Sanofi - Earnings Call - Q4 2024

Transcript

Thomas Triomphe (EVP of Vaccines)

Welcome to the Q4 and full year 2024 conference call for investors and analysts. As usual, you can find the slides on Sanofi.com. Please turn to slide number three. Here we have the usual forward-looking statements. We would like to remind you that information presented in this call contains forward-looking statements which are subject to substantial risk and uncertainties that may cause actual results to differ materially. We encourage you to read the disclaimer in our slide presentation. In addition, we refer you to our Form 20-F on file with the U.S. SEC and our French registration document for description of these risk factors. Financials reported are under the new reporting scope that excludes Opella Consumer Health. As usual, we will be making comments on our performance using constant exchange rates and other non-IFRS measures. Numbers used are in millions of euros, and for Q4 2024, unless stated otherwise.

Please turn to slide number four. First, we have a presentation, then we will take your questions. Because this is full year results, we have a few more slides. We still have time for lots of questions as we added 15 minutes to the call time on top of the usual one hour. For Q&A, we have Brian, Olivier, Thomas to cover our global businesses, as well as Roy, our general counsel, and Brendan, head of manufacturing and supply. For the Q&A, you have two options in Zoom: raise your hand or submit your question using the Q&A function. With this, I'll hand you over to Paul.

Paul Hudson (CEO)

Thank you, Thomas. Hello, everyone on the call. We made significant progress in 2024 towards becoming a focused, science-driven biopharma company. Our strategic progress was emphasized by the decision to sell a controlling stake in Opella and further prioritize R&D. On the business, we achieved double-digit sales growth with strong contribution from launchers. This included Beyfortus that achieved blockbuster status in its first full year of sales. In R&D, we're pleased with the positive phase III results of Fitusiran, rilzabrutinib, and tolebrutinib. They provide the foundation for potential launches this year, underpinning our sustainable growth. We are thrilled by the phase II of duvakitug that is ready to move to phase III, pending regulatory feedback. Houman will share more pipeline details later.

Looking at Q4, on slide six, we reported double-digit sales growth for a third consecutive quarter, supported by our key drivers: vaccines, Dupixent, and pharma launches. Taking a closer look at the launches on slide seven, in Q4, Beyfortus sales were as high as those in the first nine months of the year combined. We now have expanded RSV protection to more than six million babies around the world. In hemophilia, an increasing number of patients switched to Altuviiio from both factor and non-factor therapies. We're seeing strong patient benefits, and sales reached almost EUR 250 million in Q4. We are confident in our expectations that Altuviiio will become a blockbuster this year. Moving to slide eight, Dupixent exceeded the target of EUR 13 billion in sales, driven by the demand from more than one million patients globally.

In Q4, Dupixent grew by 16% from strong prescription trends in all geographies. In the U.S., Dupixent continued its leadership in atopic brand prescriptions across all indications, in line with the first nine months of the year. U.S. sales growth in the quarter reflected fewer business days compared to prior quarters and the normal year-end gross-to-net adjustments. In countries outside the U.S., Dupixent delivered more than EUR 3.5 billion on a full-year basis. In COPD, we are in the early stages of the launch, and we're seeing positive feedback from patients and prescribers. We expect the inflection point to be this year and COPD to become an important growth driver due to the large unmet medical needs. As we expand the benefits of Dupixent to more patients, we're pleased with the continued work on new indications, including EOE for children in the E.U., CSU outside Japan, and BP globally.

New uses, increased penetration, approved indications, and further geographic expansion are all important future drivers for Dupixent. Moving to slide nine, 2024 marked a sales record for our vaccines business, crossing the EUR 8 billion milestone up by 13.5%. This performance was driven by Beyfortus, offering a marked reduction in hospitalization across more than 20 countries with all infant programs. We have the only RSV mAb with real-world data showing greater than 80% effectiveness in more than 100,000 babies. Our flu franchise was resilient, keeping its status as the world leader. 2024 sales exceeded initial expectations, driven by our differentiated Fluzone High-Dose and Flublok. In Q4, we also made significant progress with our vaccines pipeline, with the start of six new vaccine studies, including the phase III study for a new vaccine, PCV21, in children.

Our R&D efforts in vaccines continue to be recognized by health authorities, with the FDA granting fast-track designation to our three new phase I/2 flu programs. I'm pleased to share with you Sanofi's remarkable achievement in the 2024 Access to Medicine Index. We have improved our ranking and moved from eighth to third place, underscoring our commitment to global health. Important factors for this result are governance of access, R&D, and product delivery. The Sanofi Global Health Unit plays an important role by delivering crucial medicines from the Impact Brand portfolio to 30 low and middle-income countries. Ending on such a positive note, I would like to take this opportunity to thank all Sanofians for their continued commitment to improve the lives of millions of patients. Thank you. I'll now hand over to François, our CFO, for more details on the financials.

François-Xavier Roger (CFO)

Thank you, Paul, and hello to everyone. Before I begin, just a reminder that our Q4 and full year results reflect our new reporting scope, excluding Opella. In the quarter, net sales increased by 10.3% at constant exchange rates to EUR 10.6 billion, marking our third consecutive quarter of double-digit growth. As mentioned earlier by Paul, growth was driven by new product launches as well as Dupixent. Gross margin was 74.3%, down slightly from the previous year, primarily due to the absence of COVID revenues in 2024. Excluding this COVID impact, our gross margin increased by 0.8%. The increase in operating expenses was driven by R&D, reflecting a high activity level in the quarter and brought us in line with our commitments for the full year.

Business EPS was EUR 1.31, mainly reflecting a lower gross margin, an increase in R&D, and a higher tax rate following the OECD Pillar Two implementation. Now turning to our full year results, net sales increased by 11.3% at constant exchange rates to EUR 41.1 billion, driven by our new product launches, including Beyfortus that became a blockbuster, as well as Dupixent that exceeded our ambition of EUR 13 billion in sales. Gross profit grew by 10.3% at constant exchange rate to EUR 31.1 billion, with a gross margin of 75.7%. Our gross margin declined slightly due to the absence of any COVID revenue in 2024 and the remaining impact of the Aubagio LOE. R&D expenses increased by 14.6% at constant exchange rates to EUR 7.4 billion, fully in line with our ambition to step up investments in our pipeline in 2024.

SG&A expenses increased by 4.5%, providing an attractive gross leverage benefit. Business EPS increased by 4.1% at constant exchange rates to EUR 7.12, exceeding our full year guidance. We landed our 2024 business EPS more than 6 percentage points above our initial guidance at the beginning of the year. These results reflect our ability to drive strong growth while investing for the future and while carefully managing our cost base at the same time. Looking ahead to 2025, we would like to provide an overview of anticipated key business dynamics, which may be helpful for modeling purposes. As a reminder, at the beginning of the year, we expect to see the usual impact from the annual reset of insurance deductibles, which leads to higher utilization of our copay assistance program for specialty medicines in the U.S. market.

