, sales exceeded EUR 2 billion in the quarter, up 17%. As we can see every year, US growth reflects the impact from the customary dynamics of the annual reset of insurance plans. Almost eight years into its initial US launch in atopic dermatitis, this effect underscores the large size and rapid growth of Dupixent with its leadership positions in new prescriptions across all five approved indications.

As we look ahead to Q2, we remain very excited about the outlook for Dupixent's outstanding commercial success across all geographies, supported by regulatory progress towards launching multiple new indications in major markets. With our strong Q1 performance, we're extremely confident in delivering our previously communicated objective of around EUR 13 billion in sales for the full year. As one of the leading medicines in immunology, respiratory is a core disease area for Dupixent, well ahead of any of the competing biology of any other competing biologic medicine. Dupixent has established and maintained a distinct leadership position in new prescriptions among pulmonologists across asthma and chronic rhinosinusitis with nasal polyps in the U.S. We believe in the growing importance of pulmonologists in adopting biologics to treat respiratory diseases.

We're also confident that their growing familiarity with Dupixent in type 2 inflammation will play a key role in the adoption of Dupixent as the potentially first advanced therapy in COPD in more than a decade, if approved. We also continue to build a growing body of scientific evidence around Dupixent in addressing airway inflammation. In the Vestige study, which was recently presented at the AAAAI Congress, Dupixent demonstrated reduced airway inflammation and mucus plugging in functional respiratory imaging in asthma. We have an ambition to potentially introduce a new standard of care with Dupixent in COPD for patients with type 2 inflammation. As you may recall, significant regulatory progress has been achieved with Dupixent's potential in COPD across key markets.

We are preparing for a potential launch in the U.S. as early as late June, if approved by the FDA, and plan for additional potential approvals in Europe and China by the end of the year. We're excited about the outlook for Dupixent's potential to become a breakthrough medicine for COPD, a leading cause of death worldwide. Dupixent is well positioned to potentially address the higher med need in COPD with a strong clinical profile across two large phase 3 studies and more than seven years of real-world evidence of real-world evidence data on safety across five approved indications. Dupixent addresses unmet medical need of a well-defined population of roughly 300,000 patients in the U.S. alone, whose disease is driven by type 2 inflammation and uncontrolled, despite standard of care therapies. COPD is a historically difficult disease area and a heterogeneous disease with multiple development failures in the last decade.

Over time, many patients become resigned to their medical condition. With an experienced team that has a track record of development and commercial excellence in respiratory, we plan a targeted approach to drive the awareness and identification of COPD with type 2 inflammation among patients and pulmonologists. As we have seen with our launches across other major indications, the adoption of Dupixent as the first and only biologic in the COPD indication will require some time initially, and the inflection of sales growth is most likely to come in 2025 after the U.S. launch. We are confident that, if approved, COPD will become the next major growth pillar for Dupixent. Together with our second potential blockbuster developed for COPD, it's Itepekimab. We continue to expect peak sales of more than EUR 5 billion for both products combined.

Let's now move to the new launches as Q1 further demonstrates our ability to execute successful launches and bring new medicines to patients. This quarter, all our new launches, including Beyfortus, made up close to EUR 1 billion in sales, or 9% of our total biopharma business. Beyfortus continued its global rollout in the quarter with a launch in the southern hemisphere countries of all infant protection programs in some Australian states and Chile. As RSV is seasonal, Beyfortus will have a sales pattern like what many of you know from flu vaccines. Nexviazyme grew strongly from new patients, as well as patients converting from older medicines in the Pompe franchise. We're pleased with the overall growth and franchise sustainability. Altuviiio is soon annualizing its launch. It has seen continued strong uptake, with most of the growth coming from other factor medicines than Eloctate.

Even some uptake from patients not on factor medicines. It shows how innovation can help to revitalize hemophilia and grow Sanofi's total share. Other launch medicines also did well in growth in absolute terms, including Sarclisa approved in multiple myeloma. Taking a closer look at Beyfortus, what we're really focused on and proud of is the impact on improving public health and benefit for thousands of families. We've now real-world results from last year's implementation of broad immunization programs in the U.S., France, and Spain with Beyfortus. The results are strikingly impressive. You can see the dramatic reduction of hospitalizations by the numbers on this slide. These real-world results are either consistent or even better than those from the clinical trials. The U.S. CDC recently published their effectiveness data for Beyfortus at 90%. In Europe, we've seen similar results for hospitalization reduction across France and Spain.

Overall, following the 1st season in the 3 launch countries where Beyfortus is used for all infant protection, this means that nearly 40,000 hospitalizations have already been avoided for families. This is the impact that matters most. It also provides a perspective for Beyfortus global health benefit. As we plan to launch in additional countries in H2. Together with AZ, we're working with the regulatory authorities and extending the manufacturing network to make Beyfortus more available for the upcoming season. As we're glad to see such enthusiastic demand. We're confident that where we will meet anticipated customer demand and look forward to extending all infant protection programs in the upcoming northern hemisphere RSV season. On my final slide, I wanted to highlight some progress on our ESG ambition, exemplified by the work of our global health unit.

Since its launch in 2021, the essential medicines from our GHU portfolio have supported close to 550,000 patients suffering from non-communicable diseases in 31 countries, with the objective to reach 2 million NCD patients by 2030. An additional differentiator is the meaningful work done by our teams to help build sustainable healthcare systems through partnerships with the ministries of health, trainings of healthcare professionals, and our impact investment fund focused on supporting exclusive startups and businesses. I now have the great pleasure to hand over to François, our new CFO.

François-Xavier Roger (CFO)

Thank you, Paul. I'm pleased to have joined the team here at Sanofi earlier in April, and I'm looking forward to interacting with all of you in the future. Sales were up 7% in the quarter. As Paul mentioned, growth was driven by our ongoing portfolio transformation towards biopharma medicines, with Dupixent sales up by 25% and the new launches, including Beyfortus, up by 150%. Excluding the impact of Aubagio loss of exclusivity and COVID-19, growth was 12%. This analysis does not aim at removing all headwinds, but simply illustrates what the new Sanofi may look like in the future. Our gross margin at 73.5% was down by 2.6 percentage points, mainly due to Aubagio and due to the absence of COVID-19 vaccine sales this year. In addition, the quarter was impacted by a one-off inventory adjustment to reflect declining standard costs.

R&D expenses increased by 12% at constant exchange rates, in line with our ambition to invest more in our pipeline. Resources are being deployed to advance late-stage immunology and neurology projects. SG&A increased by less than 3%, below half of sales growth, illustrating our strategic reallocation of resources. Our business operating margin decreased to 27.2%, mainly due to the gross margin decline, the step-up in R&D expenses, and an increase in the profit sharing with Regeneron. As expected, EPS was down 7.4% in Q1, also partly impacted by a higher tax rate. Just one word on cash flow. It will be impacted in 2024 by our lower business operating income and by the phasing of rebate payments in the U.S. related to prior year sales. Let me now give you some additional information on our coming quarter.

