Sanofi - Q2 2023

Transcript

Speaker 18

Good morning, good afternoon, and good evening to everyone. Thank you for joining us to review Sanofi's second quarter 2023 results, followed by a Q&A session. As usual, you can find the slides to this call on the Investors page on our website at sanofi.com. Moving to slide 3, I would like to remind you that information presented in this call contains 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 d'enregistrement universel for a description of these risk factors. With that, please advance to slide 4.

Our speakers on the call today are Paul Hudson, Chief Executive Officer, Dietmar Berger, Global Head of R&D ad interim, the Global Business Unit Heads, Bill Sibold, Thomas Triomphe, Olivier Charmeil, and Julie Van Ongevalle, and Jean-Baptiste de Chatillon, the Chief Financial Officer. For the Q&A later, you have 2 options to participate. Option 1, click the Raise Hand icon at the bottom of your screen, or option 2, submit your question by clicking the Q&A icon at the bottom of the screen. With that, I'd like to turn the call over to Paul.

Paul Hudson (CEO)

Well, thank you, Eva. Thanks to everyone for joining our call today. Together with members of the executive team, I'll take you through Sanofi's business and financial performance in the second quarter of 2023. Starting with our sales performance on slide 6, we delivered another quarter of growth in Q2, with Specialty Care and vaccine as the key drivers. In Specialty Care, sales were up double digit in the quarter, driven mainly by Dupixent, which continues its outstanding growth trajectory. Vaccine sales were up by more than 9%, and we shared with you our excitement for this growing business at our vaccine investor event last month in London. The approval of Beyfortus in the U.S. earlier in July, and the ACIP meeting taking place next week, give us strong confidence to continue to deliver mid-to-high single-digit sales growth in vaccines as previously guided.

Core assets in General Medicines and Consumer Healthcare also continued to grow. Aubagio, our last meaningful LOE in the decade, as well as non-core assets in GenMed, declined as anticipated. In summary, based on our solid performance and expected healthy underlying momentum in the second half of 2023, we upgrade our financial guidance for the full year. On the next slide, well, let's have a look at the sales performance in the first half as it looks beyond some impacts from quarterly phasing. Combined, our key growth drivers were up more than 15%, which we believe is a great emerging proof point of our successful portfolio transformation towards innovative medicines. Of note, our standalone consumer healthcare business grew 6% in the first half, while we continued to streamline the CHC product portfolio and divest smaller, non-strategic brands.

Now, on the next slide, let me take a moment to discuss how we continue to drive shareholder value for our CHC business. Since we embarked on our Play to Win strategy, it has always been our objective to maximize the value of CHC by bringing it back to growth. Julie and the team have successfully executed on their strategic priorities over the last two years, and as a result, the business has returned to growth in line with the market and delivering 8% organic growth annually. At this point, sustaining growth is critical to further drive the value of this attractive business and to further accelerate the strategic execution. In the U.S., the world's largest OTC and VMS market, Sanofi CHC has a historically lower revenue base compared to other leading players.

The targeted acquisition of Qunol that we announced this morning is addressing the strategic gap in 1 of the fastest-growing VMS categories and has the potential to unlock the additional value. Julie will tell you more about the acquisition in just a few moments. On capital allocation priorities, Well, they remain unchanged, focused on investments into science and innovation, especially, sorry, specifically across Specialty Care and Vaccines. Continuing with our biopharma business on slide 9, we are laser-focused on the 3 key launches this year, which with each of them representing significant blockbuster potential, addressing high unmet needs in large markets. As a reminder, you'll recall that last year we launched 3 highly innovative products in Specialty Care, which we believe we have a potential of up to EUR 1 billion of peak sales combined.

Those three products, Xenpozyme, Enjaymo, and Cablivi, were above EUR 250 million in sales in aggregate the first year of their launch. This year, we're launching another three innovative products, each of them with significant blockbuster potential. We believe Altuviiio, Beyfortus, and Tzield together, can add up to at least EUR 5 billion in peak sales. The sales of these important products will build over time, we are very encouraged by the early launch indicators. Before I let Dietmar dive deeper into the science behind our recent positive R&D readouts, I would like to take a moment and highlight the extraordinary cadence of positive pipeline catalysts, which we've shared with you during the first half of the year. All these pipeline successes have strengthened our confidence in delivering highly innovative medicines, which have the potential to become significant future growth drivers.

We look forward to the PDUFA date for Dupixent in CSU in October this year, potentially adding 300,000 biologic-eligible patients to the broad label of Dupixent. For Tzield, well, we made it clear when we acquired Provention Bio earlier this year, that we based the value of the acquisition on the already approved indication, and that any additional indications will be further upside. We now have the results of the phase III PROTECT study in-house. The study met its primary endpoint of preservation of C-peptide and showed an encouraging trend in the clinical secondary endpoints.... At the American Diabetes Association Congress in June, key opinion leaders confirmed to us that protecting as much of the beta cell mass for as long as possible is a critical clinical benefit for patients.

We believe that the totality of the data is compelling and look forward to presenting the full data set at the Medical Congress in the second half of this year. Given the wealth of news and a series of more readouts expected in the coming months, we decided to host an R&D day on December the seventh in New York City to discuss with you these exciting data in much more detail. We want to showcase the progress of our key innovative molecules from our growing pharmaceutical pipeline and further dimensionalize their future commercial potential to help you understand our growth trajectory until the end of the decade. With that, Dietmar, over to you.

Dietmar Berger (Global Head of R&D ad interim)

Thank you, Paul. Let's take a closer look at some of the recent pipeline successes with our innovative assets across key therapeutic areas. Starting with neurology on slide 12, let me first focus on multiple sclerosis. MS is a condition that often strikes early in life and creates a high burden on patients, families, and payers. frexalimab, our second-generation investigational anti-CD40 ligand antibody, is implicated in the CD40 ligand pathway, appearing to be involved in the MS-related inflammatory process. The inhibition of the CD40/CD40 ligand axis in the periphery, upstream of T cell interaction with B cells, dendritic cells, and microglia, prevents activation of these cells and may block the inflammation that drives MS disease progression.

We presented exciting phase II data of frexalimab in the first CD40 ligand inhibitor randomized controlled study in RMS at a late-breaking session of the 2023 CMSC annual meeting. The data highlighted that following 12 weeks of therapy, the number of new gadolinium-enhancing T1 lesions in the MRI was reduced by 89% and 79% in the higher and lower dose treatment arms, respectively, compared with placebo, meeting the study's primary endpoint. At week 24, 96% of participants in the higher-dose frexalimab arm were free of new gadolinium-enhancing T1 lesions. Based on these unprecedented results, we plan to advance frexalimab into pivotal trials in MS in the first half of next year. Turning to immunology, we have recently announced positive phase IIb data for amlitelimab in moderate to severe atopic dermatitis.

amlitelimab is a fully human, non-depleting monoclonal antibody that binds to OX40-ligand , a key immune regulator. It has the potential to be a first-in-class treatment for a range of immune-mediated diseases and inflammatory disorders, including atopic dermatitis and asthma. amlitelimab acts more upstream than Dupixent and aims to restore immune homeostasis between pro-inflammatory and regulatory T cells. In this dose-ranging phase IIB study, treatment with amlitelimab resulted in statistically significant improvements in the average Eczema Area and Severity Index, or EASI score, from baseline at 16 weeks compared to placebo for all 4 subcutaneous doses that were studied. Biomarker results support an effect on both type 2 and non-type 2 pathways. Based on these top-line data, we are particularly excited by amlitelimab's potential for disease modification and infrequent dosing. We look forward to sharing the full results later this year.