We anticipate only modest headwinds from the introduction of changes to Medicare Part D under the IRA. We continue to simplify our portfolio of other medicines, and we expect around EUR 250 million of sales reduction from these proposals. We expect Beyfortus to grow further with additional penetration and geographic expansion. Our gross margin is expected to increase in 2025. R&D expenses will be slightly up, as there was a one-off Sobi item last year. SG&A will also slightly increase in preparation for upcoming launches, and we expect capital gains from portfolio simplifications to be again around EUR 500 million. Our effective tax rate should remain broadly stable compared to 2024. For our 2025 guidance, we have decided to expand our disclosure by providing sales growth in addition to EPS growth. For 2025, we project sales to grow at a mid- to high-single-digit % at constant exchange rates.

This guidance now excludes any impact from hyperinflation, which accounted for about 1.8 percentage points of sales growth in 2024. We estimate a positive foreign exchange impact on sales of approximately plus 2% to 3% in 2025. Business EPS growth is expected to grow at a low double-digit % at constant exchange rates before foreign exchange and before share buyback impacts. We estimate a positive business EPS impact from currency of approximately plus 2% to 3% as well. Shifting to our free cash flow in 2024, which was mainly impacted by three one-offs. First, the impact of price cuts of Lantus in the U.S. in H1 for EUR 1.1 billion. Second, the entire elimination of all factoring of receivables for EUR 1.4 billion. And third, an unfavorable exchange rate impact of EUR 0.8 billion, all of it resulting in a closing free cash flow of EUR 6 billion.

We expect our free cash flow ratio to be back to our historical levels steadily over 2025 and 2026. The slight increase of our net debt at the end of 2024 reflects our strategic investments, including the acquisition of Inhibrx, as well as our value proposition to shareholders in the form of a growing dividend. Our net debt-to-EBITDA ratio, which is actually pretty close to our net debt-to-BOI ratio, was at 0.7 times at the end of 2024. This showcases a low gearing ratio and an optimal balance between strategic capital allocation and financial flexibility. In 2025, Sanofi will receive a cash consideration in the high single-digit billions of euros from the Opella transaction, at the earliest in Q2, while retaining a significant stake in the company above 48%. Let me conclude by confirming our existing capital allocation policy.

Our primary focus is to invest in our business to drive growth, demonstrated by our increased investment in R&D last year, as well as ongoing investments in manufacturing, in AI, in digitalization, as well as in sales and marketing. We will continue to explore external growth opportunities to strengthen our four existing therapeutic areas and potentially cover white spaces. In all our external investments, we maintain strict discipline and focus on value creation for our shareholders. Our preference remains for investments in a range of EUR 2 billion-EUR 5 billion each. We are committed to maintaining our AA credit rating in the short to medium term. In line with our commitments to shareholders, Sanofi intends to execute a share buyback program of EUR 5 billion in 2025. These repurchases will be conducted preferably through block trades and in the open market.

Shares acquired will be canceled, and we'll have an accretive effect to Sanofi's earnings per share, mitigating part of the Opella dilution. This commitment underscores our confidence in Sanofi's future and our commitment to delivering long-term shareholder value. Our proposed dividend of EUR 3.92 per share for 2024 marks the 30th consecutive year of dividend increase, further reflecting the emphasis we put on shareholder reward and the dependability of our dividend policy. With the proposed dividend and the share buyback combined, we will reward shareholders with almost EUR 10 billion in 2025. This would be a record year in terms of shareholder return for Sanofi. I'll hand over to Houman to provide an update on the progress of our innovation pipeline.

Houman Ashrafian (EVP of R&D)

Thank you, François. 2024 accelerated the transition into a company with increased focus on science, with our pipeline starting to deliver meaningful benefits for patients and healthcare systems and growth opportunities for our company. We presented convincing clinical trial results at recent medical meetings, including for TolerBrutinib in SPMS, Rilzabrutinib in ITP, and Fituxuran in hemophilia, the molecules from our pipeline that we are incidentally preparing for launch this year. As we look holistically at R&D productivity, scientific publications and high-impact journals, and deepen our commitment to developing science and bringing new medicines and treatments to patients, we have an increasing trend of high-impact publications, and we now plan to closely track this leading indicator of improved productivity over time. Our pipeline has continued to deliver positive results, including eight positive phase III readouts in 2024.

We've initiated 18 mid to late-stage studies with seven phase IIIs and six new molecular entities moving into the clinic. This increased level of activity is the main driver of R&D spend that François covered earlier. On the regulatory side, we've made substantial progress with 21 acceptances of our regulatory submissions, including for the three new molecules for this year. Some of these are benefiting from priority review. We received 14 approvals supporting the ongoing new launches. Please turn to the next slide. We're pleased with the significant progress made for Sarclisa in 2024, including approvals of the IMROZ study in the U.S. and E.U. last week. During the ASH meeting, data were presented in the frontline treatment option in multiple myeloma, both for patients eligible and ineligible for autologous stem cell transplant.

On the left, we have the PFS curve from the HD7 study, where Sarclisa added to a standard frontline combination demonstrated a 43% improvement in PFS based on a hazard ratio of 0.7. We're very pleased that Sarclisa continues to shine in terms of patient benefits by offering a new standard of care. On the right, we reference the IRAKLIA phase III study of subcutaneous Sarclisa, meeting both co-primary non-inferiority endpoints, in addition to confirming a safety profile. Additional data from ongoing studies in combination with different standards of care and across multiple lines of treatment will support a broad application for subcutaneous administration, which we think will bring new benefits to patients and healthcare systems. The first regulatory submission is expected in the first half of 2025. On slide 21, our commitment to rare diseases remains steadfast.

Rilzabrutinib is one of the new additions to this portfolio, with potential in ITP and far beyond. At ASH, we shared the phase III data in ITP, with Rilzabrutinib being its primary endpoint of a durable platelet response in 23% of patients compared to 0% on placebo at week 25. In addition, a platelet response defined as a platelet count achieving at least 50 times 10 to the 9 per liter, or a platelet count between 30 times 10 to the 9 per liter and 50 times 10 to the 9 per liter that doubled from baseline, was achieved in 65% of our patients after only 15 days of treatment.

As rilzabrutinib pleiotropically addresses the underlying immunological mechanisms of the disease, instead of just boosting platelets per se, as some existing medicines do, it confers an improvement in the quality of life of clinical symptoms and fatigue, even in non-durable responses. We anticipate global approvals this year and launch, as regulatory reviews are ongoing in the EU, China, and in the US with a PDUFA date of the 29th of August. In addition, we now have meaningful benefit in severe IgG4-related disease from our phase two programs, with IgG4 being shared for the first time today. We're evaluating the move into phase III with at least one of these two indications. As we remain committed to rare disease, we believe rilzabrutinib can bring significant patient benefit as we unleash the potential of pleiotropic immune modulation.

On slide 22, our partner Teva recently announced positive DevaTicoag phase IIB results in IBD. IBD remains an important unmet medical need in immunology, where we are underrepresented today. DevaTicoag represents a meaningful opportunity for Sanofi to begin to bring new science and benefit to IBD patients, continuing immunology and far beyond. We saw statistically significant and clinically meaningful benefit in ulcerative colitis and Crohn's disease, with all endpoints met and faring pleasingly competitively within the TL1A class. It is the first and only TL1A to demonstrate benefit in Crohn's disease. Patients achieved strong placebo-adjusted responses across both indications, as high as 27.4% clinical remission in UC and 34.8% endoscopic response in Crohn's disease, both at the high dose level tested.