In Q2 2024, we expect Dupixent and the new pharma launches to grow further while we continue to see the impact of the Aubagio loss of exclusivity in Europe. Of note, we don't expect any Beyfortus sales in Q2 due to early delivery in Q1 in some southern hemisphere countries, while shipment in northern hemisphere countries are not expected before the second half of 2024. For the full year 2024 sales outlook, we expect Dupixent to reach around EUR 13 billion and the vaccine franchise to grow mid-single-digit, with Beyfortus anticipated to reach blockbuster status. The Aubagio loss of exclusivity will continue to impact the top line, mainly in H1. Finally, planned divestments will lower our sales by around EUR 300 million over the year.

For the full year P&L, we expect our gross margin to decrease slightly due to Aubagio and the absence of COVID-19 sales and revenues this year. OpEx is expected to grow, with about EUR 700 million step-up in R&D, while SG&A expenses are expected to remain stable. Finally, our tax rate will increase to around 21% due to the implementation of the OECD Pillar 2. We confirm our full year 2024 expectation of a low single digit decline of our business EPS at constant exchange rates. Excluding the impact of the higher tax rate, the full year 2024 business EPS is expected to be roughly stable. On foreign exchange, we see a negative currency impact to EPS of around 6% based on April 2024 average exchange rates. As a reminder, we continue to anticipate strong business EPS rebounds in 2025.

As we have mentioned earlier, in 2024, we are transforming the company for long-term value creation. With that, I am now handing over to Houman.

Houman Ashrafian (EVP and Head of Research and Development)

Thank you, François. We've seen substantial phase 2. We've seen substantial positive pipeline progress already in Q1, where we continue to deliver a consistent newsflow of clinically important data in scientific publications and congresses. For Frexalimab, encouraging phase 2 data in multiple sclerosis was recently published in the New England Journal, but updated with data from the 48-week open label extension, which was presented last week at the AAN conference, supporting our commitment to MS patients. In atopic dermatitis, we have the potential to further establish our leadership with Amlitelimab, where we presented the phase 2B data AAD, where a largely sustained effect of Amlitelimab on atopic dermatitis symptoms was demonstrated after 52 weeks of dosing. Later, I will further talk about the data presented from these two pipeline projects.

On the regulatory side, we've reached an impressive pace of approvals, with 2 of them for Dupixent and multiple indications within different countries. FDA discussions regarding Dupixent's sBLA in COPD are ongoing under the priority review process, as Paul has mentioned. As usual, it's always possible that the FDA could require additional information to complete the priority review of our submission to finalize labeling. As a reminder, there is currently no biologic treatment approved in COPD underlining our commitment to make Dupixent available to as many patients as possible as quickly as possible, and supporting the ambitions for Dupixent that Paul has already outlined. Amlitelimab, our non-depleting OX40 ligand monoclonal antibody, has shown potential best-in-class efficacy with a durable clinical response rate after 52 weeks from the severe AD phase 2b study.

The responder percentages reflected in the IGA 0/1 and the EASI 75 scores, which are both surrogate endpoints for AD, were maintained and still significant, in fact, following the withdrawal from the drug at week 24. As you can see from the bar charts at week 52, results on and off medicine are similar, which shows the persistence of response, suggesting the potential normalization of inflammatory T cell activity and potential effect on type 2 and non-type 2 biomarkers. These important data support the viability of the 12-week extended dosing interval, which will improve the patient's treatment paradigm and potentially expand Sanofi's presence in AD and beyond, has been interpreted by some to hint at potential disease-modifying activity.

The opportunity of treating patients by treating this core central pathway with consistently good safety in both parts of the study signals that Amlitelimab has the potential to reach much beyond AD and become a pipeline in a product. The cleanest AE profile in this class may reflect the importance of non-depleting mechanism differentiating Amlitelimab. The enrollment of all 4 studies, phase 3 studies, is on track with the 1st regulatory submission expected in 2027. Now switching to Frexalimab, our CD40 ligand antibody, high efficacy, non-lymphocyte depleting potential MS treatment also has a pipeline in a product potential with multiple indications under development. Most importantly, in relapsing remitting MS, the 48-week data from the phase 2 open label extension study has shown a sustained reduction of disease activity monitored by mean number of gadolinium positive type 1 lesions appearing at each MRI.

As you can see on the bar charts, patients who have switched from the placebo arm to the Frexalimab arms, both IV and subcut, have shown an impressive decrease of lesions. It's important to mention that nearly every patient on Frexalimab IV had no new lesions presented at a near to 0 annualized relapse rate at 48 weeks. 87% of participants completed the extension, and Frexalimab once again proved to be well tolerated with an acceptable safety profile. phase 3 studies in relapsing remitting MS and NRSPMS have been initiated, and the 1st regulatory submission is expected in 2027. Frexalimab has the potential to provide additional benefits to patients and extend Sanofi's presence in multiple sclerosis. Switching gear now, turning to Rilzabrutinib, our oral BTKI, one of our 12 priority medicines.

As you can see, we're developing this medicine in multiple indications, such as in ITP in rare hematological diseases, but also in our main key therapeutic area, immunology, including asthma and chronic spontaneous urticaria. We were pleased to announce earlier in the week the positive readout of the Luna 3 phase 3 study in ITP, a rare autoimmune bleeding disorder characterized by abnormally low levels of platelets, persistent and disabling fatigue, and increased hemorrhage. These results confirmed the positive phase 2 data, with additional details to be presented at forthcoming medical meetings and a regulatory submission later this year. Alongside this positive news, we also received more phase 2 data in asthma, this time at the high dose, confirming the previous positive trends. We're very excited by the opportunity to present the data at the ATS conference next month. We can't wait to see you there.

Positive data in the third indication, CSU, were presented in February at the AAAAI annual meeting, with phase 3 starting later this year. These data sets are important stepping stones of our R&D transformation journey, emphasizing our commitment to rare diseases and to unlocking the important potential for BTK inhibitors, and also highlighting the value that our experience in immunology can bring to the development of a medicine that started its life in another company. Having recently reshaped our overall oncology strategy, we want to cover this in a little greater detail. Our strategy is one of selectively investing areas where we believe we have a chance to make a meaningful difference based on our expertise in immunology.

Our aim is to focus on critical unmet medical needs for patients, benefiting from immune mechanisms and related mechanisms of action, such as our NK cell engagers and using our technologies and platforms with the ADCs or the nanobody platform. I would like to end this slide on the positive news for the cancer community, where we are pleased by the recent positive U.S. development supporting the use of minimal residual disease, or MRD, as clinical endpoint in myeloma. Recognized by the FDA, this can potentially bring new effective treatments to patients earlier. We currently have Sarclisa, our CD38, with a best-in-class potential and approvals in more than 50 countries as an option in the relapse myeloma setting.

Last December, the readout of the IXIA study marked the 5th positive phase 3 study and second positive in transplant eligible newly diagnosed multiple myeloma patients, where 77% of patients reached MRD negativity versus 67% in the comparator arm. The Sarclisa group had a 60% higher chance of achieving this data. Additionally, we had the IMROZ phase 3 study, which was positive, and we look forward to sharing the latter in upcoming medical congress with anticipated submission in H1. To end my part of the presentation on a positive note, showing our ongoing commitment to deliver clinical data in the service of patients, I would like to highlight the upcoming phase 3 and phase 2 readouts, as well as regulatory submissions occurring in 2024 and 2025.