We're preparing for phase III studies in atopic dermatitis to begin in the first half of next year. Moving on to my next slide, at our investor call during the ATS meeting in May, we highlighted very positive results from some of our early-stage molecules in immunology, including SAR443765 in asthma. SAR443765 is a bispecific Nanobody that targets both IL-13 and TSLP. With its unique two binding domains, we see this molecule producing a synergistic effect compared to both anti-TSLP and anti-IL-13, as illustrated on the chart on the right. Its target profile has the potential to become the most potent anti-type two agent with coverage of non-type two patients as well. Based on this exciting early data, we plan to initiate the phase IIB program by the second half of the year.

On slide 15, our regulatory and R&D milestones. As Paul highlighted earlier, we made great progress on delivering our pipeline, including the landmark BOREAS results in COPD and the approvals of Altuviiio and Beyfortus in the U.S., to name just a few. We have moved to the second half of 2023, let me also update you on tolebrutinib. You know, we currently have 4 phase III studies ongoing, of which 3 are fully recruited. The tolebrutinib phase III trials are event-driven and powered based on reaching a predefined number of clinical events, defined as six month confirmed disability worsening or progression. We used historical data to estimate event rates that led to the original projected timelines.

As far as the readouts of the trials, GEMINI 1 and 2 in RMS are concerned, the current actual event rate occurs at a pace that makes us confident that the readouts will occur in the middle of next year. In addition, based likewise on event rate analysis, we now expect the results of the non-relapsing SPMS trial, called HERCULES, earlier than expected, also in the middle of 2024. Importantly, we remain on track for our planned submission timeline of tolebrutinib in 2024, as previously stated, but now with the added opportunity to file both RMS and SPMS together for a more complete data package. Concerning the ongoing partial U.S. clinical hold on the recruitment of new patients for the PERSEU.S. study, we are actively working to better understand the tolebrutinib safety profile and are in communication with the FDA regarding this work.

We will update you once we have meaningful new information. On my last slide, let me finish with a topic that is close to my heart and aims at the inclusion of communities that are historically underrepresented in the development of pharmaceutical innovation. We have embarked on a major journey to design and conduct clinical trials with clearly defined diversity goals, which are representative of disease population demographics. Sanofi's efforts in R&D strive to have these communities represented in our clinical trial programs as much as possible. It is our responsibility as a leading biopharmaceutical company to recognize any difference in the safety and efficacy of our drugs and vaccines that may exist between different populations of people.

We will continue to address as many of these access barriers as possible at the earliest stages of study design, to advance toward a world where the research we conduct and the data we generate are more representative of the patients we aim to help. With that, I hand it over to Bill.

Bill Sibold (EVP of Head of Specialty Care)

Thank you, Dietmar. Now, looking at Specialty Care, where we delivered yet another strong quarter with solid double-digit growth, despite the anticipated impact from generics on Aubagio in the U.S., which started in the second half of March. Dupixent performance was excellent in the quarter, with demand-driven growth across all approved indications and geographies. In rare diseases, our Fabry and Pompe franchises reported near double-digit growth in the second quarter, with Nexviazyme as one of the key contributors. We are very pleased with the launch of the Nexviazyme in the U.S. and ex-U.S. markets, where we continue to successfully drive switches to Nexviazyme as the next standard of care in Pompe disease, with an established efficacy and safety profile. Now, moving to my next slide, Dupixent sales were up 34%, reaching almost EUR 2.6 billion in a single quarter.

As highlighted on the slide, the brand drove continuous, robust growth in both the U.S. and ex-U.S. geographies. Roughly six years after the initial launch of Dupixent in AD in the U.S., we remain very excited about the outlook for the brand's outstanding commercial success and expect to cross the EUR 10 billion mark this year. Our key 2023 regulatory milestones are on track and provide additional sources of significant future growth. For example, we talked to you about the filing and upcoming PDUFA date for Dupixent in CSU, which is a significant opportunity for expansion into a large population of 300,000 patients in the U.S. alone. Outside the U.S., we continue to roll out the rollout of additional approved indications in additional patient populations in key markets such as Japan and China. Moving to slide 20.

Let's take a closer look at the impressive performance of Dupixent over time. The brand continues to grow its leadership as the number one NBRx across all specialties in the U.S. market. In dermatology, Dupixent is the gold standard in AD across all age groups. Our strong execution of launches has been recognized by Spherix Global Insights. The report highlights Dupixent in prurigo nodularis as the number one recent dermatology launch based on dermatologist familiarity and user base three months after launch. PN has further strengthened our position with dermatologists, reinforcing Dupixent's strong efficacy, including on itch, across multiple inflammatory skin diseases. With the positive experiences in AD down to the age of six months and approval in prurigo nodularis, dermatologists continue to build their strong confidence and familiarity with the brand.

In respiratory, Dupixent continues to demonstrate its leadership position in the U.S. asthma market, holding the number 1 NBRx share in respiratory biologics for the last 3 quarters among pulmonologists and allergists combined. As you know, advanced therapy penetration is an important marker of both potential and success in these markets. The penetration data on this slide will remind you of the very significant growth potential, which remains in AD and asthma for approved therapies, and we are more confident than ever that Dupixent will continue to take the largest share. Now, on my next slide, let's switch to Altuviiio, another exciting launch in Specialty Care. As Paul mentioned earlier, we are on track to unlock the full potential of this important new therapy in hemophilia A. We are already seeing very encouraging early launch indicators and strong momentum going into Q3.

Altuviiio is capturing an increasing share of switches and has quickly positioned itself as the factor of choice, capturing over 70% of all switches to factor products, with over 250 patients already prescribed Altuviiio in the U.S.. While still early in the launch, switches are mostly coming from heme competitor products, including approximately 10% of switches from Hemlibra. We believe this positive trend will continue as more patients gain first-hand experience with the benefits of high sustained factor levels in the normal to near normal range. Commercially, we are making fast progress as well. Over 80% of our priority accounts, who represent the majority of volume share in the heme market, have already prescribed the product.

From a market access perspective, we have received very favorable feedback from payers, granting coverage aligned with label and no step edits for more than 150 million lives. Importantly, we have implemented a robust patient support program, including reimbursement education and a 30-day free trial program to help accelerate patients starting Altuviiio while their insurance coverage is verified. With this, I'm handing it over to Thomas.

Thomas Triomphe (EVP of Head of Vaccines)

Thank you, Bill. In the second quarter, vaccine sales were up 9%, driven by PPH performance, with strong Pentaxim sales in China and the Hexaxim introduction in new public markets in our rest of the world region. PPH also benefited from favorable phasing. As I highlighted before, in the U.S., Vaxelis continues to expand and gain market share from pentavalent vaccines. These sales are not booked in the Sanofi top line. Meningitis, travel, and endemic franchise decreased by -6% due to the divestment of Japanese encephalitis vaccine last year. Excluding JEV sales, the franchise performance was stable, signaling that travel and endemic vaccinations are back to their pre-pandemic level. Of note, in Q2, we recorded an additional EUR 59 million sales linked to the remaining European shipments of our COVID-19 booster, VidPrevtyn Beta.

It's not worth it, that during the spring booster campaign in the U.K., about half of the COVID-19 doses used were Sanofi boosters. Overall, the vaccines delivered a very strong first half performance with +12% growth. Moving now to flu on slide 23. We do expect to achieve in 2023, the same record sales of last year at constant exchange rate, thanks to the recognized quality of our differentiated influenza portfolio. From a phasing perspective, we currently anticipate an H2 flu sales split between Q3 and Q4 of 2/3 to 1/3. The expansion in Europe of Efluelda, our high-dose influenza vaccine, gaining market share versus standard dose vaccines, will be a primary driver, as well as the conversion from trivalent to quadrivalent vaccines all over the world.