Combined with a favorable safety and tolerability profile, these positive results offer an opportunity to advance the program into phase III development and potentially offer an improved outlook for patients with moderate to severe inflammatory bowel disease relatively soon. Additionally, data will be presented at the ECHA meeting later this month. I'd like to conclude with my usual news flow slide, now with 2026 news flow for the first time. We plan 12 phase III readouts, 15 regulatory submissions, and 13 regulatory decisions in multiple jurisdictions, increasingly capturing the improving value of our plans. Importantly, we also see the intensity of the news flow increase over the coming two years, building on our earlier comment about our focus on improving R&D productivity. The cadence and the volume of the R&D drumbeat continue to quicken. We look forward to updating you on our progress.

As I regularly say, we remain humble in the face of disease, and regrettably, not everything will work. However, I'm optimistic that the impact of talented science-focused teams, coupled with our increasing exposure to breathtaking digital technologies, will drive this unique pipeline in our core focus therapy areas in the service of patients. I would like to thank all of my brilliant R&D team members and colleagues across the company for the positive progress made this year. We are indeed chasing the miracles of science to improve people's lives. With this, I hand back to Paul for Q&A.

Paul Hudson (CEO)

Well, thank you, Houman. Thank you, François. We'll now call to your questions. As a reminder, we would ask you to limit your questions to one or two each. I say this every time so everybody hears that part. You'll be notified when your line is open to ask your question. At that time, please make sure you unmute your microphone or option to submit your question by clicking the Q&A icon at the bottom of the screen. Your question will be read by our panelists. Now we'll take the first question, please.

Operator (participant)

Yes, the first question will be from Luisa Hector from Berenberg. Lisa.

Luisa Hector (Head of Global Pharma Equity Research)

Hi there. Thanks for taking my question. On the buyback, perhaps you could just comment on the rationale for the size, the 5 billion, and how soon you might start the buyback, and then any color on plans for the rest of your proceeds. So essentially, just later thoughts on M&A targets by development stage, therapy area, size, et cetera. Perhaps then I could move to vaccines. I would like to ask Thomas some questions, maybe on the pneumococcal vaccine. So the phase III entry, very exciting. Perhaps a bit more color on what you're looking to show in phase III and how you see the competitive landscape, because there are others coming forward with vaccines, perhaps with higher valency, 24, 31. So how you see a 21-valent vaccine fitting in. Thank you.

Paul Hudson (CEO)

Thank you, Luisa. I counted eight questions. So okay, so buyback, sizing, timing, proceeds. Over to you, François.

François-Xavier Roger (CFO)

Yes, so good morning, Louise. See, the rationale for the EUR 5 billion, actually, we wanted to mitigate part of the dilution of Opella. So I think that we are addressing that with the EUR 5 billion. What we did as well was to listen to you as analysts and to listen as shareholders as well. And we found that EUR 5 billion was actually the amount on which there was a consensus as well on your side. The starting point, we expect to start the share buyback in the middle of next week, actually, or relatively quickly. The rest of the proceeds, it's part of our capital allocation. You saw that first and foremost, we want to invest in our business, which is what we did in R&D last year, which is what we do as well on a permanent basis in AI, in manufacturing.

There will be more coming in in sales and marketing ahead of quite a few launches coming in. Obviously, we are looking as well very seriously at external growth opportunities, BD and M&A, without any pressure, because we have a strong growth outlook ahead of us, because we have a strong pipeline as well. I mean, Houman just covered it a few minutes ago. That being said, we have a strong balance sheet. As you could see, we have a limited amount of debt as at the end of 2024, so which gives us a certain number of opportunities. But we don't feel any pressure to go crazy on M&A and BD. So we will remain very disciplined while having the opportunity to complement whatever we have in our pipeline.

The main focus will be essentially on our four therapeutic areas, which you know, plus potentially some white spaces, once again, without feeling any pressure and always focused on creating value for our shareholders.

Paul Hudson (CEO)

Thank you. Thomas, PCV21, competitive landscape.

Thomas Triomphe (EVP of Vaccines)

Thank you, Louise. Indeed, Sanofi was very pleased to announce the start of the phase III program for PCV21 pneumococcal product. The study is progressing as per plan. And in total, we are expecting to include more than 7,000 infants into the overall phase III program. More broadly and in line with your question, as you know very well, first of all, it's exactly at the heart of what we're doing today at Sanofi Vaccines. It's reaching either the pediatric for this phase III program or the elderly segment, both segments where we are very well positioned. So it fits perfectly with our portfolio. It will be nicely complementary. It's a big space today. You know that pediatric is about 70% of the pneumo business altogether. And basically, as per the competitiveness of the program, I think I have a couple of things to highlight.

First of all, PCV21 program is going to be the first pediatric vaccines against pneumococcal disease that will enter into the National Immunization Schedule, the first one with more than 20 valencies. So I think that it will position well as a starting point. As you've noticed also from our December announcement, we've announced a refocusing of the alliance with our partner SK, which means that it's a starting point. It's not an ending point. We'll start with PCV21. And of course, our objective is to be competitive all over the marketplace. Therefore, we'll keep going forward with more and more valencies. So we appreciate, obviously, that other companies are working on other candidates in this space, but we do believe that we are very well positioned to start a significant entry into that place, and we will remain competitive in the future.

Paul Hudson (CEO)

We're ahead of the first, as you said, over 21- or 21-valents and a couple of years ahead in the pediatric market, which is the biggest segment of all in that market. Okay, next question.

Operator (participant)

Next question is from Graham Parry from BofA.

Graham Perry (Head of European Pharmaceuticals Biotechnology Equity Research)

Great. Thanks for taking my questions. So firstly, on Dupixent and just the gross net adjustment in fourth quarter, can you just clarify that was just a one-off adjustment catch-up for channel mix rebate levels through the whole year of 2025 and just the extent to which that drove the €150 million miss. Was that just the majority of that compared to, say, invoicing days? And then just any comments you've got on how that could progress into 2025? And then secondly, on Beyfortus, just given clesrovimab potential for approval this year, possible inclusion in the season, what are you assuming in your guidance for the year on Beyfortus? Is it expected to grow? And then finally, on tolebrutinib, if you could just update us on the indication that you're expecting for tolebrutinib in non-relapsing SPMS.

Is it classically defined non-relapsing SPMS you're discussing, or is there any potential here to get a broader label for progression independent of relapse activity? Thank you.

Paul Hudson (CEO)

Thank you, Graham. Brian, Dupixent growth, and now look to 2025.

Yeah, thanks so much, Graham, for the question. And I'll first start off by reiterating what Paul said in his opening remarks. We couldn't be more pleased with Dupixent's four-year performance, delivering greater than EUR 13 billion. As you guys know, we provided the target of EUR 13 billion for the year, 23% growth this previous year. And again, it's underlying demand-driven is what's happening here. So we have strong TRX growth across indications and across geographies. And that's the same actually for Q4. Q4 was really strong performance with double-digit growth in terms of sales and TRXs. And it's just exactly as you said. I think you said it in your question. It was really due to the Q4 net sales reflect some one-off items in the U.S. So there's some true-ups there. And of course, there is a little bit of the fewer business days.