As you can see, news flow will increase and become busier as we move into 2025, supported by the step-up in R&D investments that François just mentioned. I'm enthusiastic and impatient at the same time as the news flow keeps on getting richer and better, thanks to the clinical studies that we're constantly starting. With this, I hand back to Paul.

Paul Hudson (CEO)

For sure, enthusiastic and impatient. I can confirm that. We'll now have the call to your questions. As a reminder, we would ask you to limit your questions to one or two. As you can see, you have 2 options for Q&A. Hit the raise hand icon. You'll be notified when your line is open. So do remember to unmute, or alternatively, submit your question through Q&A function, and our question will be read out by us. Over to you.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. The first question will be from Peter Welford from Jefferies. Peter.

Peter Welford (Senior Research Analyst)

Hi. Hopefully, you can hear me. Thanks very much for the questions. Can we just start off with Dupixent and just thinking about the momentum we've seen, but equally then the new, more importantly, the new indication, COPD? I guess I just wonder if we can sort of square up some of the very positive commentary, I guess, we heard on the potential for this indication, obviously significant unmet medical need, but also some, perhaps, word of caution just not to get too ahead of ourselves. I guess certainly challenge checks we've done. A lot of doctors seem to think that with COPD patients, they already know whether they have Type 2 Inflammation in many cases or not.

So if you can talk about, from your point of view, what the challenges are here, and why we shouldn't expect, at least initially, a potential bolus of patients, given they currently have no other options available, and potential challenges, I guess, when you think about that. And then, if I could just ask a second question, just quickly to François. You mentioned on the gross margin just with regards to a one-time adjustment. I wonder if you could just go into that a little bit more detail. And is that very much one time for the first quarter? And therefore, perhaps you could possibly quantify it. It would help. Thank you.

Paul Hudson (CEO)

Peter, thank you. Brian, Dupixent, COPD.

Brian Foard (EVP and Head of Specialty Care)

Yeah. Thank you so much for the question. Really, as we get ready for the launch in COPD, first and foremost, it all starts with the patients. And I think what we've seen with this brand is that by going into diseases that are driven by underlying Type 2 Inflammation, we've really opened up new treatment opportunities for these patients and really transformed a lot of patients' lives. I think, as Paul mentioned, over 850,000 patients already on therapy. Many of those actually happen to be asthma sufferers and are treated by the pulmonologist community. So, as you can imagine, as we've spoken with pulmonologists, they're extremely excited about having potentially a new option to treat these patients that, quite frankly, are on the highest dose of therapy. And that's why I think to contextualize them, these patients are on the highest doses of therapy and still exacerbating.

We have to contextualize that the right way. Then you saw our reductions in both the BOREAS and the NOTUS trials, how effective they were at actually adding reduction in exacerbation rates of 30% and 34%. We're very positive about this. I think the challenge with this particular patient population is probably less about the patient population and more about the fact that whenever you bring a new therapy like this in more than 10 years, biologic ramp will take just a little bit of time. Even though there's a burden of disease there for the patients, there will take a bit of time to get these physicians used to using biologics. That said, the pulmonologist community does use biologics today.

So we feel like we're in a good spot in preparing the marketplace really quite well, but excited about bringing it whenever it comes to the market.

Thank you, Brian. Houman, anything to add?

Houman Ashrafian (EVP and Head of Research and Development)

Yeah. So, hi, Peter. You asked a very specific question about the patient burden of disease and patient population. I just want to be clear about how we developed this molecule, both in asthma and COPD. We were very specific about our stratification strategy. We thought very deeply about the eosinophils' concentration of the blood, and specifically the phenotype. We stuck to our knitting very specifically on what we saw in the phase 2. And that reflected in an outstanding reduction in exacerbations in our phase 3 studies. I think it's really important to recognize, as Sanofi goes forward, that our development strategy is laser focused to enable launch in the highest unmet medical need population. And that's what we've done. So that's why we have confidence in the way this population launch will expand.

Olivier Charmeil (EVP and General Medicines)

Let me just add. I think Brian touched on it too. But remember, and I have to give Regeneron’s some credit for really pioneering in AD with us back at the beginning, but they were strong on that. We had to really build out the education around these things. When you enter new areas, you have to do the proper amount of education and work, make sure the right patients are identified and get supported. And that's why I think we've shared that we expect an inflection point in the business evolution more likely to be in 2025, because we have that work to do. François, anyone else.

François-Xavier Roger (CFO)

Yes. Good afternoon, Peter. So the question on the inventory adjustment, it's a one-off, essentially, for Q1. What happened is that our standard costs are moving down, which is actually good news for the medium term. But we had to revalue, as a consequence of that, our existing inventory to the lower standard cost. And this is a one-off adjustment that we booked in Q1. We don't expect to get much of it in Q2 and Q3 and for the balance of the year. And it was relatively sizable because it was close to half of the gross margin decline in Q1, which means that we can expect that our gross margin should not see the same negative deviation versus last year as we progress further into the year.

Paul Hudson (CEO)

Thank you. Next question.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. Next question is from Luisa Hector from Berenberg. Luisa.

Luisa Hector (Head of Global Pharma Equity Research)

Hello. Thanks for taking my questions. I wonder if we could just get an update on consumer factors that will determine your exit strategy and the timing and pros and cons of the different exit routes for maximizing shareholder value. And then I wanted to ask on Rilzabrutinib. So good data in ITP, just how you think about that sales opportunity, and also the asthma. So the phase 2 positive for the high dose, I think, in asthma, any more color around the safety profile and how you can proceed in asthma. I think the next step was phase 2b, but any more color on endpoints, trial design, and that stepping stone to phase 3. Thank you.

Paul Hudson (CEO)

Okay. Good. François, CHC.

François-Xavier Roger (CFO)

Yes. Luisa, François speaking. So I'll take the question on consumer. As of now, we want to keep all options open, which means, basically, you can consider that we can consider a potential spin-off, an IPO, probably partnering as well with private equity. So we keep all options open with one single idea, which is to maximize value creation for shareholders. So I don't want to comment on the pros and the cons of each of the options for the time being, given that we are working with a very open view for the time being. But we'll keep you posted as we progress further into the year. But don't be worried. This is about creating value for shareholders.

Paul Hudson (CEO)

Did you want to make a quick comment about where we're at in terms of technically being ready?

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Sure. I mean, first, I can confirm that we're excited and that we're on track. And to give maybe a little bit more of color on the practical side, all our system cloning activities that had to happen successfully happened actually just last week. And moreover, we're all well advanced in determining the scope of all the transition service agreements, which are very important as well. And in the meantime, we continue to focus on our three strategic priorities as we execute our overarching mission to make self-care as simple as it should be. So we're well underway.

Paul Hudson (CEO)

Thank you both. Good questions on Rilzabrutinib. Houman, I don't know whether, Brian, you want to comment on potential value in ITP, or Houman can either. But Houman, do you want to start off with?