In parallel, we continue to observe relatively low vaccination rates due to post-pandemic vaccination fatigue and some price erosion in the standard dose market due to ample supply. Overall, the elderly demographics remains very positive, and based on historical data, we generally expect a rebound in flu vaccination rates in the coming years, similar to what was observed after the H1N1 flu pandemic. On my last slide, I'd really like to underscore that we are advancing our new vaccines candidates and reported rich flow of data from our pipeline in the first half of the year. Following strong Phase I/II data, our PCV21 candidate, SP0202, is expected to enter Phase III in H1 2024. Ambitions to be the first pentavalent vaccines with more than 20 serotypes and has clear blockbuster potential.

Similarly, we plan to initiate in H1 2024, the Phase III of SP0125, our RSV total vaccine candidate, designed to protect children entering their second RSV season. Most importantly, we are fully on track to launch Beyfortus this fall to protect babies going through their first RSV season and to relieve parents and the healthcare systems from the heavy burden of RSV disease. In the U.S., Beyfortus was approved on July 17th for the prevention of RSV, lower respiratory tract disease in infants. Building upon this key milestone, an ad hoc ACIP meeting is now set for early next week, on August 3rd, to discuss nirsevimab use for the coming season, with both a recommendation vote and a Vaccines for Children program inclusion vote scheduled.

Momentum is also very strong in Europe, with medical agencies in France and Spain having published broad infant recommendation for Beyfortus, and where specific budgets have been set to ensure Beyfortus coverage for the 2023 RSV season. With this, I hand the call over to Olivier.

Olivier Charmeil (EVP of Head of General Medicines)

Thank you, Thomas. General Medicine sales in the second quarter were EUR 3.1 billion. Our core assets grew 2.4%, driven by double-digit growth of Toujeo and Rezurock, partially offset by lower sales of Lovenox due to competition and the absence of COVID-19 related demand compared to the same period last year. Toujeo Q2 sales grew by 15%, driven by solid volume growth, mainly in the rest of the world markets, including China, which we consider to be a key market for this product going forward. Rezurock continues to grow in the U.S., based on an increased number of patients and a larger pool of prescribing specialists. Sales of non-core assets decreased mainly due to Lantus, which continued to be impacted by unfavorable U.S. channel mix and a related true-up adjustment in the second quarter.

Sales in China were lower to VBP implementation in May last year. We confirm our full year 2023 objective and expect GenMed sales to decline at a low single-digit rate compared to last year. Turning now to Tzield. Players have responded favorably, with more than 200 million lives in the U.S. now covered, and we are encouraged by the number of enrollments into our patient support program. Improved family support and a shorter time between enrollment and infusion are expected to further drive positive outcomes for at-risk individuals and accelerate the uptake of this innovative therapy. At the same time, scientific organization, patient groups, and policymakers have started to highlight the need to screen for Type 1 diabetes proactively.

Importantly, at this year's American Diabetes Association meeting, the ADA updated its guidelines to now include a recommendation for Tzield as a therapy for delaying the onset of stage three autoimmune type 1D in stage two patients. With this, I'm handing it over to Julie.

Julie Van Ongevalle (EVP of Consumer Healthcare)

Thank you, Olivier. Sanofi CHC sales in the second quarter were up 0.7%, negatively impacted by the inventory phasing related to the upgrade of our ERP system in the U.S. and Brazil, as I shared last quarter. While the market continues to grow at a dynamic pace, driven by price and mix. Digestive wellness and cough and cold categories continued to perform strongly with double-digit growth. When looking at the first half sales performance, I'm glad to highlight that all categories reported growth, except for pain care, which was down versus the exceptional COVID-related demand last year. Sales of others were down 13.4% in Q2, as we continue to streamline our portfolio and divest smaller, non-strategic brands. In the past three years, we have successfully simplified our brand portfolio and have halved our number of brands.

Over the last two months alone, we completed one divestment in Europe and signed a second in Japan. Excluding divestments, our organic growth was almost 2% in Q2, and 7.5% in the first half. In parallel, we're regularly assessing growth opportunities to strengthen and scale our portfolio of brands and geographic footprint. As Paul introduced earlier, I'm very happy to present to you our acquisition of Qunol. Once the acquisition closes, Qunol will allow us to participate in the VMS category, one of the biggest and fastest growing categories in the world's largest market, which is the U.S.. Qunol is focused on healthy aging, one of the most dynamic segments within VMS, and is the number one brand in the U.S. of CoQ10 for heart health, as well as the number one brand of turmeric for joint health.

With a strong science-backed product portfolio, Qunol enjoys above category brand loyalty and has delivered double-digit sales growth due to its premium positioning. Qunol will be joining Sanofi CHC top five brands in sales. Integrating this brand into our existing U.S. commercial infrastructure will enable us to unlock future value within the healthy aging segment. Continuing on our ambition in North America, I'm also extremely happy to announce that Sanofi CHC U.S. and Canada were recently granted the B Corp certification. As you may know, B Corp is recognized to be a gold standard among ESG certifications and awarded to companies who have achieved verified high social and environmental standards. This certification will help us to continuously progress and is fully aligned with our ambitious sustainability strategy, which is focused on better self-care and goes hand in hand with healthier communities and healthier planets.

This achievement also enables us to further connect our brands with consumers, as we know that despite high, despite high inflation, 66% of Americans and 80% of young Americans aged between 18 and 34 are willing to pay more for sustainable products. We also have seen that products marketed as sustainable grew 2 times faster than those that were not. We are the first large healthcare company to be B Corp certified in North America, and I hope many others will follow. With this, I'm handing it over to Jean-Baptiste, our CFO.

Jean-Baptiste de Chatillon (CFO)

Thank you very much, Julie, and well done both for Qunol and the B Corp certification. It's really great. On slide 31, before taking the P&L perspective, let me highlight the underlying sales performance in H1 by separating out some of the special current drivers. We reported sales of EUR 19.7 billion in the first half of 2022. When taking out sales lost due to product divestments or Aubagio LOE on your API carve-out, the base becomes just under EUR 19 billion. From there, we added almost EUR 1.7 billion in H1 this year, a gross rate of 8.9% at constant exchange rate. Dupixent, across its multiple indication, is a key contributor, but I'm also encouraged to see that the recent launches in Specialty Care, plus Rezurock and GenMed, are starting to play a more significant role.

Vaccines remain strong. Sales were additionally supported by COVID vaccine sales this year. In totality, we are offsetting the decline in the U.S. large business. On slide 32, when we look at the Q2 group P&L, we see again a slight improvement in gross margin due to favorable Specialty Care product mix, efficiency gains in manufacturing and supply on COVID vaccine contracts. This was partially offset by generic competition for Aubagio on lower net pricing of Lantus in the U.S. R&D expenses were up slightly driven by the growing vaccines pipeline. Pharma R&D spending was lower in Q2 due to a high base effect, as several mid-to-late-stage oncology trials were still in progress in the same period last year.

BOI grew 6.6%, to EUR 2.7 billion this quarter, and it included higher capital gains related to portfolio streamlining compared to the same period last year. More importantly, we continue to benefit from the increased share of profit that is paid by Regeneron towards the development cost of the antibody alliance.... in Q3 this year, there will be an inverse effect. As in Q3 2022, we recorded a true-up related to Q2 2022 development balance. On slide 33, let me briefly comment on the CHC P&L. As already signaled, in Q1, we expected a softer quarter. This was mainly due to the inventory built in the two largest markets in anticipation of an important software switch linked to ordering and billing. As anticipated, the G&A also continued to grow because of further implementation of the standalone organization.