There's a little bit of each of the two mixes. But overall, again, really, this doesn't affect volume. We're in a really strong position as far as volume goes. And now having 2024 behind us, it even further reinforces our commitment to our longer-term guidance that we've provided. So I feel like we're in a very good shape exiting 2024 and entering 2025.

Yeah, and you see the script trends as we started the year. So very encouraging already. Beyfortus guidance, Thomas, and competitive set.

Houman Ashrafian (EVP of R&D)

Yeah, so thanks for the question, Graham. First of all, maybe before we switch on to 2022, 2025, a couple of thoughts on 2024. Very happy about the first year of Beyfortus. First full year of sales. We reached close to EUR 1.7 billion, unprecedented pediatric immunization launch in the history of pediatric immunization. So I think that's a proof point of our capabilities. Now, it's also a proof point of the capability of the product because you've seen that not only we're happy about the sales, but most importantly, we're very happy about the impact we have seen on hospitalization in the newborn population. Now, moving forward from 2024 to 2025, we see further growth in 2025. That's very clear when you look at the penetration on the number of countries we can go to.

There's more penetration in some markets, and there's a couple of more markets, notably in Europe or Asia, where we could grow in the coming year in 2025 and after in 2026. So obviously, we also recognize that there are more competition coming down the road. You've pointed another monoclonal antibody that could come in 2025. We expect this other monoclonal antibody to come in 2025 in the U.S. As we discussed before, I think first impact will be the fact that we will talk more about the importance of RSV prevention. So it will raise the importance of the awareness of RSV disease. That's the first thing. And then, of course, while there will be more competition down the road, we believe that we have a competitive profile with nirsevimab. We have an extensive amount of real-world evidence. You've seen many countries showing 80% or 90% reduction on hospitalization.

You've seen the very pristine safety on a large scale that is provided with Beyfortus moving forward. I think that from a real-world evidence, from the competitive profile that we have also with a significant half-life compared to the other monoclonal antibody, we are well positioned to grow in 2025.

Paul Hudson (CEO)

Thank you, Thomas. Houman, tolebrutinib and potential label?

François-Xavier Roger (CFO)

Yeah, so thanks for the question, Graham. Tolabrutinib has been submitted in line with our previous guidance last year. We're excited about the data for Tolabrutinib, as you suggested, secondary progressive MS, and we are equally excited about the readout later in this year for PPMS. This is a demonstration of Sanofi's commitment, unwavering commitment to Beyfortus MS.

Paul Hudson (CEO)

Okay, next question.

Operator (participant)

Next question is from Seamus Fernandez from Guggenheim. Seamus?

Seamus Fernandez (Senior Managing Director and Senior Analyst)

Oh, thanks very much. I'll just go simple and try to abide by the one question request. So actually, the question is for Paul and Houman sort of simultaneously. If you each wouldn't mind offering up the catalyst that you're most excited about in 2025 in particular, I think most investors anticipate the results of Itepekimab most eagerly, but love to just kind of hear your thoughts on maybe your top three, and if perhaps they might differ slightly, it would be fun to hear that as well. Thanks so much.

Paul Hudson (CEO)

All right. So the old, which is your favorite child? For me, it's the one that called me most recently. Different things for maybe Houman, you start now.

Houman Ashrafian (EVP of R&D)

Yeah, so I'll be very quick. Top three, I think we're excited about the launch of DUP and COPD, which my beloved colleague Brian has already talked about. I think bringing itepekimab alongside that for patients who are former smokers will be very exciting, and reinforcing our position in pulmonary inflammation and immunology. I think it's an exciting time for immunology as we continue the quickening drumbeat, particularly in disorders like asthma and in hidradenitis suppurativa. And finally, I'm very excited about the ongoing activity around our completely internally generated bispecific activity in linvoseltamab. So those are my three, but it would be remiss of me not to comment on our three launches that are coming up.

Paul Hudson (CEO)

I'm excited about all of our phase II programs. Just to give it, I think the quality of what we're putting in means that we're more confident what comes out. Of course, the normal risks around that. Probably a bit of overlapping with you, Houman, the itepekimab COPD, it's game changer for former smokers. So I think that is going to be really interesting. And I could pick from three or four other things, but on the later stage, I think it's primary progressive MS with tolebrutinib. I think they're all a big deal. And I think we can go a bit deeper into the phase IIs. But it's an exciting year for us. No LOEs, mid-high single-digit growth, strong rebound in EPS and pipeline catalysts. I mean, that's where we wanted to go, top-line pipeline. Next question.

Operator (participant)

Yes, next question from Peter Verdult from Jefferies. Peter?

Hi, thanks for your questions. I hope you hear me. So I'll stick to two. Firstly, just on Beyfortus, can you just comment there on two things, both in terms of you said growth for 2025. Can we expect U.S. growth within your assumption for 2025? And what's regarding the actual doses that you shipped at the moment to the U.S. or indeed other markets? Have they been used? Or are there still doses at the moment that are outstanding that are presumably likely to be used during the first part of the year as the season continues? And then secondly, I just wonder if you can comment on the potential for linvoseltamab there. I think our catalyst has been pushed into 2026. Does that reflect any changes to the data you're awaiting or any change to the phase II?

Or is that purely just a timing from the point of view of recruiting and getting sufficient data on board for the decision in ASPA phase III? Thank you.

Paul Hudson (CEO)

All right, Peter, thank you. Thomas on Beyfortus, U.S. growth and doses shipped.

Thomas Triomphe (EVP of Vaccines)

Yeah, we don't. Thanks for the question, just Peter. We don't provide exact number of doses shipped by provider or to each country, but I can still give a bit more color on 2025 versus what happened in 2024. So I think what's at the heart of your question for 2024 is how did we deliver the growth on 2024 and what does that mean for how should you think about 2025? So first of all, we had a significant increase in supply in 2024. All the teams have been remarkably working on both sides of the partners to deliver that. That has enabled us to deliver in Q4 2024 enough doses to cover for the 2024 needs and the Q1 2025 needs. Because as you know very well, RSV is not flu. And therefore, you have babies being born in January and February and some more catch-up.

So there will be RSV season in January, February, and March. And we've shipped doses in Q4 2024 for that to happen. So this is what we're accounting for. I still believe that when it comes to penetration, there is an opportunity to increase in the U.S. in the coming years. Of course, as always, when it comes with VFC, it's year by year progressively. There's a lot going on in the U.S., as you know very well. So we'll know more in the coming few weeks. But when you look at the profile of the product, we believe that there is a good space for the product moving forward.

Paul Hudson (CEO)

Thank you, Thomas. Houman, Linvoseltamab.

Houman Ashrafian (EVP of R&D)

Yeah, so as I said, thanks for asking the question. We're very proud of linvoseltamab combining the potency of TSLP and IL-13, best in class, first in class, unprecedented molecule with phase III data that's out there. Your specific question was about the implication of the move into 2027 of that. I just want to take a step back. I think Sanofi has adopted a new discipline. This is part of our credo now. We're an organization that is robust in our use of data. And what all we've done, as you can see, by outlining and dimensionalizing our pipeline timing, what we've tried to do is align that beautifully with clinicaltrials.org. That's all we're doing. There is no implication for linvoseltamab.