Houman Ashrafian (EVP and Head of Research and Development)

Let me start. Actually, Brian and I'll tag team this one. Luisa, thank you for the question. So you have 2 parts to your question. There was ITP and asthma tolerability. So I'll just hit those very directly. I think that there still is a major unmet medical need in ITP. As you know, 50% of patients remain undercovered for care, particularly in terms of a lack of stability of platelet count. They also suffer very substantially from fatigue. Rilzabrutinib is something, a great joy to me personally, having treated these patients. The beauty of this treatment has a number of elements. One is it obviously prevents the production of B cells, hence the BTKI, the Bruton's tyrosine kinase inhibition, but also prevents phagocytosis of those platelets and reducing their platelet count.

Thomas Triomphe (EVP and Vaccines)

So mechanistically interesting compared to standard of care today, which undercovers 50% of patients, but also in some cases requires relatively extreme dietary modification. Rilza offers real opportunity. Point one. Point two, you asked about tolerability. To date, what we've seen has been gratifying in terms of Rilza's tolerability in every aspect. So that's pretty exciting. And then your question about asthma is super clear. We presented our low-dose asthma data last year. As you know, we were excited by that data. The opportunity for Rilza to become the 1st oral advanced asthma treatment is remarkable, but it has the potential to change the paradigm of how we treat asthma compared to what we have today.

All I can say is that it is with very substantial pleasure that I will invite everyone on this call to come to the ATS meeting to hear the outcomes of our Rilza study, which we could not be more thrilled in sharing. With that, to dimensionalize the market, I'm going to hand over to my twin, Brian.

Brian Foard (EVP and Head of Specialty Care)

So I think it's a really good question. I think, as you saw on R&D day, when we really started to talk about the 12 assets, this was one of those assets we talked about. So the slide, I think, that was presented earlier was really impressive to show that in three potential indications, CSU, ITP, and then in asthma, this could be really differentiated versus the competition in each of those therapeutic areas. Now, specifically, as it relates to ITP, and maybe I'll go a little bit broader and just say in rare blood space, we actually think that this could be potentially a blockbuster across both ITP and wAIHA combined. But contextually speaking, I mean, if you think about the two of them, obviously, ITP will be a little bit bigger than what we see in wAIHA, just based on the size.

I think there's about 50,000 patients we see as being eligible for ITP. So really excited about this differentiated profile and bringing it to patients as soon as possible.

Paul Hudson (CEO)

Thank you. I'll be in San Diego at ADS for the weekend between other meetings. So I'm looking forward to seeing the data presented, too. Next question.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. Next question from Graham Parry from BofA.

Speaker 13

Great. Thanks for taking my questions. So first one is just on Tolebrutinib, and just thinking about scenarios for the readouts to the data there. Just given the low likely annualized relapse rate that you're going to see in the control arm, if you assume it's going to be similar to Evobrutinib, do you see that there's a thought process here that perhaps actually progression would be the better primary endpoint? And is there a possibility here to change the statistical analysis plan for those relapsing studies to disease progression?

Alternatively, in the event that you didn't see that you met the primary endpoint on the Gemini studies, and we believe you do hit endpoints in the progressive trials, do you think that this could be something which would be priced higher in the market for that smaller overall MS patient population, but just as a progressive MS drug? So that's the first one, Tolebrutinib. Second one, Beyfortus supply. You said you can make this a blockbuster this year. I think my understanding was that that's sort of based on what you know you definitely have for supply, but you're working on increased supply. So perhaps could you sort of dimensionalize or quantify the upside here from bringing more supply on through the course of the year?

I think if you just assumed you're able to satisfy the U.S. birth cohort alone, that would be EUR 1.5 billion or so. And you did talk about launching an additional market. So perhaps help us to dream a little about Beyfortus revenue for the year. Thanks.

Paul Hudson (CEO)

Okay. We'll help you dream a little in a moment, Graham. But first that, well, maybe there, too. Tolebrutinib, Houman.

Houman Ashrafian (EVP and Head of Research and Development)

Yeah. Let's start. So before Paul breaks out into song, I'm going to just Tolebrutinib. Thanks for the question, Graham. Deeply thoughtful, as always. So first part of the question was on scenarios. As you know, there's a bunch of scenarios. We have two relapsing-remitting trials running, Gemini 1 and 2. We've got Hercules and Perseus. I think going into all the permutations of those scenarios is challenging. But let me just dimensionalize this across those indications. Firstly, in terms of relapsing-remitting, you make an excellent point about previous failures, particularly in comparison to Aubagio.

Let me just remind everybody very briefly on this call that in terms of penetration across the CSF by physical properties, and actually some of the biological properties we've seen with Tolebrutinib, these are outclassed, in some cases, by 2 log orders, any of the other molecules in the space. Even Evobrutinib's primary biological capability is very substantial. Second point, I'll remind you, when we talk about mechanism, is compared to some of our competitors out there, patients who come off standard of care and go on to Tolebrutinib have a continuing reduction in their neurofilament light. These 2 parameters make us optimistic about the yet cautious in the role of Tolebrutinib, both in relapsing and progressive disease. Point one. Point two, in terms of your specific question, which you asked about endpoints, of course, you're right that in 2024, ARR is currently the endpoint of choice.

However, most of the community and most of the physicians that are looking after these patients will point you to the fact that actually composite confirmed disability progression is much more important to the patients. And indeed, many of the endpoints that are currently being used use a relapse-independent progression rate. So the short answer to this question is, we'll see where we get with Gemini 1 and 2. But I would strongly suggest that the regulator and the patients care deeply about disease progression. And we are well powered to address that question. On the progressive disease, we're very substantially hopeful because of the data we've discussed before. And of course, there is no Aubagio comparator arm in that population. I think that provides you with a nice wrap-up of Tolebrutinib. I'm going to hand over to Brian on that topic.

Brian Foard (EVP and Head of Specialty Care)

Yeah. I think the question on price is really the question on value, I think, more than anything else. It starts with there's no more differentiated program, I think, in MS, for sure, than this Tolebrutinib program. So we'll see what the scenarios are. It's hard to guess today what the final scenarios will likely be. And we'll determine the value based upon that. And we'll comment on price, probably, at that particular point, but not now.

Paul Hudson (CEO)

Thank you, Brian. Thomas, Beyfortus supply?

Thomas Triomphe (EVP and Vaccines)

Exciting topic. So where we are on Beyfortus, first of all, you've seen the strong performance in Q1. I start by reminding that point with a significant amount of sales, above EUR 180 million just in Q1. I'm mentioning that to highlight the fact that it covers not only NH 23/24 last shipment for Northern Hemisphere, but also the 1st shipment of Southern Hemisphere with 2 Southern Hemisphere countries where we have started the launch. So that's the 1st part. As you have seen, also, we've mentioned through François that we will not expect sales of Beyfortus in Q2. It has nothing to do with supply, simply related to the fact that we were able to actually ship the Southern Hemisphere supply in Q1 and not in Q2. And of course, the rest of the sales for this year will come with the Northern Hemisphere in Q3 and Q4.

Now, as per the heart of your questions on supply, we're full speed. Both AstraZeneca and us are working on extending our industrial network, as we have mentioned before, together. We've already added, of course, packaging lines. We're adding filling lines, as we have discussed altogether. As we speak today, we are every single day filling new Beyfortus syringes for the coming season. We're going full speed, as we discussed also. Of course, while we are currently manufacturing and filling doses, it will then depend as to the release of this product, as per the speed of approval of these 2 filling lines by the regulators, notably U.S. FDA and EMA, especially.