This year's Q2 was also supported by a meaningful capital gain linked to product divestment. To summarize, we finished the first half growing EPS again, almost double digit. This was supported by a strong underlying sales performance when excluding Aubagio. The improvement in profitability was further supported by COVID vaccines related sales and revenues, capital gains phasing, and last year's amended antibody alliance, that more kind of set our investments in launches from the CHC standalone organization. Let's move to the outlook. On slide 36, we are recapping the H2 business outlook. Dupixent is expected to continue its strong performance, thanks to its many indications, and also the still low biologics penetration, especially in atopic dermatitis. We assume high rate of generic erosion for Aubagio, with the product also going alone in Europe in Q4.

Flu sales in the northern hemispheres are expected to be similar to prior year level, then GenMed sales decline is expected to decelerate. We also expect significant contribution from our three innovative launches this year, mainly Altuviiio and Beyfortus, which combined could be over EUR 400 million in sales in H2, based on our plans. On the P&L side, we expect our last COVID vaccine revenues of approximately EUR 400 million in H2 to be reported in the other revenues line. Capital gains in the second half would be most likely lower than in H1 and could reach around EUR 200 million. This brings me to my final slide, the full year outlook. Based on our resilient business performance in the first half on our COVID-19 revenues, we are raising guidance and expect now EPS to grow mid-single digit at constant exchange rate.

We continue to experience headwinds from currency, approximately -6.5% to -7.5% for full year, based on July average exchange rates. Let's now move to Q&A.

Speaker 18

We will now open the call to your questions. As a reminder, we would like to ask you to limit your questions to two each. For the Q&A, you have two options to participate. Option one, click the Raise Hand icon at the bottom of your screen. You will be notified when your line is open to ask a question. At that time, please make sure you unmute your microphone. Option two, submit your question by clicking the Q&A icon at the bottom of the screen, and your question will be read by our panelists. Please go ahead.

Operator (participant)

The first question will be with Emily Field from Barclays. Emily?

Emily Field (Director of Head of European Pharmaceuticals Equity Research)

Hi, thanks for taking my question. I'll just ask two. On the first one, you know, we've been getting a lot of questions about how a potential competitor entrant in atopic dermatitis could influence Dupixent, particularly from a pricing perspective. I was just wondering if you could provide some, some thoughts there and, you know, sort of your share expectations moving into the back half of the year. Also just on flu, you know, what impact are you expecting vaccine fatigue, fatigue to have on volumes for 2023? Just any other color you can provide there would be great. Thank you.

Jean-Baptiste de Chatillon (CFO)

Well, thank you. Thank you, Emily. Bill, pricing, do you?

Bill Sibold (EVP of Head of Specialty Care)

Well, look, thanks for the question, first of all, Emily, and, you know, we're excited about the quarter that we've had. We're excited about the future, and we're excited about the competition coming, actually. I think it helps us grow the market. I think one of the key things that you have to remember that the future growth is partially driven by biopenetration, and when we have more products there, it helps drive that biopenetration. Now, the other side of that is that the best profile wins, and we have the best profile. I think anything you look at that's coming in the pipeline is either incomplete or just inadequate to compete with what Dupixent has already shown in, you know, well over 500,000 patients already, globally.

You know, I think anyone coming in has a tough time competing just against the best profile, as I said in the remarks, the gold standard. However, you know, it is a competitive market, and whenever you have a competitive market over time, there's, you know, always some impact on price. We've taken all the competition, the new indications, everything into consideration, and it's all considered in our strong growth that we expect for the future.

Paul Hudson (CEO)

Thanks, Bill. Very well said. You know, people forget we already have a lot of competition, and they're doing a really great job and maintaining, the right price and the right balance. So thanks, Bill. Thomas, over to you, volumes for flu.

Thomas Triomphe (EVP of Head of Vaccines)

As I said, we're talking about competitive fields where we have great product. I think flu is a very good example. Thanks for your question, Emily. It's difficult to quantify what's going to be in volume, the, the, the vaccine fatigue impact. Traditionally, you know that we are not communicating specifically on number of flu doses in terms of volumes, but rather on flu sales. Why? Because we are differentiating our portfolio, and that's the strategy that has been successful for many years. We focused on products that provide protection beyond flu. That's why we are able to really move the market to superior product and to superior, yeah. That's why in a competitive field, we are doing very well. Of course, we remain totally ready to take any opportunity in the market.

We know very well it's a, it's, it's a changing market, and should the EPM energy during the full season be strong, we'll be ready to move forward.

Paul Hudson (CEO)

That's right. Thank you. Thank you, Thomas.

Operator (participant)

Next question is from Richard Vosser, from J.P. Morgan. Richard?

Richard Vosser (Head of Pharmaceuticals and Biotechnology)

Thanks for taking my question. Just one more on Dupixent, just on the quarter. The, the, the growth rate in the U.S. fell a bit more in line with the, the TRX growth. Is that the, the, the mix is now stabilizing in terms of Medicaid and commercial patients? Or is there a little bit more price pressure or a rebate adjustment? Just some idea of what's going on in the quarter. Then secondly, on the CD40 ligand, efficacy clearly looks pretty good. How differentiated is this? Could this be on safety, convenience, just versus some of the high-efficacy products that are clearly taking over the market in MS. Thanks very much.

Paul Hudson (CEO)

Okay. Thank you, Richard. Maybe Bill, just a short one, just to cover that off.

Bill Sibold (EVP of Head of Specialty Care)

Yeah, sure. Thanks, Richard. You know, at the U.S., it's 70% commercial, right? That's been, that's been incredibly stable over time. You know, look, if you're looking at the quarter, versus Q1, gross net unchanged, versus last year, there's some additional contracting and rate-rebating built in there. You know, it's all anticipated, as I said, we've taken this into consideration for the future growth that we expect.

Paul Hudson (CEO)

Thank you, Bill. Maybe, Dietmar, CD40 ligand and how it will be differentiated.

Dietmar Berger (Global Head of R&D ad interim)

Yeah. Richard, thank you for the question. I mean, obviously, there are, there are different medicines available, right, in MS. The data that we've presented at the, at the MS conference, at the, you know, MS Centers conference, actually, we feel is unprecedented, right? When we look at the, when we look at the efficacy, when we look at the reduction in the, in the gadolinium-enhancing lesions, especially, you know, the, the 96% reduction, that really provides a, a lot of potential benefit for patients. On the positive side as well, when we, when we look at the safety profile that we've also presented at the same conference, it actually looks very, very well tolerable.

We feel we have both on the safety and the efficacy side, a really important new product, a really important new option for patients. It's a new mechanism, you know, that patients do develop resistance, do develop progression, you know, to the currently available mechanisms. Bringing this new mechanism with this profile to patients will be a real benefit. Really looking forward to that.

Paul Hudson (CEO)

Thanks, Dietmar, you know, I was, I was about to add that actually, that, that patients still progress even with standard of care. We know there's always enthusiasm for a different level of efficacy with the right balance on safety and, and, and this will be first and best in class. I think it's pretty exciting, for us. The data certainly supports that at this point. Next question. Thank you.

Operator (participant)

Next question is from Peter Welford, from Jefferies. Peter?

Peter Welford (Senior Research Analyst)

Hi, thanks for taking my questions. I've got two. Firstly, on Beyfortus. I wonder if you could just talk a little bit about, ahead of the ACIP meeting, your thoughts on the pricing that you'll disclose to ACIP, and also how we should think about for the ACIP, what a positive, I guess, recommendation and vote looks like. I say that just because there was some confusion, I guess, after the meeting for the adult vaccines as to the implications of it. I wonder if you could just set up your settings as the sort of debates that will be, and what a positive outcome looks like from your perspective. If I could just go back to the CD40 ligand.