In fact, our commitment both to moderate to severe asthma as well as high-risk asthma underlines the importance of this potential molecule to both increase efficacy, healing and possibly drive durability. So, simple answer to your question, we remain super confident.

Paul Hudson (CEO)

Thank you. It is really actually quite an exciting product given in particular on high-risk asthma. I mean, I've been in asthma 35 years, and I think this is a real incredible opportunity. Okay, next question.

Operator (participant)

Next question from Jo Walton from UBS. Joe.

Paul Hudson (CEO)

Jo.

Jo Walton (Analyst)

Thank you. Can you hear me?

Paul Hudson (CEO)

Yes.

Jo Walton (Analyst)

Excellent. Mike, two questions, please. Firstly, can I push you a little bit more on vaccines? Perhaps you can give us some idea of what you think the penetration today in relevant infants is in the U.S. and what that would be compared to some other sort of early pediatric vaccines, just to give us a sense of what the upside for the market there is. And also within vaccines, can you tell us a bit more about the proportion of your sales that go to, let's say, adolescents with mandates? Because I think people are fearful that whilst everyone is going to be allowed the choice to have a vaccine going forwards, perhaps some of the mandates that really pushed people to vaccination may weaken anything to do with individual choice, and you do tend to see lower vaccination rates.

So I'd like you to discuss that a little bit in more detail if you could. And could you also just please tell us a little bit more about healthcare reform in the U.S., your assumption of how much more you're going to have to pay for the Part D for those patients who are in catastrophic cover and whether you see any offsets in terms of increased volume from lower patient copays, more adherence, for example, for things like Dupixent in the elderly?

Paul Hudson (CEO)

Okay, thank you. And my friends from the panel can do on the left part on the assumptions. Some very specific questions, Thomas. I'm not sure that you can answer them specifically, but you can certainly share what you think.

Thomas Triomphe (EVP of Vaccines)

Yes. And if I cannot answer them specifically, it's good. That's why we're having quarterly calls. Might be some other quarters down the road. What I mean by that, sorry. Hi, Joe. And back to your first question on the penetration in the U.S., it will be today in January a bit premature because I said before, you have the full data a few weeks after injection. And we know very well that RSV season is going to go still in January, February, and March. So it's a bit early to say. I would expect a significant percentage of the U.S. birth cohort has been protected against RSV this year, which means more than the majority, more than half, if you wish. But it's way too early to be a bit more precise. Wait for a couple of one or two earnings calls and we'll do a bit more.

It will give you more idea of further room to play. But there is, as for any immunization coming into the market, it takes two or three years to pick in terms of VCR. So I think that's what we should expect for the product, especially as the whole category. Now, on your second question, which is very different on percentage of adolescents corresponding to mandated or potentially mandated immunizations in the U.S., I understand where the question is coming from. A bit early there, I would say that if you want to have an idea, the immunizations you're talking about are some boosters in adolescents and some meningococcal shots in adolescents, so many and boosters. However, if you're looking at the heart of your question, I personally do not believe that mandatory or not mandatory situations will make a big difference into the vaccination coverage rate.

We are not specifically worried for that. Of course, it's something we're monitoring as a field. But when you look at the clear benefit-risk of our product moving forward between disease and not disease, those one-time immunizations are very clear in terms of safety and benefits. So again, there are some decisions that will happen in the coming few months or quarters, maybe. Let's see. Let's not have too many hypotheses. But whether or not mandatory situations are removed, I do not foresee today a major impact on ourselves.

Paul Hudson (CEO)

Thank you. Maybe François will be speaking. On the Medicare Part D, as I said, we expect a modest impact. It has been fully built in our 2025 guidance and budget, obviously. You talked about the volume elasticity. It's very difficult to assess, but we don't expect a significant positive volume elasticity out of it. But maybe I'll let Brian complement what I say.

François-Xavier Roger (CFO)

Yeah, I think as François said, we're a little bit less exposed versus some of the other organizations as well based upon the nature of our portfolio. Again, more innovative medicines and vaccines. So you tend to have a little bit less exposure there. As well, you see a lot of our business, even for Dupixent, we've said 70% of our business really primarily comes from commercial versus, again, in the government channels. But nevertheless, I think, Joe, you hit the nail on the head a little bit. What we haven't seen yet is, will we actually have a little bit of volume improvement based upon the $2,000 annual out-of-pocket cap for patients, which could lead to improved compliance for patients as well? So that's really to be determined. But that could be a potential slight offset, if you will.

But we feel like we're in a very good position as we enter into 2025.

Paul Hudson (CEO)

Okay, thank you. Next question.

Operator (participant)

Next question is from Richard Vosser from JPMorgan. Richard?

Richard Vosser (Managing Director and Senior Analyst)

Hi, thanks for taking my questions. Two please. One on Amlitelimab. Just as we think about the asthma data that's coming up and the 12-week dosing, could you just talk through your level of confidence that you'll see no detrimental reduction in efficacy there through the data? And then secondly, a question on Itepekimab. Obviously, Dupixent in COPD has a broader label. The launch is going exceptionally well from the script trends. But what implications does that have for the residual opportunity for Itepekimab in COPD? Thanks very much.

Paul Hudson (CEO)

Okay, Houman.

Houman Ashrafian (EVP of R&D)

Yeah, thanks, Richard. Two quick answers and thank you for both questions, so just categorically, I obviously haven't seen the data, just to be clear, but I don't expect, based on the pharmacodynamics of Dupixent in atopic dermatitis, a condition which is both clinically overlapping and pathophysiologically overlapping. I don't expect any drop-off at week 12. In fact, what we saw with Dupixent is progressive increase throughout the duration of atopic dermatitis over 52 weeks, so I'm actually comfortable that the pharmacodynamic half-life of Dupixent will continue to grow throughout the course of asthma. We remain studiously awaiting the outcome of the Dupixent asthma result, which should be this half of the year.

And then specifically talking about Itepekimab, just to challenge a little bit of the underlying premise of the question, while we were appropriately rewarded with a broad label for Dupixent with type 2 inflammation and chronic bronchitis, I think that the population of former smokers is a very substantial one. And one that we led the science with both genetically and in terms of characterization of the patients, where IL-33 secretion is substantially increased in bronchoalveolar lavage. So actually, if anything, the opportunity is very substantial in the former smokers who have significant morbidity and mortality, as I said, with COPD. And we remain steadfast in our view that in a success scenario, which we'll know fairly soon, the combination of products will reach a peak sales of more than $5 billion a year. Brian, any further thoughts?

Yeah, I'd like to complement that with, again, like other therapeutic areas or disease states that we've gone in with our immunology portfolio. Again, we're the first mover into the marketplace, so the biologics penetration rate today is, again, just what we're doing with Dupixent and COPD, number one, and so as we go in there with both of these agents, we're going to be able to continue to grow patients, I think, on those therapies, but just nicely, as you said, this is going to open up the population, and across the two, we've shown you that two by two before in the past. Itepekimab plus Dupixent will open up the opportunity to reach more than 80% of the COPD population. Again, around two million patients, if you think about it, across the G7, if you will, so they're both uniquely sit in unique places.