So we believe that with all the elements we're putting together with our partner, we'll be able to have this supply released in due time for the coming Northern Hemisphere season, which is why we are very confident in our ability to reach blockbuster status. To be more specific beyond that will be what we will discuss together at the Q2 earnings call when we'll have more news from our supply perspective and discussions with the regulators.

Paul Hudson (CEO)

Yeah. Thanks, Thomas. I think everybody, as Susanna Kieral says, everybody's doing the very best because the demand is so significant. Q2 is a much better moment to give you much more facts, as we have them, frankly. Next question.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. Next question from Tim Anderson from Wolfe. Tim.

Speaker 14

Hi. This is Brian. Not for Tim. Just 2 quick ones from us. After the EPS reset in 2024, you talked about a strong rebound in 2025. Consensus has growth being around 15% in 2025. Any comment, even if only directionally, on that figure? I know you might not say anything right now, but anything you might want to call out, such as uncertain variables that might jump out. And then a second question on OX40. You've said previously that this might be your most important pipeline drug, similar to Dupixent, but you capture full economics. Just want to ask, how de-risked do you think this asset is at this point in terms of how phase 3 trials might read out and whether you can confirm that there might potentially be an earlier readout, potentially in 2025?

Paul Hudson (CEO)

Okay. Thanks, Brian, asking for a friend. I would say, François, any comment? I mean, to be clear, I don't want to put you on the spot, but we just said strong rebound. So is there any other color you can give?

François-Xavier Roger (CFO)

No, Brian. What I can tell you, I don't want to quantify the EPS rebound, but we are very confident about it. I think we have the building block starting with the growth profile that we have today. And if we put aside already, even you can see it in the first quarter of 2024, some of the exceptional items and negative ones, like Aubagio and the comparison basis for COVID-19 sales, for example, we are already on a very strong platform in terms of growth today, and which gives you a fair illustration of where we can be in 2025. But I think it's too early to quantify it today. And I would not like to give guidance for 2025 at this point in time.

Speaker 14

Thank you. Houman, OX40 ligand?

Houman Ashrafian (EVP and Head of Research and Development)

Yeah. Let me respond to this very briefly. Presented the data earlier. Super excited by the data. 3 points. Remember, this is a biologic, which has been in a large number of patients. Bless you. It's likely to be extremely safe, particularly compared to anything else that's out there. It's highly well tolerated. The dosing interval is extremely interesting. And importantly, off-drug disease suppression is important. So there are only 3 comments to make on this. One is, you said, how optimistic are we? Very optimistic. But we're optimistic because it may also have the opportunity, and this has been echoed by external commentators, to have the potential to reduce atopic march and the progression of disease, particularly in those with early atopic disease. Point one. So number one is, we're bullish for that reason. Number two is, mechanistically, it's kind of interesting, right?

Because it addresses both Th2 as well as Th17, Th22 pathways, which impact on a broad ethnic set of populations. So number 2 is, it's de-risked from that perspective. And number 3 is, clearly, we're taking it forward in a multiplicity of indications, some of which will read out this year. So the quick answer to your question is, we're driving the studies as hard as we can. We've got 4 phase 3s in flight. We'll drive them to completion in an orderly manner as possible. And we, bearing in mind it's a biologic, feel optimistic that we've been able to quantify its risks and benefits.

Paul Hudson (CEO)

Great. Thank you. Next question.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. Next question from Emily Field from Barclays. Emily.

Emily Field (VP and Equity Research Analyst)

Hi. Thanks for taking my question. The first is just piggybacking off of the earlier Dupixent launch and COPD answer, the contrasting thought between that the biologic ramp is going to take some time, but that pulmonologists are very familiar with Dupixent, obviously. As you're thinking about this launch, is this one that is going to require a great deal of incremental promotional spend? And then on Altuviiio, you mentioned taking share from therapies other than Eloctate. Are you seeing more share take from Hemlibra, as that did decline in the U.S. in the quarter? And then a big focus of their call yesterday was on the potential competitive threat from Mim8. Are you seeing that as a potential threat to Altuviiio, or do you see that more as posing a threat to bispecifics? Thank you.

Okay. Brian, over to you. COPD ramp. And I think the challenge is, if pulmonologists know Dupixent already, why should it take so long? And what will be the cost of doing it?

Brian Foard (EVP and Head of Specialty Care)

Yeah. I think there's a couple of things in there. So I think, just as we said before, as you bring in a new therapy like this to any patient population, you've got to educate the patient population. You've got to educate the physicians. There's a lot to be done there to where it's not just a come-in-and-take-share game. It's going to be one of those things where it's biologic penetration. We've seen this very well in atopic dermatitis. As you see in AD, here we are. We're nearly eight years in, and the biologic penetration rate's 11%. So it takes time. It takes effort. The good news about cost, and I think the expense, is, if you think about it, we're very efficiently set up because we're already set up across the alliance, actually, deeply in the pulmonologists' offices across all countries.

From an SG&A standpoint, there will be a lot of efficiencies there because this will be our second indication in the same offices. So we, of course, will spend to support this launch. It's absolutely a critical launch to reach as many patients as possible. But we certainly see some efficiencies there in the way in which we're set up.

Paul Hudson (CEO)

Thank you. Altuviiio share, any business coming from non-factor and a comment on Mim8?

Brian Foard (EVP and Head of Specialty Care)

Yeah. A couple of things there. I think it always goes back to the patient and the unmet medical needs. So if you think about this patient population, it's all about efficacy at the end of the day. And previously, where you speak about Hemlibra, that was more of a convenience play than anything else. While effective, it was more of a convenience play, the first subcutaneous product. So I'll break it into two pieces. Altuviiio is doing exceptionally well. We couldn't be more pleased with the launch progress because, again, the physician and the patient population really understood that for a single dose, you can actually have near-normal factor levels for an entire week. And that's really changing the game in the offices now. Where are we primarily taking business from?

We always said we primarily take it from factors because we believe all patients that are on factors should be moved to Altuviiio. The factor marketplace is about 60% of the marketplace still today, 60%-65% of the marketplace. So that is primarily where we're taking business. Two-thirds of our switches are coming from competitors. One-third is coming from Altuviiio, again, a factor that should be switched. Now, as it specifically relates to Hemlibra, and then we'll talk about the competitor that's coming. I definitely think Hemlibra should be more nervous about the competitor than us, for sure. But we're taking about 10%. About 10% of our business is actually coming from Hemlibra. It wasn't what we anticipated necessarily. But again, I think it goes back to the efficacy side of things. So again, we couldn't be more pleased with the progress so far.

A lot of our physicians, more than 80% of the physicians, have prescribed. We'll reiterate that they continue to increase their prescribing moving forward. So again, we're off to, again, a really good start as we hit almost the first year mark for Altuviiio.

Paul Hudson (CEO)

Thank you, Brian. And of course, as we watch the market evolve, you're right. I think we took more patients from Hemlibra than expected, probably because they're trying to chase efficacy down to the once-a-week, which meant once-a-week convenience was roughly the same. I think what Hemlibra set the bar on was trying to find some new convenience standard, and I think whether it's monthly or perhaps even eight-weekly with Altuviiio around, I think that could be a new level, too. So the market's clearly going convenience versus efficacy in the trades. So I think we're going to be well positioned. Next question.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. Next question from Emmanuel Papadakis from Deutsche Bank.