Just curious, can you talk a little about what the phase III plan is gonna be in that study in terms of you. Does the phase III trial now in that setting, do, do you have to look at CD20s as the comparator? Or, or what sort of comparison arms can you use in a study like that now, for ethical grounds? Thank you.

Paul Hudson (CEO)

Thank you. Thank you, Peter. Maybe Beyfortus, ACIP, right, you know, right around the corner, Tom.

Thomas Triomphe (EVP of Head of Vaccines)

Yes, right around the corner. As you know very well, registered July 17th, ACIP next week, August 3rd. We are very excited and confident about the forthcoming recommendation and the voting. Why? I think I want to explain that there has been great work with the ACIP over the past few weeks, and we've been really reassured by the ACIP recognition of the burden of RSV disease for all infants. A clear recommendation for all infants is critical and will be successful, in my view, to ensure equitable access across the population, which is a very important part to look at when it comes to prevention. During ACIP meetings in the past, key stakeholders have clearly expressed their interest in ensuring that broad and equitable access, and therefore, that gives us confidence.

Similarly, we expect inclusion into the VFC program because this decision is critical, again, to ensure equitable access for all infants. Moving forward with confidence towards ACIP.

Peter Welford (Senior Research Analyst)

Tom, am I right in saying that we're the only preventative for RSV on the agenda at ACIP next week?

Thomas Triomphe (EVP of Head of Vaccines)

We are, absolutely. The second part of the question, sorry, Peter, was on price. Very similar to what we said in the past, we want to ensure... That's very much linked to the ACIP recommendation, so both go together. If there is a broad ACIP recommendation, we want to ensure there is equitable access for this product to everyone, and therefore, it will be a premium, innovative vaccine price, well aligned with what was discussed in terms of pricing during the previous ACIP meetings.

Paul Hudson (CEO)

Thank you, Thomas. Dietmar, Peter had some ideas on how you should run the phase III for the CD40 ligand, so over to you.

Dietmar Berger (Global Head of R&D ad interim)

No, thank you for the question, Peter. I mean, we're obviously looking at, at what the right studies are. We will communicate as, as soon as we've really taken those decisions and have discussed them also with, with regulatory authorities. Let me just, just point out that, you know, this is an important new mechanism. Looking at the role that CD40 plays, now as we have a molecule that has that right safety, and the variety of... Right? So, this is a major opportunity for us, not only in neurology but more broadly really in inflammatory diseases.

Paul Hudson (CEO)

Thank you, Dietmar.

Operator (participant)

Next question is from Seamus Fernandez from Guggenheim.

Seamus Fernandez (Senior Managing Director and Senior Analyst)

Oh, great. Thank you. Just to follow up on, on Beyfortus, and, you know, sort of the growth expectations based on the ACIP recommendation and the opportunity in hospitals. Just hoping to understand the trajectory of growth. I think historically for pediatric vaccines, we've seen a substantial uptake, perhaps even approaching peak penetration within three to four years. Just trying to get a better understanding of your, the, the trajectory of growth there. Then separately, on omalizumab, just trying to get a better understanding. You're speaking about a broad mechanism of action, longer-acting potential, as well as competitive efficacy results in that patient population in atopic dermatitis.

Just trying to get a better understanding of how long a duration you're looking at, and also differentiation from other OX-40-targeted agents that you've discussed outside of this, where safety of targeting the ligand was viewed to be a potential advantage. Thanks.

Paul Hudson (CEO)

Thank you, Seamus. Thank you for raising the expectations for Thomas on the call for Beyfortus. Thomas, I'm interested in the shape of the curve, too, so maybe you could answer that.

Thomas Triomphe (EVP of Head of Vaccines)

Always appreciated. Thank you, Seamus. Now, the important thing, first, we are really ready to launch, and again, you will know that it's the first time ever there will be a broad preventive measure to avoid RSV and bronchiolitis in newborns. Very exciting, obviously. Now, we to Seamus, we first going to get the ACIP recommendation. Those two votes, as per the previous question from Peter, are obviously very important. If we go for an equitable and broad access, which we count on, I believe that it will take, as always, for vaccines, a few years to reach peak sales. It tends to be steady progressive ramp up over a certain number of years.

Again, we are talking here all together about a EUR 2.5 billion market. We believe there's no asset like Beyfortus in this market. We are confident about our trajectory for blockbuster.

Paul Hudson (CEO)

Yeah. Good. Well said. Dietmar, omalizumab, some questions about differentiation against between OX40-ligand , maybe an OX-40, and then maybe some suggestion about, interval.

Dietmar Berger (Global Head of R&D ad interim)

Yeah. Yeah. I mean, obviously, we have not communicated the full data yet. They will be at a conference later this year. But even if you step back and look at the mechanism, when you look at the data that we have communicated up to now, there is clear differentiation, first of all, from a, you know, how is the molecule designed? It hits the OX40-ligand, right? It doesn't hit OX-40. It's a non-depleting monoclonal antibody, whereas others that are actually depleting and, in that sense, then, can lead to, you know, for example, autoimmune phenomena, which we have not seen in the studies that we've communicated so far.

OX40-ligand, the OX-40, OX40-ligand axis, again, is broadly implicated in different types of diseases in, in immunology and in inflammatory disorders. It actually acts more upstream, right? As I said before. It really gets to that homeostasis between pro-inflammatory and regulatory T cells, and you get that specifically when you hit the ligand, not so much when you hit OX-40 itself. That really gets to this distinction between, do you see autoimmune phenomena? Do you get the right benefit, risk, et cetera, et cetera. What we're also really interested in and, and what we were, what we're looking forward to further discuss then is, by targeting, OX-40, can you actually also lead to a reset of the immune system somewhat?

Do you have an extended effect, which I think is really important with this medicine? How often do you have to dose? I think you're going, well beyond with this, you know, well beyond like, for example, a four to eight weekly application then. I think that's. There's a lot of really positive potential characteristics to this molecule, and we're very much looking forward to share the full data set later during this year.

Paul Hudson (CEO)

Maybe later this year, get also to give more specifics on interval, for example...

Dietmar Berger (Global Head of R&D ad interim)

Yeah

Paul Hudson (CEO)

...which could be a significant-

Dietmar Berger (Global Head of R&D ad interim)

Yeah

Paul Hudson (CEO)

... a significant opportunity. We'll, we'll find out. I don't want to miss the, the sort of last bit on, you know, we have a readout coming on the OX40-ligand TNF in HS, and I think that's also a little bit of something that could be a, a new standard. Of course, we don't know.

Olivier Charmeil (EVP of Head of General Medicines)

Exactly.

Paul Hudson (CEO)

I think we're trying to do something that's not been done before.

Olivier Charmeil (EVP of Head of General Medicines)

Yeah, which is part of our NANOBODY platform.

Paul Hudson (CEO)

Yeah. Exactly. Exactly. Okay. Thank you.

Next question is from Peter Verdult from Citi. Peter?

Peter Verdult (Managing Director)

Thank you. Peter Verdult, Citi. Two questions. On Tzield, I don't know whether this question is for Paul or Olivier or Bill. Position feedback on the drug is pretty impressive in the current indications. Just, can I push you on any further launch metrics, number of patients on treatment, number of sites that you've got open in the U.S. to offer this 14-day infusion treatment? Paul, on PROTECT, I mean, the, the primary endpoint was positive, in recently diagnosed patients, but it was only a numerically trend-- numerical trend on time and range and, and insulin use. I'm just trying to work out sort of over and above that $2 billion peak sales, is that proposition still intact without those secondary endpoints?