They overlap ever so slightly, I think, in the above 300 EOS level in the type 2 COPD patient population. But I think the complement of the two really shows that we're going after this disease state from all angles because there will be different patient populations that will benefit from both drugs.

Brian, just a quick addition before you go back to Paul, which is I just want to remind everybody that Itepekimab works in the high eosinophil and the low eosinophil population equally in terms of relative risk reduction, and we do have a lifecycle management strategy for Itepekimab with CRS with NP. Our Dupixent story is now being rolled out in conjunction with our extremely valued partners, Regeneron.

Paul Hudson (CEO)

Thank you, Richard, allowing Houman an opportunity to hijack the call. Perfect. Next question, please.

Operator (participant)

Next question is from Florent Cespedes from Bernstein Société Générale. Florent?

Florent Cespedes (Senior Analyst)

Good afternoon. Florent Cespedes from Bernstein. Two questions, please, on the pipeline. First, on R&D budget with a long list of phase two products. So how will you manage the R&D budget going forward? Good problem to have, but any color would be great. My second question is for Thomas. We see more and more vaccines projects on the pipeline and on the new slide tables. I like the phase III and the RSV for toddlers. Could you maybe elaborate a bit, even though it's for 2026, on how you see these projects nicely, a good addition to your existing RSV franchise? Thank you.

Paul Hudson (CEO)

Thank you, Paul. Managing the R&D budget. Yes, Florent, good afternoon. So for 2025, we expect a moderate increase in terms of R&D spend and investment. But don't forget that this comes over a EUR 900 million-plus increase in 2024 over 2023. And don't forget either that, obviously, as it is the case every year, we have projects being completed and new projects coming in, new clinical trials coming in and out. So we are comfortable with the amount that we have for 2025 with a slight increase over 2024. Once again, it is a EUR 900 million-plus increase. For 2026, we have not provided any indication for the time being. We are working on it. Thank you. All right. Good. Thomas?

Thomas Triomphe (EVP of Vaccines)

Thanks for the question, Florent. Indeed, I like the way you framed the question, Florent. We're really looking forward to building our RSV franchise. So the first product was the Beyfortus, as we just talked about at the beginning of the call. And as I noted before, we want to make sure that we complement that with an RSV toddler approach for the second season and thereafter, as well as with an elderly approach moving forward with respiratory combinations. For the RSV toddler candidate you're talking about, indeed, we're in phase III. 2026 readout will be an important one. Why am I particularly excited about this one? Because it really complements very well what we're doing on Beyfortus. First season, you get your newborn protected with Beyfortus.

Second season, you want to make sure that you're able to provide what we call complete protection, i.e., we're targeting by it being an intranasal product to go through the mucosal immunity and to prevent not only lower respiratory disease, but also upper respiratory disease, which is why we're going for the intranasal approach. We think it makes a lot of sense. There's a significant burden of disease still in kids one year, two years, and three years of age, and we believe that we have a step forward ahead of any competitor on this area. That's why we're so excited about it.

Paul Hudson (CEO)

Thank you, Thomas. Okay, next question, please.

Operator (participant)

Next question is from David Reed Risinger from Leerink Partners. David?

David Reed Risinger (Senior Managing Director and Senior Research Analyst)

Yes, thanks very much, and congrats on all the strong business momentum, so my two questions are first, what amount of Nuvaxovid sales are factored into 2025 sales guidance? And second, should we expect top-line press releases on phase two trial results, or will we need to wait for you to provide updates on them in conjunction with quarterly results calls? Thank you.

Paul Hudson (CEO)

Okay, thank you. Nuvaxovid, Thomas?

Thomas Triomphe (EVP of Vaccines)

So, maybe a thanks for the question, David. As you know very well, we've announced last year the collaboration with Novavax to make sure that we are really looking forward to building what we believe could be a competitive, not only competitive, but a winning ticket for flu and COVID-19 combination. We always highlighted a couple of things that I like to stress again here today. First of all, the big objective of this alliance is really to get to the right combination vaccines, flu and COVID. And we believe this market, to be well served, needs to ensure that there is the right level of safety, efficacy, and making sure that we have thermal stability.

And of course, when you have two winning leaders in flu with Fluzone High-Dose and Flublok, that's why we're very happy that we have received the fast-track designation for both phase one two trials done with Nuvaxovid. Of course, in 2025 and 2026, moving forward, we're going to start commercializing Nuvaxovid, first and foremost in the U.S. This, in 2025, the first reason is to learn about the COVID-19 market. It will be our first time in the U.S. So we need to understand, first of all, how is the market behaving there on COVID-19? And if our hypothesis of the fact that there is room for actually a better tolerable COVID-19 vaccine is indeed confirmed into the marketplace. You know very well that there is a PDUFA date in the U.S. for this product in April.

Let's make sure that we first move forward to the PDUFA date, then the label we have. Of course, we have not disclosed any sales targets specifically for COVID-19 in 2025 and 2026. As you know very well, this has been already included into the guidance that has been shared with François. Again, it's going to be progressive learning, building on the market, and then really launching at scale our combination.

Paul Hudson (CEO)

Yeah, thanks, Tom. And I think you said it about safety. I mean, it'd be interesting to have a non-mRNA COVID opportunity. And if that has a lower burden, we don't know. But from a safety perspective, and that leads to being a stronger choice, we'll find out.

Thomas Triomphe (EVP of Vaccines)

It could be what changes the COVID-19 VCR rate, which has been collapsing recently.

Paul Hudson (CEO)

I think so. I think we all remember what it was like to get the safety challenges en route. But anyway, okay. Houman, over to you. Are you going to do press releases for phase two?

Houman Ashrafian (EVP of R&D)

Let me start with a very simple comment that we are very conscious of our materiality requirements. We will remain great stewards of that. That's the very first point beyond anything else. Now, speaking specifically about clinical trials, we're also conscious of the embargo requirements of major meetings. We need to be very thoughtful about that. We will absolutely not commit to publishing top-line phase two data as they come, except where they're material or as part of a broader story. Please watch the broad story development around R&D and pipeline and Sanofi as we go. We're now becoming a science company.

Paul Hudson (CEO)

Thank you. Well said. Okay, next question.

Operator (participant)

Next question is from Peter Verdult from BNP Exane.

Paul Hudson (CEO)

Peter.

Yeah, hi. Hello, sir. How are you?

Houman Ashrafian (EVP of R&D)

Okay.

Okay. It's Peter Verdult here from BNP Exane. Two questions. Houman, just on TL1A, really interesting asset in light of your data in UC and particularly Crohn's. And also, given the market seems to have described all the value of this class to competing assets. So recent KOL checks point to biomarker-led strategies being keenly sought. So I'm just seeking confirmation from you and your partner, Teva, that a biomarker will be deployed in your phase III program. Timings on the phase III start and whether you're considering going beyond IBD in your clinical development program. And then a very quick one for François on Dupixent, just simply on profitability dynamics in light of the COPD launch, accelerating volumes and the manufacturing changes that you're putting through.