Emmanuel Papadakis (Pan-Euro Pharmaceuticals Equity Analyst)

Thank you for taking the questions. Maybe a question on cash flow, first of all, please. François, you mentioned some caution on the outlook for this year. I think you mentioned some one-time adjustments for prior year rebating. Perhaps you could give us a bit of color, maybe in absolute sense. Cash flow last year was around EUR 11 billion. Free cash flow was above EUR 8 billion. So what should we be thinking of for this year? And you did have some rather outsized restructuring costs in Q1 over EUR 700 million. So where is that likely to land for the full year? What proportion of that is cash? And a large working capital outflow in Q1, which drove a negative cash from operations, which was also rather unusual. So comments around those would be very helpful. And then a quick one on Tzield. Flat again, a few quarters in a row.

Still confident on blockbuster potential. If so, what gets us there? What are the timelines? Thank you.

Paul Hudson (CEO)

So François, you do that. And then maybe, I don't know whether Olivier wants to comment on Tzield.

Olivier Charmeil (EVP and General Medicines)

Yeah. Let me start. Good afternoon, Emmanuel. On the cash flow, so it is essentially the fact that it decreased already in Q1 is essentially coming from the lower gross-to-net in Lantus. As you know, we are booking lower payouts. But we have to pay, from a cash flow point of view, the rebates on a higher base. At least in Q1, we will have a little bit of an impact as well in Q2 and Q3. This has impacted our cash flow significantly in Q1, and there will be a little bit of it on the next two quarters. Obviously, this will remain for the full year. So I just wanted to flag on the fact that this is kind of a one-off, but it will impact our cash flow for the full year. I don't want to quantify it because there are other moving parts.

This is a fairly significant one-off impact. On the restructuring cost, it's essentially linked to many of the projects that we have already announced. Part of it is actually, obviously, hitting France, as you know, because it's in the public domain as well. It's not necessarily a cash item that will be significant in 2024, as it will spread over the next two years, partly. Some of it could potentially impact the end of 2024.

Paul Hudson (CEO)

Thank you. Olivier, comments on Tzield?

Olivier Charmeil (EVP and General Medicines)

Comments on Tzield. We see a positive evolution and a slight acceleration, both in terms of screening and in terms of infusion rates, Q1 versus Q4. Where we have higher infusion in Q1, we have higher infusion in pediatric patients, which is for us a good signal, which means that we are progressing. Infusion have accelerated, driven by more field-force execution and better coordination along the patient journey. Payers' coverage is good. It's not a barrier to utilization. We said from the beginning that it would be a slow burn. We are shaping a market that didn't exist. There was no screening because there was no treatment. We know that it will take some time. But we think that it's worth the effort. It's about creating the awareness and making sure that both awareness at the patient level, at the family level, but also with HCP, is developed.

We are very encouraged by the consensus guidelines that are being developed, the white paper from ADA, as it was recently developed. There are a lot of activities. There's been a lot of activity in the Congress of ATTD with JDRF making and aligning a lot of medical societies towards guidelines. Overall, it's going to be a slow burn. We are confident that in the future, it will continue to progress. We think that it's worth continuing to invest. This is reinforced by A1C change with KOL and clinicians that really gives us confidence that with Tzield, we have the first and only disease-modifying therapy in type 1 diabetes.

Thomas Triomphe (EVP and Vaccines)

Maybe I could add as well, Olivier, that you said it. We knew full well when we made the transaction. There's a reason why some of these small companies celebrate medicine is because they just can't do this type of work over this many years. If I could add anything, the quarterly transitions are of less interest at the moment. The screening numbers are where we're heading. In 2026, 2027, 2028, this medicine's going to be a big deal, contributing to the company. We'll do the hard yards. I'm not sure you mentioned it, Olivier, but there was no competition for a decade. So we don't need to rush this. We can do this properly. In fact, we're the next competitor with the CD40 ligand. So in time invested in building proper screening, infusion capacity where necessary, doing these things, we've all been on this journey before.

I was on it with HCP. I was on it with Remicade. You just do the work properly, and we'll get the benefits a few years from now because there's nothing to displace us. And that, of course, will set us up in the community for the CD40 Ligand. So we're actually really pleased with how guidelines and other things are falling quickly into line. Next question.

Yes. Next question from Seamus Fernandez from Guggenheim. Seamus.

Speaker 13

Great. Thanks so much for the question. So I just wanted to clarify the tolerability comments around Rilzabrutinib. Just to confirm, it says safety consistent with prior results on the slide. Just wanted to confirm that that is consistent with the lack of an LFT or liver signal, as previously stated, as well as maybe confirmation to some degree that the MS population, that the BTK signal in the MS population, may actually be population-specific. And then just a quick second question. Paul, just wanted to get a sense for how you're thinking about business development from here, I guess, with the incremental investment in R&D and the robust kind of pipeline dynamics heading forward.

Wanted to get a better sense of how you're thinking about business development going forward in terms of perhaps areas that you're most focused on building out, or if there is kind of a profitability or stage of development, later stage, that's more interesting versus early stage? Thanks so much.

Okay. Thank you, Seamus. Houman tolerability, Rilzabrutinib, and some also comments about MS and other populations creating different responses.

Yeah. So Seamus, thanks for the question. Both thoughtful. The first one, brief and to the point. I can confirm that we're pleased with the liver tolerability profile of Rilzabrutinib thus far and confident taking it forward. As you said, point 2 on Tolebrutinib, you very thoughtfully have called out the fact that multiple sclerosis appears to be a distinct indication for the with the BTKIs. There may be interaction between the BTKI and the underlying biology in MS, which predisposes people to a liver signal. I think that's, as you were referring to, a reasonable hypothesis. We have data supporting it and reflects clinical experience. I think both of those points are well made.

Thank you. On the BD, I guess, slash M&A point, we guided to the sort of EUR 2 billion-EUR 5 billion range in bolt-ons. That's sort of standard, I think. We did commit after Q3 last year that we would hold R&D through 2024 and 2025 round about EUR 7.7 billion. So we don't want to wriggle away from that. I don't think that's appropriate. Of course, we will get some failures in there, which will free up some capacity or some delayed starts or different things, which will mean that capacity will open up for us perhaps into 2025 and 2026. And then, of course, most of the big studies start to graduate as the pipeline comes along. And that gives us the sort of automatic bandwidth.

I think to maintain that, you might see more of our effort and energy on the bolt-ons either in the early phases, where this bigger spend comes later, and we can absorb that without missing a commitment, or indeed in the late stages, where the R&D commitment ongoing is minimal, and we can hold the line on what we've said and perhaps bring in a later stage asset. We have a good balance sheet. We know how to leverage that. But I think the discipline around working within the envelope on our R&D budget is to be maintained. Should I throw the normal CEO disclaimer in? We remain opportunistic. Everything else? Of course. But we've given guidance to you. We'd like to honor it for us and for you and make sure we get it done. And if we find some opportunities to reallocate, that's perhaps our biggest thing.