Bill, apologies, I'm gonna come back to Dupixent only because it's probably near term, gonna be an area of focus. I mean, a lot of people talk about rebating and price, but I'm just more interested in just Dupixent today in the U.S.. What is the split between commercial and Part D? I'm just trying to work out. We all know that Dupixent is gonna be a huge drug based on where penetration is today in the, in the current indications and the label expansion plans you've got. What we need to balance that with potential short-term volume pressures in terms of your competitor. The only thing they can do is do a very aggressive bridge program. Commercial patients, high deductible plans, would that create some sort of short-term volume pressure on the Dupixent franchise?

If we can explore that a little bit in, with a little more detail, that'd be great. Thank you.

Paul Hudson (CEO)

Okay. Two questions that I think became 3. Thank you, Peter. Olivier, any more color you want to add on Tzield launch?

Olivier Charmeil (EVP of Head of General Medicines)

Yeah, Peter, I think you said it right. The interest around Tzield now with our customers, with your opinion leaders, has surpassed our expectation. Some of us are just back from San Diego. We have been very impressed by the excitement within the type 1 diabetes community. We are, of course, very happy with the recent update of the ADA guidelines that we were not expecting so early. We know that of course, we still have a lot of work to do. We took the product beginning of May, and we are getting structured. We need to work and we, I had it in mind from the beginning, of course, on the screening programs in order to make sure that they are consistent.

There are a lot of initiatives that are emerging, both in the U.S., but also outside of the U.S. In the past, there was no, of course, or limited interest to screen, but it's clear that since the registration of teplizumab, the interest of screening has increased dramatically, and even some countries are going to go in the direction of systematic baby bottle screening in the upcoming years. We need to work, of course, in order to make sure that there is a limited timeline between the intent to prescribe and infusion. We are conscious that it's a slow burn, but we are, of course, very excited and very impressed, of course, by the positive feedback from KOL.

Continuous rollout in terms of education, in terms of understanding the different stages of Type 1 diabetes, Stage 2, Stage 3, that is not always fully understood. We will provide you more detail during the call in the next quarter. What I can say about PROTECT is that we have a positive trial with a strong result on primary endpoint of preservation of C-peptide. With KOL affirming, affirming at ADA that protecting the beta cell mass for as long, of course, is a clinical benefit.

More to come in the upcoming weeks, but for the time being, very impressed by the initial feedback of the Type 1 diabetes community and KOL.

Paul Hudson (CEO)

I think Matthew had something about, maybe about time and range or some of the-

Dietmar Berger (Global Head of R&D ad interim)

Yeah

Paul Hudson (CEO)

other nuances.

Dietmar Berger (Global Head of R&D ad interim)

Yeah. Peter, I think that this is really important, right? To discuss this because when you step back, we are really blazing new trails with this program. How long have we waited to have a medicine available for patients with Type 1 diabetes, right? The initial data delay on delay of onset were already unprecedented, and now having positive data in the setting of early intervention is another really important data set. Very clear data on the primary endpoint. That's important. The study is positive. The secondary endpoints describe more the clinical benefit, and when you look at time and range, when you look at insulin use, that's really what gets people excited.

We've had discussions at the ADA meeting, very, very positive feedback, as you have heard yourself, right? When we look at the totality of data, this is a very convincing package, and we're really looking forward to discussing those data further.

Paul Hudson (CEO)

Yeah. Thanks, Dietmar. I think, I think, you both summed it up very well. You know, we said when we took this asset that, that we knew we had some work to do in terms of building the infrastructure and helping support patients. I think that that's gonna be a journey for us, but a positive one. Given the scale of the unmet need and the lack of competition, you know, through the rest of the decade. I think Olivier said it really well. I think we've all been very pleasantly surprised by the demand and what that can mean. It's very early days, but I think it's really great to see so many centers, wanting to get started. Bill, the Dupixent question?

Bill Sibold (EVP of Head of Specialty Care)

Thanks, Peter. so just specifically, it's 70%, 70% commercial in the U.S. you know, that's, you know, I'll remind you now that we have 5 indications in the U.S., also, multiple age ranges. I think the thing to take into consideration here is, as you look ahead and just where we are today, are kind of 2 key numbers. atopic dermatitis biopen is 12%. asthma biopen is 22%. we have 3 other indications beyond that and other indications coming. you've heard me say it now for a bunch of years that we are kind of at the beginning still. In many ways, we are at the beginning. We're at the beginning in new indications, new age groups, new geographies. I think there's still a lot ahead of Dupixent.

Paul Hudson (CEO)

We're really excited about it. You've heard me describe it as a rocket ship. It's a rocket ship.

Peter Verdult (Managing Director)

Thank you. Very clear. Yeah, thank you. Thank you, Bill. I mean, I, I understand, particularly when people have been over-interpreting the immunology marketplace through Q1 and Q2 in other disease areas, that there's a, a high level of questioning. You, you have to understand, we already have competition in both AD and asthma?

Paul Hudson (CEO)

As Bill said, we have three more indications. We're first and only, pretty much. Then we have this low penetration, as Bill said. The market opportunity is so vast, and frankly, because so many patients are suffering, let's not forget that. We have so much work to do on that. There's such a pull. You know, we really are still only at the beginning, and I think people have to really understand it that way. It's exciting.

33% growth, I think it was, Q2, on a medicine of this size, I think. For us to be talking in these terms is really a privilege to be involved in it. Okay, the next question.

Operator (participant)

Yes, next question is from Thibault Boutherin from Morgan Stanley. Thibault?

Thibault Boutherin (Equity Analyst)

Yes, thank you for taking my questions. I just have two, please. The first one on U.S. insulins and Lantus. You highlighted the step down in sales this quarter for U.S. Lantus due to net price decline. Was there a specific negative gross net adjustment in the quarter or any other one-off, negative one-off? Should we consider that the sales this quarter in the U.S. for Lantus is a good proxy for what to expect in the future? The second question on the COVID-19 one-off revenues. Can you confirm that these revenues are relating to agreements previously made with European countries? Your slide indicate that you will book them, the revenues, in other revenues. What margin should we assume on these revenues? Is it just the usual vaccines gross margin?

Also, just a quick follow-up on that, should we expect that these revenues will not persist beyond 2023? Thank you.

Paul Hudson (CEO)

Okay, J.B., we'll come to you on COVID-19 one-offs, and, Tommy, you put your hand up if you wanna add something. Olivier, insulin.

Olivier Charmeil (EVP of Head of General Medicines)

Yeah. Thibault, thank you for your question. Yes, there was some gross to net elements in the Q2. The Q2 is not a good proxy for the end of the year. You could use as a good proxy, more, you know, our first half decline, which is a little bit above 55%. Even if we think that we are going to do better in the second part of the year, we are in a declining market, as large in 3%-4%. Of course, you know, as at, the volume are holding pretty well. Our market share has been pretty stable on the Basal Plus market, 33%-34%. Very consistent across the last 5 or 6 quarters.

Of course, more sales in the channels that IV discounted, 340B and, of course, Medicare coverage gap. Overall, you should expect a much better second part of the year, on Lantus in the U.S..