The simple question, François, I'm not asking for numbers, but just will 2025 be a significant sort of gross margin driver as it relates to Dupixent, or do we need to be a little bit more conservative and wait until 2026? Thank you. Okay, thank you. The biomarkers.

Hi, Peter. Congratulations. I should start by saying the TL1A story, yeah. We did a great deal around the TL1A, and we were quiet until the science was allowed to speak for itself. Based on preliminary data, we're very excited about how competitive our molecule is. I don't share necessarily your KOL calls feedback that standard of care will require biomarker-based stratification as an obligatory option. But of course, we are active in thinking about how we design our phase III trials to deliver the maximum value for patients. And in terms of lifecycle management options, we are working diligently with our partner, Teva, to establish the best path forward with lifecycle management options. More on this space in February ECCO meeting. And with that, I'll hand over to François and Brian for the next level of questions.

François-Xavier Roger (CFO)

Yes, Peter. On the question of gross margin, let me give you a little bit of insight. First of all, if you look at it four or five years ago, we were four to five percentage points lower than our peers in terms of gross margin. We have gone a long way because if you look at it in 2024, we were basically at par with our peers, which gives a good illustration of the way we manage our portfolio and we manage some efficiency program as well. In 2025, we expect to see some further progress in our gross margin, which is partly coming from Dupixent, but not only. By the way, our growth, even in 2024, and this is the case in 2025 and in the coming years, I would say we are not Dupixent dependent just to increase our gross margin.

So it's a combination of factors, but there is a fair contribution from Dupixent, but it's not only Dupixent. And I must say the other new product launches have a fair contribution to it as well. Thank you. Anything to add? No. Okay, good. And Peter will allow a little bit more time in the next call given the length of your new title. Right. Next question, please.

Operator (participant)

Next question is from Steve Scala from TD Cowen. Steve?

Steve Scala (Pharmaceutical Analyst)

Oh, thank you so much. Also on TL1A, has the best-in-class profile held up when the data is cut by biologic, naive, and biologic experienced patients? So that's the first question. And secondly, are you highly confident FDA will not ask for additional data such as the PPMS data for approval of tolobrutinib? And is the every week monitoring for three months likely to be what's in the label? Thank you.

Paul Hudson (CEO)

Okay. I think we'll go straight to you, Houman.

Houman Ashrafian (EVP of R&D)

Yeah. Well, I don't want to undermine the discussion at ECHO later this month in terms of biologically naive and biological experience. Suffice it to say that we warmly invite you to the ECHO meeting to come and see the breadth of our data. I think you'll be pleasantly surprised, and then very specifically with PPMS and SPMS, as you know, we're working closely with the FDA who encouraged us to submit for SPMS now. As you know, the result of the PPMS result comes out later in the year. You can infer exactly what the data set requirement will be for SPMS in that regard. Of course, any decision is subject to regulatory final active review, and then with respect to the label and monitoring, I think you'll see that the FDA will adhere pretty closely to the phase III clinical trial protocol.

That's been the standard in this kind of space in terms of intensiveness and regularity of the monitoring. And we anticipate that that's how it will play out in the label. We should be upfront and straightforward in saying that Sanofi will support any decision by the regulator to provide the most thoughtful and safe path for patients to take this disease-modifying drug.

Paul Hudson (CEO)

Thank you, Houman. Next question, please.

Operator (participant)

Yes. Next question is from Emmanuel Papadakis from Deutsche Bank. Emmanuel?

Emmanuel Papadakis (Equity Analyst)

Thank you for taking the question. Yeah, Emmanuel Papadakis of Deutsche Bank. So maybe a question for François on the outlook for the operating margin. Just talk a little bit about the potential for margin leverage in the midterm. Presumably, we should see revenue growth beyond, well, beyond 2025. We obviously have some financial considerations to take into account, the Regeneron co-development lines, some royalty lines, perhaps. Just your thoughts on whether steady, modest margin improvement in the midterm is a reasonable assumption. And then maybe a question for Houman on one of the handful of interesting phase two data points we're due this year. Berliner-Tanfib, the oral TNF, the phase one data last year showed moderate efficacy. You've emphasized the potential as a combination opportunity with biologics in that setting. We do the psoriasis data relatively soon. What are you hoping to see in that?

Is the plan to take it forward now as a biologic combination phase III? Thank you.

François-Xavier Roger (CFO)

Okay, François. Emmanuel, for the medium term, I don't want to give a guidance, but directionally, I can help you a bit. Obviously, we expect a strong level of growth in the coming years, solid level of growth, let's say. Gross margin should continue to increase as well over the next coming years, as I said earlier. R&D, still early to say because, I mean, it depends on what the readouts will be in the coming months. Directionally, G&A, you can expect that there will be a flat to declining growth for the G&A part, but the sales and marketing part could increase a little bit because we have a fairly heavy program coming in. You were mentioning one important item, which is the profit sharing with Regeneron and the end of the reimbursement for R&D there, which is coming at the end of 2026, beginning of 2027.

So this will put a little bit of pressure probably in 2027 on BOI. That being said, not in absolute value. I can tell you anywhere. Our BOI will increase in absolute value each and every single year, but there is a possibility that it could be a little bit under pressure as a percentage of sales in 2027 from what we can see today. Still early. Let's not forget that we have other items that are coming in, like the Amvuttra royalties, which is going to grow significantly in the future as well. So I think that directionally, that's what I can tell you. Once again, I'm not providing a guidance for the medium term in terms of BOI.

Emmanuel Papadakis (Equity Analyst)

Yeah. Thank you. And I think you mentioned the Amvuttra. That's what I just mentioned. So I think that is an important point to consider.

Paul Hudson (CEO)

Houman, oral TNF R1?

Houman Ashrafian (EVP of R&D)

Yeah, thank you for the question. So firstly, we had pleasing results last year. The data are on track, as we're always committed to releasing that in the first half of this year. And that's exciting. Just to dimensionalize that for you, yes, of course, there's a logic for it to be used in combination treatment strategies, particularly in the modern era where we have seen that combination cytokine blockades can both increase the efficacy ceiling or support the efficacy ceiling and also provide durability. But I just want to be clear that as well as combination therapies, remember, Sanofi is now becoming the premier immunology powerhouse, and we have network effects internally where we can combine our molecules to generate greater value for patients.

Just to be clear, in plaque psoriasis, not only is there optionality for combination therapy, but depending on the results, we'll certainly consider using it as monotherapy as a prebiologic small molecule TNF R1 signaling inhibitor. I should remind everybody, however, that rheumatoid arthritis will read out later in the year, and that's an even more classically TNF-mediated disorder. We're excited to see that in monotherapy and combination therapy, and there are further indications supporting our broad lifecycle management strategy in immunology.

Paul Hudson (CEO)

Yeah, I think Houman just added, the RA data will be important in the TNF driver. I think the question was also what are you hoping to see? If safety is right, the combination opportunity is significant, and then we'll see on mono as well. But we'll look forward to that. Okay, next question, please.

Operator (participant)

Yes, next question from Shirley Chen from Barclays. Shirley. Shirley.