We'll take it. But demonstrating the discipline post-Q3 last year is the number 1 priority because don't forget, we have enough assets in-house to, we believe, to grow EPS, of course, and to do what we need to do and to go all the way through the lifecycle of Dupixent and whenever that comes. But the discipline is what will be judged on, I think, over the next couple of years, at least. So that's as much as I can share with you. Next question.

Yes. Next question from Jo Walton from UBS. Jo?

Yes. Can you hear me?

Yes.

Excellent. Two quick questions then, please. On Altuviiio, I wonder, is there any evidence of moderate patients rather than severe patients beginning to try prophylaxis, given that this is now an ability to get to a normal level of factor clotting? On Beyfortus, could you give us an idea of what the next countries would be? So you've obviously got potentially more demand than supply. What's the sort of order of countries that we should be thinking of as you roll out? Because you said you'd be rolling out some more this year. If I can just finally say, is there any read across from the failure in Frexalimab in Sjögren's Syndrome to any of the other indications? Or should we see that as completely isolated?

Okay. Good, Joe. Good questions. Brian, Altuviiio use moving into moderate?

Yeah. I think, I mean, the way we think about the marketplace is actually, again, all these patients are on therapies. So when we talk about the switches, again, these patients are identified really early in their life, and then they're on some type of therapy. So from a moderate standpoint, we don't think about it that way. Actually, we think about it as what type of therapy are you on, and what types of efficacy levels are you looking for, or convenience levels are you looking for? And that's why, again, we're really bullish because of what we've seen from a switch standpoint. The marketplace is really responding to the profile that we're bringing, which is better efficacy, near-normal factor levels over a weekly period with a one-dose type of therapy. So we're seeing switches of all patient types, no matter the types of therapy that they're on.

Thank you. I do think Altuviiio is going to surprise everybody, I have to say. All the feedback and been in the conferences, I think that near-normal thing Joe mentioned is the goal. Thomas, I'm not sure whether you're prepared to share a list of countries in what order, but maybe if you give some regional input.

Houman Ashrafian (EVP and Head of Research and Development)

Yes. And I can tell you a bit of flavor of how we're doing it and why we're not saying so much more. So rightfully, as you said, Joe, of course, we are going to make sure that we have ample supply for the three geographies where we had significant uptake last year. You know very well about Spain, the U.S., and France. Moving forward, we've already, during Southern Hemisphere ongoing season, opened Chile and a couple of regions in Australia. Moving forward for Northern Hemisphere 2024, I expect more European countries to pick up.

What happens, and that's very important to remember, each time we introduce a new immunization, there is always a very specific national process for first setting up the right recommendation through the recommending body, then the price setup, and then we launch into the right national immunization schedule, which is why I cannot give you specific European countries right now because I need to leave it to the recommending bodies to make sure that they have those votes, and we proceed for NH2024. In addition to this geography in Europe, you know very well that we just got the registration of Beyfortus in Japan in Q1 2024. And you should expect a little bit of Japan and China sales in the private sector, I will say, not national immunization program for 2024, in order to prepare for larger volumes in the coming years. But that's for the following seasons.

The only thing that Joe's comment on Frexalimab is well placed.

Speaker 13

Yeah. I'll say it over to you.

Houman Ashrafian (EVP and Head of Research and Development)

Thanks, Paul. Thanks, Joe. Great question. Just to be super clear, we'd always positioned Frexalimab primarily as an MS and a T1D medication. It clearly demonstrates its chops in MS in great detail and is progressing in T1D. It is incumbent on us as a patient-centric organization for us to be thoughtful about the broadest possible patient benefit we can bring with our drugs. In my own clinical practice, I treated a bunch of patients with Sjögren's, and they are definitely an unmet medical need. We initiated some experimental medicine studies to see whether we could signal-seek in those indications. I don't see the Sjögren's readout as anything other than failure in a signal-seeking study. We remain confident about Frexalimab in the bigger letter indications.

Yeah. And I think you're right. The Type 1 diabetes and MS, where I think you said it already, but just the risk of repeating it, where we have pipeline or a product, we will go and explore some adjacent areas where we think there's some pathway or some biological reason why there might be an impact. And you should expect more of that from us in early POC, left and right, in the big pipeline and the product drugs because we need to do that. I think we really need to do that. And of course, everybody's tried Sjögren's because it's difficult to crack. And we can't pull any punches if we think we can do something. Okay. Next question.

Next question from David Risinger from Leerink. David?

Paul Hudson (CEO)

Yes. Thanks very much. And thanks for all the updates today. So I just have one question. And maybe you could comment in some detail, please. So the company has accelerating INI phase 2 readouts in 2025. Could you discuss the key cards that will be turning over for the candidates with the biggest commercial potential? Thanks very much.

Okay, David. Thank you. So I think Houman will start with you on we've already put them into two buckets, frankly. So I don't know how much more we need to add. But for the readouts that you're excited about, for example, Houman for INI, I think 2025 specifically is what you asked.

Houman Ashrafian (EVP and Head of Research and Development)

Yeah. Specifically. It's like choosing between one's favourite children for our readouts in 2025. But I'll give it a go. So firstly, it's our big letter. And you asked for the answers in some detail, and I will try and provide them with thoughtful detail. So our phase 2's reading out, as you've seen, there are Amlitelimab in a variety of disorders, particularly hidradenitis suppurativa and alopecia areata. Number one, as I said, with a non-depleting OX40 ligand inhibitor, we hit the type 2 inflammation but also take on a bunch of other mechanisms. OX40 is often regarded as a checkpoint, an immune checkpoint. And I'm excited about its role in alopecia areata and the hidradenitis suppurativa, which have very diverse clinical indications. Obviously, we have an oral RIPK1 with a role in ulcerative colitis. We think that's interesting. The biology is well precedented.

So number one, I think the Amlitelimab constellation of therapeutic opportunities is interesting. I think the IRAK degrader is super interesting. It's mechanistically unique, where we with our partner have played both in atopic dermatitis as an oral therapy but also in hidradenitis suppurativa, again. And then two others, just to call out, as you asked what our favorites were. The oral TNFR1 signaling inhibitor has the potential to be a truly disruptive therapy for patients with inflammatory disease, as it will capture potentially the value of classical TNF treatment but with a differentiated side effect profile, not affecting TNFR2. And the second one I wanted to call out is obviously Lunsekimig, a very special molecule in asthma. The reason it's special is because it seeks to augment durability but also raise efficacy ceilings.

The way it does so is to take two modular targets, both of which have precedented mechanisms in asthma, put them together. So what we do is learn from the ecosystem, and with the excellence of our platforms, enhance what we know from the ecosystem. Before I jump off the pedestal, I also want to doff a cap to Thomas because it would be remiss of me to talk about our pharma agents and not talk about the RSV products that are reading out in phase 2 next year. We remain as excited about vaccines as we do as our pharma products.

So Houman, it’s nice it took you a while to David’s question.

You asked and answered that.

There's a lot going on. Did you mention TNF OX40 ligand in HS?

I didn't mention those, nor did I mention TL1A or some of the other amazing things.