Paul Hudson (CEO)

Thank you, Olivier. You know, it, it's... I touched on it in my presentation about the sort of transformation of the portfolio we're on. The team have done exceptionally well with Lantus, but it very much we were the Lantus company for, for a very long time. You know, as we transition, you know, our portfolio and our pipeline, Dupixent and beyond, you know, Tzield is a good example of that. We're becoming a new company and a new portfolio, I think it shouldn't be lost as we move from one horse to the other, which is pretty much what our job is to do, is to make that successful transition. I think the team, Olivier's team, did a really outstanding job on that. So JB, COVID,

Olivier Charmeil (EVP of Head of General Medicines)

Yeah, COVID, COVID revenues. I confirm that EUR 5,400 million will be booking other revenues. As a proxy, you can take the average gross margin of vaccine applied to that as, as it is normal.

Paul Hudson (CEO)

Maybe the only thing I will add is that, Thibault, no, we don't expect, 2024, similar revenues, so we expect it to be real one-off in 2023.

Thibault Boutherin (Equity Analyst)

Great, thank you.

Paul Hudson (CEO)

Thank you.

Operator (participant)

Next question is from Graham Parry, from BofA. Graham?

Graham Parry (Senior European Pharmaceuticals and Healthcare Equity Analyst)

Great. Thanks for taking my questions. First one is just on your guidance for launch products for Beyfortus, Altuviiio, Tzield of EUR 400 million in the second half. I think consensus sales for those is around EUR 275 million at the moment. Just where are you more optimistic there? Is this... Are you anticipating a faster launch of Beyfortus than the EUR 150 million-ish that consensus is forecasting at the moment or an acceleration in Altuviiio, for example? Then secondly, on the Tzield PROTECT study, you sort of seem to have shied away from saying whether you think you can file or not. Just to be clear, do you intend to take this data to regulators?

Is it your expectation at the moment that to file in that indication, you may need more data or a new trial looking at insulin use and time in target glucose range? Thank you.

Paul Hudson (CEO)

Hi, Graham. Thank you very much. The, the difference, I think, between what you have in consensus and what we put out there for the launches. Firstly, to remind you that, we wanted to give some type of number to give you a sense of how quickly we're transforming the portfolio. I mentioned that a moment or two ago. I think perhaps one of the biggest gaps in versus consensus on Beyfortus, and, and I think we can really close some of that, you know, with the in-market performance.

Jean-Baptiste de Chatillon (CFO)

Especially after the recommendation.

Paul Hudson (CEO)

Yeah

Jean-Baptiste de Chatillon (CFO)

... if we get it.

Paul Hudson (CEO)

If we get if we get the recommendation next week-

Jean-Baptiste de Chatillon (CFO)

Absolutely

Paul Hudson (CEO)

... I think back to the original question about shape of launch, I think we'd expect to do certainly better or close to consensus, or sorry, better than consensus on Beyfortus. I don't know whether... I mean Olivier's already touched on Tzield. I don't know whether we'll come, we'll come back to PROTECT in a moment, but Bill, do you want to add anything other than you've already said on Altuviiio? I mean.

Bill Sibold (EVP of Head of Specialty Care)

No, look, it's early days, but, you know, it is a great product, and it really has the potential to redefine what is possible for hemophilia A patients because it does get their factor level to normal or near normal. You know, that takes some time for the community to digest, if you will. But, you know, out of the gates, I think we're real strong and really excited. This is, you know, kind of the factor. You know, there's been a lot of questions about does it, you know, does it start to make gains with other competitors, non-factors, for instance? As I said, about 10% of the switches are coming from Hemlibra.

You know, it's not a question of frequency, and I think, you know, some of our competitors may make that comment or have. It depends if patients want what is possible from a factor level. Ultimately, why don't they deserve the same right to be closer to normal like non-hemophilia A patients? We think it's gonna take some time for the market to get used to having that possibility and, and reimagine what's possible. You know, very excited about that launch.

Paul Hudson (CEO)

Yeah. Thibault, anything on the filing?

Graham Parry (Senior European Pharmaceuticals and Healthcare Equity Analyst)

Yeah. I mean, again, stepping back for a second, right? You have a positive study. You have preservation of beta cell mass, which is, is really important for this disease. You have secondary endpoints that, you know, show a positive trend, you know, that, that really show that there's, that there's clinical benefit. We talked about time and range. We talked about insulin use. Keep in mind, this is on top of continuous glucose monitoring. This is on top of the best available therapy that these patients can have these days, right? They have their continuous glucose monitor on one arm and their insulin pump on the other arm, and they're treating themselves continuously, which means, you know, showing additional benefit on top of that, is really important, right, for patients.

I'm looking forward to discuss this data with regulators, to say it very clearly.

Paul Hudson (CEO)

we are spending some time looking at the data because I think you said it very well, these patients were effectively very well managed. To show the difference was always a high bar, but there are differences, and I think, you know, we hope to get to that point where we can do that. You know, I just want to go back, and just quickly, you know, I, I mentioned it in upfront that, last year, we received very important medicines, but smaller potential, Xenpozyme and Enjaymo and Cablivi. This year, it's Altuviiio, Beyfortus, and Tzield, much bigger potential. As we keep getting into the launch sequence here, you know, we, you know, we'll be getting to the amlitelimabs and, and, and big indications like Dupixent and COPD.

You know, you're seeing the order of magnitude as the pipeline matures, become much more significant. You know, that's our role, is to deliver that and to show how that cuts off the things that have been in decline for a number of years. That, that, again, that transition is management's responsibility, and we're really happy about how that's trending so far. Maybe take another question. We have time.

Operator (participant)

Yes. Next question is from David Risinger, from Leerink. David?

David Risinger (Senior Managing Director and Senior Research Analyst)

Yes, thanks very much. I have two questions, Paul, please. First, so just to follow on, on what you just mentioned, could you discuss the opportunity for accelerating sales growth, prospects following the annualization of Aubagio generic impacts in 2024? Second, could you comment on the outcome of your discussions with the FDA regarding a potential early filing of Dupixent for COPD? Thanks very much.

Paul Hudson (CEO)

Okay, thank you. Thank you, David. Thank you for pointing out that Aubagio is our last meaningful LOE of the, of the decade. Anniversarying that is going to be quite an important moment for us because, you know, it's been a great medicine, and it's been giving a lot to the company, but it's our last meaningful LOE. Not sure about the suggestions for growth next year on the back of that. J.B., do you want to make a comment?

Jean-Baptiste de Chatillon (CFO)

Well, what we, what we see when you look at what we published at Q1, looking at having drugs make it really blockbuster to launch, I suppose 26, going to this area of Dupixent. We are really looking at a growth profile, by having 3 to 5 drugs from EUR 2 billion-EUR 5 billion potential sales. It's really, when you take this potential for growth, of course, we are aiming at growth, that's what we want to deliver. Don't forget that our underlying growth right now is quite impressive already, which gives us a big, great opportunity to deliver.

Just if you look at H1 2023, when you take just our growth drivers, Dupixent, Specialty Care products, and when you, when you take the core assets of Genmab on the vaccine sales, it's 15.3% just in H1 2023. I was also showing when you take out the divestments on the of Aubagio on EUROAPI carve-out, we are really already enjoying a great growth. We want to stimulate that. We want to be a growth company. Yes, that's what we, we do every day.

Paul Hudson (CEO)

Thank you, JB. It's quite an important point, and we did put it in the deck for that reason, that, and I didn't come into this Q&A to start talking about our portfolio transition, but we wanted to make it quite clear that that +15%, we recognize that it's taking off things that, that are, you know, coming to the end of their journey. You know, the reality is, that's a big number, and we're, we're not suggesting what it is for next year. You can see where our ambition lies with accelerating the underlying to get it to something that's, that's, we would hope to compete with the best in the industry, you know? That's, that's what we, that's what we think. Dupixent, COPD, filing, Dietmar, anything you want to add?