Paul Hudson (CEO)

Okay.

Operator (participant)

Okay, so we'll come back to you. Shirley, sorry.

Paul Hudson (CEO)

Oh, the last moment.

Shirley Chen (Analyst)

Oh, great. Oh, thank you. Thank you. Hi, Shirley Chen here on behalf of Emily Fields. Just moving back to Beyfortus if I can. So when we're ordering and contracting for Beyfortus for the next RSV season happens, we're just trying to understand a bit more about how much of first-mover advantage we still have here for the next season. And how do you consider the pricing of Beyfortus year over year? So in 2024, we saw a slight price increase by 5% according to the American Academy of Pediatrics. So would you keep this trend, or would you consider the price slightly differently for the next season due to the potential competition? Another question on broader vaccine business. So obviously, there's a lot of attention on nominee to HHS.

So are you concerned about vaccine hesitancy as impacting your broader vaccine business, given how widely publicized this is, even if there are no changes in policy? Thank you.

Paul Hudson (CEO)

Great. Tom.

Thomas Triomphe (EVP of Vaccines)

Two great questions. Thank you very much, Shirley. First of all, on Beyfortus, maybe a couple of points on your questions on the ordering patterns and price. First of all, from an ordering pattern perspective, I think it's very important to be clear that RSV is not flu, so the product is not changing every year. It's not a seasonal product because of that. Even though immunizations are much more focused on some part of the year, it's the same product all year long. So you don't have the same pre-book effect that you have, for example, in influenza. I think that's an important differentiator to have in mind. Having said that, more specifically for 2025, I think the gist in your question was about the fact that, is there a first-mover advantage? I would say yes, just because of the product profile.

Again, if you look at our product profile, we have an unprecedented body of real-world evidence showing massive reduction of hospitalization for newborns in countries that have used Beyfortus. And by the way, not the same drop in hospitalization in countries that have decided to go other ways than with Beyfortus. So I think that's an important factor to look at. Now, there will be maybe specifically for 2025, a little bit of a first-mover advantage just because if you look at the U.S. market, physicians, practitioners have used Beyfortus this year, are comfortable with it, have really appreciated not only the efficacy, but the safety profile. And now that we have full supply, we are able to deliver whenever they want it in 2025. So we're really moving forward well on this.

On the price point of Beyfortus in 2025, we are seeing the situation as no erosion of price point in 2025. We will hold there. On the second question, sorry, that you had on vaccine hesitancy, I don't think we are in the position to make a lot of conjecture about the future, but a couple of points I think that are important and valid to your questions. First of all, is vaccine hesitancy a concern? Yes, vaccine hesitancy is a concern for any vaccines out there on this planet, but also on the fact that actually, when there is vaccine hesitancy, there is less protection and there is more disease.

Interestingly, and that's what I want to close this point on, it's interesting to see that after three or four years of soft flu vaccination coverage rate, you see a comeback of influenza in the U.K., in France, a little bit in Japan, and many other markets where actually there is an increase in the severity and the number of hospitalizations due to influenza this winter. I think it's a good wake-up call, and if vaccine hesitancy goes too much the wrong way, we will see more and more disease, so we need more vaccines. We are welcoming all the debates about those, about the safety and the benefit they provide, and we feel confident about the future due to the quality of our products.

Paul Hudson (CEO)

Thank you. Next question.

Operator (participant)

Yes, next question from Eric Le Berrigaud from Stifel. Eric?

Eric Le Berrigaud (Managing Director)

Yes, good afternoon. Thank you. Two questions. First, on Sarclisa. Any chance to get a better understanding of what your ambition is with the drug? It's a two-player market where the other guy is having 95% market share. So if you're successful in closing the gap, it could be an exceptional opportunity for you. But it was first about data, and now you have the data. It was then about formulation. You will soon have formulation. So probably the remaining question is the willingness to invest and support on the commercial side, a relaunch or a stronger launch based on those data. So where are you? What's the market intelligence telling you? Is it too late? Is it becoming too much your market? Are you not having too much time given patent term, Blackstone royalties?

Anything to help us understand whether it can be a blockbuster for sure, but a multi-blockbuster maybe, and the second question, a very short one, given the current dynamics with Altuviiio, is that one your next blockbuster and no later than this year? Thank you.

Paul Hudson (CEO)

I'll take the second part. It'll be a blockbuster this year, Altuviiio. Brian, Sarclisa, ambition.

Yeah, and thank you so much for the question. I think you framed it really nicely. If you look at that CD38 marketplace, again, this is a marketplace where the physicians like the CD38 target for multiple myeloma. We estimate that that marketplace could be somewhere in the range of $16 billion by the 2030 timeframe. Well, now, as Uman said, we've had a real strong drumbeat of new information coming out. Of course, really favorable data, I think, putting us in the first-line therapy, but also the recent data that we've had for the on-body device. And I think that's not to be underestimated. The subQ formulation offers a significant advantage in terms of patient and nurse experience. Utilizing an on-body delivery device, we believe this could ease the use and reduce some of the treatment burden along with the strong efficacy and safety that we've provided.

So we absolutely do not think it's too late. We absolutely believe we have all of the elements we need now to compete in the marketplace. We are investing behind this asset, as we've said before, and we believe it's going to be a multi-blockbuster.

Yeah, maybe I'll just add, so just said Altuviiio blockbuster this year. Sarclisa, potential blockbuster next year. I think Brian touched on it with the on-body device opportunity for nurses to manage multiple patients simultaneously is still, from an oncology office perspective, still a major advantage because we do have great data. We do have incredible medicine, and these things matter in a head-to-head race. Okay, last question, I think.

Operator (participant)

Yes, last question from Ricardo Benavides from Santander.

Hello, everyone. Thank you for taking my question. I wanted to ask you regarding your outlook on tariffs. The Trump administration has openly stated that it has been considering placing tariffs on both APIs and pharmaceuticals. Right now, we know that the tariff outlook is still a bit uncertain, but could you give us some light on how your top line or operating income could be affected if either 2.5% universal tariffs are implemented or more aggressive 25% tariffs to China are applied? And in more qualitative terms, how could you protect yourself against these measures? Potentially increased production activity in the U.S., try to ration for any potential medicine shortages? Thank you.

François-Xavier Roger (CFO)

Ricardo, François speaking. Just a couple of comments. First of all, it's difficult for us to comment on something that is not real today. So very, very difficult to comment. Just be aware of the fact that we have a significant industrial base in the U.S., which is about 25% of what we market worldwide is coming from the U.S. So we are a little bit underindexed versus our commercial presence there. But once again, very difficult to comment on something that is still a plan or for discussion.

Paul Hudson (CEO)

That's it. Okay, thank you very much, François. Thank you to everybody for the comments. We've got a busy year, I think, ahead of us. We made significant progress in 2024. We upgraded our EPS guidance twice and exceeded it. We continue to advance to becoming a focused science-driven biopharma company.

As we entered 2025, we provided you guidance today, including mid- to high single-digit sales growth expectation and a strong rebound in earnings, as well as a solid outlook for our pipeline. Thank you for your interest in Sanofi. With this, we'll now close the floor. Thank you.