I was going to say the TL1A will be up there too. So it's going to be busy. It's going to be busy. But this is what we've been trying to get the company to this point. We don't know if they'll all work, of course, but we do know that we would rather have the readouts. Okay. Next question?

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. Our next question from Richard Vosser from J.P. Morgan.

Richard Vosser (Managing Director and Senior Analyst)

Hi. Thanks again for the questions. Hopefully, you can hear me. Just firstly, on the outlook, given the top-line momentum, could you frame maybe the level of flexibility you have in the R&D and launch plan and hence the likelihood that any outperformance could drop through to earnings? I mean, it wasn't that long ago. You outlined the acceleration. So I'd assume that any near-term investment opportunities that you wanted to accelerate, you perhaps have done already. And then secondly, just on the theme of the consumer separation, perhaps François, as it's your first earnings call as CFO, I could ask your thoughts on what might be on your list in a scenario where Sanofi was to receive a significant cash inflow.

Really just your thoughts on appetite for larger volume or larger value of M&A, larger buybacks, or willingness to operate with net cash for a period of time. Thank you.

Paul Hudson (CEO)

François, do you want to take a stab at those?

François-Xavier Roger (CFO)

Yeah, I can. On the R&D flexibility, I mean, this is good news if we can generate additional resources. I think that we will need to decide on due time on each and every single case on their merits. If we have good cases for good returns on investment on R&D, I think we will not hesitate to do it. That being said, I mean, we should not discount the fact that we let some of it flow to the bottom line. And I think that it's extremely important as well that we reward our shareholders in an attractive way, which is the reason why I'm coming back to what I said earlier as well, on our total confidence on the significant rebound in EPS, for example, in 2025. I think on capital allocation, I think that we have a very clear policy.

So first of all, we want to invest in our business, both organically and inorganically as well. I think Paul touched on it earlier. We need to be very disciplined on that, which means that we are rather thinking today of bolt-on cases within the EUR 2 billion-EUR 5 billion, clearly with a view to get some return on generated value for shareholders as well. Paul said it. We don't want to discount either larger opportunities if they present themselves and if they're attractive, obviously. In terms of capital allocation, we don't want to discount share buybacks. That's a possibility, especially in the context of the separation of CHC. So this is part of the option that we keep on reviewing. Let us work further into the year to decide exactly on which route we get.

But we heard the message that there is an appetite as well from shareholders to get some share of the cash that we could generate from that transaction.

Paul Hudson (CEO)

Thank you, François. You have time for another question.

Julie Van Ongevalle (EVP and Head of Consumer Healthcare)

Yes. The last one will be from Peter Verdult from Citi.

Peter Verdult (Managing Director)

Thank you. Thank you, Peter from Citi. Two questions, please. I think everyone on the call realizes, and your comments portray it, that pipeline perception is the missing piece of the puzzle to get the shares flying again and above 100. So with that in mind, I've got two follow-up questions for Hooman, please, on Rilza and Tolebrutinib. Totally get you can't disclose too much ahead of data presentation. But Hooman, can I push you as best I can to give us a sense of how competitive you think that Rilza dataset in ITP is from an efficacy safety perspective to incumbent molecules such as Promacta, especially given Promacta is facing generic risks? So I'm going to try and push you as best I can without getting you to disclose the data.

Then on Tolebrutinib, the head of the late summer phase 3 readouts, just how you're thinking about the relative opportunity across readouts for remitting and progressive. Because on relapsing-remitting, the KOL feedback we're receiving and the data that's being presented at ACTRIMS and ECTRIMS seems to be showing a waning effect for both Evobrutinib and Tolebrutinib over time as it relates to gadolinium lesion reduction. So the message we're getting is be wary of a positive result in relapsing-remitting. Progressive is clearly where the biggest unmet need is. But we don't yet have any randomized phase 2 data that we can sort of bank on. So is it just the brain penetration angle and the NFL data that you spoke about earlier, Houman, that is what gives you confidence in the progressive trials? Would you bring any other points to the table? Thank you.

Houman Ashrafian (EVP and Head of Research and Development)

Okay. Thank you so much for those questions. As always, deeply thoughtful. Let me just take Rilza very quickly. I think the existing standard of care like they've been incredibly important medicines, by the way. And I don't want laypeople not to appreciate how important they've been to the treatment of ITP. But they don't get to the heart of the disorder. As I said, mechanistically, both suppression of the B cells and the reduction of Fc gamma-based macrophage platelet destruction has been really important. And just building up the number of platelets doesn't ameliorate the severe fatigue, etc. So I really do think Rilza is a deeply important new add to that space. And as Brian beautifully said, beyond ITP, its future role potentially in rare blood is really very significant.

The tolerability profile is, as you say, I can't disclose, but to my mind, very pleasing. So the ITP answer, bullish on Rilzabrutinib. On Tolebrutinib, from time to time, I find it frustrating that people try and change the goalposts. Let me be super clear. I think in progressive disease, there is almost nothing out there of any significant value in secondary progressive MS. It's a horrible disorder with ventricular dilatation and substantially unmet medical need. Today, many of those patients are either undertreated or labeled as a different condition in order to access therapy, right? So for progressive disease, I think the risk-benefit should the Tolebrutinib readout play to our favor is unequivocal. I'm prepared to be confident that if there's efficacy with the level of safety we've now seen with monitoring, that in progressive disease, there is significant value on the table.

With respect to relapsing-remitting, where my frustration comes in, to take at this stage in Gemini's development, to argue that even if the molecule works in phase three and passes the goalpost, that we now have another discussion about whether this is going to be sustained, I think it's a difficult question to answer. My view is, in a few months, we will see the results of Gemini 1 and 2. I think that the regulatory path is really well established, both with respect to ARR but also with respect to disability. This isn't something we've invented. And I think the onus will be on us and the regulator to get this through and benefit patients with relapsing disease if we hit ARR and/or disability. I think it's simple as that, really.

Peter Welford (Senior Research Analyst)

Yeah. Thank you.

Paul Hudson (CEO)

Thank you. And thanks, Pete. I mean, I'm with you. I think Rilzabrutinib has a really competitive profile irrespective of Promacta and its challenges with diet and everything else. I think once we get beyond as well to asthma and to CSU, I think you're talking advanced orals in these spaces. And I think the question is the right question about earlier was asked about tolerability. If you can thread that needle, which I believe we can, you really unlock a huge patient potential. That's why we put it in the 2 to 5. On Tolebrutinib, I think Houman summed it up beautifully. Let's not forget that an advanced oral with potentially disease-modifying could be the profile. And there's a real space for it.

So I think that if we can get it done the right way and we'll get the studies soon enough, so it's sort of not even worth speculating anymore. I think if we affect progression in any form, even if we have to have conversations with regulators about what is sort of understood and what is not, I think it's very hard to resist something that could do that. We'll find out, right? We'll see how good the data is. So thanks, everyone, for your time today. We've had an excellent start in 2024. Sales advanced by 7%. Growth was driven by launches, including new indications for Dupixent. Our transformation is gathering pace. And I felt that a bit today during the call with the questions weighted towards the future and what we're trying to do. If you have any follow-up questions, feel free to contact the IR team.

They never rest. Have a great rest of your day. Thank you.