Dietmar Berger (Global Head of R&D ad interim)

David, thank you for the question. I would love to tell you more, but we're still ahead of those discussions. Let me again, also just briefly step back here because I think the BOREAS data in COPD are very important for patients, for us, for the, for the community. What we've seen there in, in efficacy with a, with a well-known safety profile, is just and, and will just be an entire change in, in how these patients are treated. So I think it's very important that we have those discussions with regulatory authorities. The unmet medical need for patients with COPD is very high, so it's the third most important reason for death on a, on a global basis. We are coming back from the ATS meeting, from the American Thoracic Society meeting.

Where we had the discussion of the data, where we presented the data with very positive feedback from the community and key opinion leaders. We are very much looking forward to have those discussions with the regulatory authorities.

Paul Hudson (CEO)

Okay. Yeah. Thank you. Just to keep making it clear, you know, since, since Q1 update, you know, I think you've touched on this a little bit. You know, we're still ahead of any significant regulatory conversation, so, you know, nothing has changed for us on that. We, we remain very enthusiastic. I think it's just worth us saying. I think you touched on it, but of course, in Q2, we have the chance to be at ATS and, and meet a lot of opinion leaders. This is very exciting. Let's be honest. This is unmet needs and advanced therapy. You should, you should know that we will bring our best forward in that in that regulatory interaction. Okay.

Operator (participant)

Next question is from Gary Steventon, from Exane BNP.

Gary Steventon (VP of Equity Research)

Hi there. Thanks for taking the questions. Firstly, just on the guidance, I guess, how should we think about your ability to continue to ramp up investment in R&D and behind new launches over the mid, near term? Commentary on growth and the contribution from the new launch is pretty encouraging. I'm just wondering kind of how close or not you might be to a point where it's more difficult to reinvest that near-term growth, given that the extra COVID vaccine revenues seem to have supported the guidance upgrade. Secondly, just on consumer, actually, and the strategic priorities here. You've, you've slimmed down the number of brands, improved growth. We've got the divisional P&L, today's deal helps to strengthen that U.S. presence.

Other than making progress on the OTC switches, and, and I think an, an update there would also be very much appreciated. What do you see really as, as the next steps for consumer on that roadmap? Just quickly, you mentioned the new deal being a top five product, so any further quantification there would also be helpful. Thank you.

Paul Hudson (CEO)

Okay, Gary. Thank you. JB, how are you threading the needle?

Jean-Baptiste de Chatillon (CFO)

We've been threading it for a while, each time, we have this challenge to do new arbitrage, to do one in, one out, to improve permanently our growth profile in our pipeline. As you hear me say often, we still have a lot to do in our transformation, on the cost base is still presenting a lot of opportunities. Some are longer to deliver, we are doing a deep work with all our M&S manufacturing and supply team to improve some basics. We know also that we will have some trade-off within our own portfolio, because that's the story that we are in.

To to build the growth, we need to to thread that needle, where we reinvest in R&D. That's why we are here.

Paul Hudson (CEO)

Yeah, maybe also I could just add, that there is a, with the management team, that we've done a lot of great work on reallocating all, adding, you know, giving back to the bottom line. I think we're now working transversely on other sort of structural, systemic opportunities to try and free up more resources. I think, I think we have a good plan, and I think there's some confidence in the team to be able to do that. Nothing, nothing, nothing too crazy, but definitely enough to be able to make sure we don't miss a value creation opportunity. Julie, a whole host of things for you to, to answer, ranging from, you know, don't forget the switches.

Maybe make a comment about the top five, and what sort of- what's the next big moment for you and the team?

Julie Van Ongevalle (EVP of Consumer Healthcare)

First of all, Gary, thank you so much for the question because this, this quarter is a big moment for CHC. I think overall, what I can say is that our ultimate goal is to maximize the value creation of CHC. What we've been doing in the past two years, we really focus on our existing portfolio, divesting, pruning and divesting a part of it, double downing on the brands that we believe have the most potential. Today, we are ready to welcome a new brand that is helping us to really fill one of our strategic gaps and strengthen our geographic footprint. That's really what we want to continue to do, obviously, is to...

everything that will drive max value creation for, for CHC. On Qunol specifically, again, high quality assets, strong science, in a very special healthy aging segment, and what really enjoys high, category, I mean, brand loyalty. Top five brand means that, again, it has a brand that still has a lot of potential also in the future because it has a premium positioning, and also, because of it in its category, but also because of its model, and that we believe there's opportunities potentially for other chronic diseases. A lot of obviously looking forward to welcome the brand at closing and to expand it. On, on switches, there is nothing new.

Obviously, we continue to work with the FDA on the approval of the switches, and we're advancing on the execution of the on their strategy to lift the clinical hold, including the generation of the necessary data, and I hope that we'll have more information in by the end of the year.

Jean-Baptiste de Chatillon (CFO)

Yeah. That's part of our next steps. Of course, we would like to unlock the value of those switches, on Instillon. We will work on it. Apart from that, we have not, departed from, what we said, in December 2019. We want to grow, consumer health, we want to maximize the value. We want, really to give, some management teams the maximum opportunity to, to grow this value. That's where we are.

Paul Hudson (CEO)

Okay, thank you. Thank you, Julie. JP?

Jo Walton (Research Analyst)

Last question from, Jo Walton from Credit Suisse. Jo?

Paul Hudson (CEO)

Jo?

Jean-Baptiste de Chatillon (CFO)

Jo, you may be on mute.

Operator (participant)

Yeah. You need to unmute your line.

Jo Walton (Research Analyst)

Apologies for that. I just have two questions, please. I noticed that Dietmar isn't on the executive committee, just looking at the on your website. I wonder if you could tell us when you're going to be in a position to announce a new permanent head of R&D. Could I just ask, you know, related another R&D related question? It's a couple of years now since you bought Tidal IP for the targeted delivery, you know, CAR T, certain cell types. I wonder, this area still looks to be facing real challenges. Is it still an area of focus for you? Can you tell us when we may hear next steps on it, please?

Paul Hudson (CEO)

Okay, Jo, thank you. As with all internal announcements, we'll communicate them when we communicate them. Thank you for the update there. Dietmar, Tidal, I think the question was.

Dietmar Berger (Global Head of R&D ad interim)

Yeah, Tidal. That is a very interesting program within our oncology research at this point in time. It is the approach to use mRNA-based therapeutics to generate CAR T-cells in vivo, basically. Give the mRNA and generate the, the CAR T-cells within the patient, which, which could be entirely disruptive, as you know, Jo, right? for the CAR T-cell space. We are progressing that program. It's moving forward. We'll give an update once we can, but let me just tell you that this is part of our broader Genomic Medicine Unit and our genomic medicines initiatives that we have, and also synergies there that we realize with our mRNA Center of Excellence. Our first product from this Genomic Medicine Unit is actually coming into the clinic this year.

It's not a Tidal program, but it's really showing you that progress that we're making on the genomic medicine side. So far, the program is actually moving forward very well in the research arena, and I'm looking forward to bring that closer to the clinic.

Paul Hudson (CEO)

Okay, thank you. Yeah, so thank you. Maybe just the last couple of comments. I think we said up front, it's a solid quarter. We've given an upgrade to the guidance. We've advanced the pipeline. We are reallocating resources to R&D and growth opportunities. I think this is the work that needs to be done, and I think we're really happy with the progress that we're making. Of course, we expect to see, you know, an even better performance in some areas, as we get through the rest of the year, time will tell. No, we're very excited about the progress we're making in the company. Thank you to everybody for dialing in, and making time for asking questions, and we look forward to reconnecting at the next available opportunity.

Hopefully, many of you just made a note for December the seventh, New York City. I think that would be a good day. All right. Thank you very much.