French pharmaceutical giant Sanofi SA (SNY.US) released its first quarterly earnings report under new CEO Belén Garijo on Thursday. Although the company raised its full-year sales growth forecast thanks to the stellar performance of blockbuster drug Dupixent, the contraction of its research pipeline and a lack of strategic updates disappointed the market, causing the stock to fall more than 3% during trading in Paris.
The earnings report showed that Sanofi posted a strong second quarter, with revenue reaching €11.6 billion, significantly exceeding the analyst consensus estimate of €10.85 billion. Core operating profit hit €3.29 billion, also well above the market consensus of €2.96 billion. Adjusted earnings per share rose to €2.09. The core driver of performance remained the super-blockbuster drug Dupixent, developed in collaboration with Regeneron Pharmaceuticals Inc (REGN.US). Sales of this drug, used to treat asthma and atopic dermatitis, surged 38% in constant currency in the second quarter to €5.15 billion, far surpassing the market's expected €4.48 billion. Sanofi subsequently raised its annual sales forecast for Dupixent in 2030 to €25 billion, compared to the current analyst estimate of €24.2 billion. Given the strong demand for Dupixent, Sanofi upgraded its 2026 full-year sales growth guidance from high single digits to approximately 10% in constant currency, and expects the growth rate of core operating profit to continue to slightly outpace revenue growth.
Despite Dupixent's brilliance, the earnings report revealed a chill in other business segments. While the portfolio of newly launched products, including hemophilia therapy Altuviiio and multiple myeloma treatment Sarclisa, grew 48.3% overall to €1.3 billion during the quarter, the vaccine business and Altuviiio itself both fell short of market expectations, casting a shadow over the results. What unsettled investors even more was the failure of successor products. Just last week, Sanofi announced it was abandoning plans to seek marketing approval for its experimental eczema drug amlitelimab, which was once considered a potential future successor to Dupixent. The company disclosed that it had recorded an asset impairment loss of up to €952 million (approximately $1.09 billion) in the first half of the year.
Pipeline Overhaul: Terminating Multiple Projects, Appointing New R&D Head
In her first formal communication since taking office, Garijo did not shy away from the challenges facing the research and development system. "Realizing our full potential will require greater scientific rigor," she said. Under her leadership, Sanofi is undergoing a major overhaul of its R&D pipeline. In addition to amlitelimab, the company confirmed on Thursday that it has also decided to terminate the development of two other experimental drugs, itepekimab for lung disease and balinatunfib for psoriasis. In the entire second quarter, Sanofi cut more than eight R&D projects, with quarterly R&D spending rising 18% year-on-year to €2.23 billion, which included more than €200 million in costs related to project terminations. To reshape R&D productivity, Garijo has appointed former Roche Holding AG (RHHBY.US) executive Paulo Fontoura to lead the team, tasked with prioritizing high-quality assets and improving the efficiency of resource allocation.
Under the pressure of an impending patent cliff with no successors in sight, mergers and acquisitions have become a key path to strengthen the pipeline. Key patents for Dupixent are expected to expire in the early 2030s, at which point it will face competition from cheap generics. Former CEO Paul Hudson left the company precisely because he failed to demonstrate an effective strategy to compensate for this lost revenue. Garijo stated that the company is looking for opportunities to grow through acquisitions, with a continued focus on immunology, rare diseases, and vaccines, but will maintain "high prudence" in deal execution. Chief Financial Officer François-Xavier Roger, who also oversees business development, revealed that compared to the past focus on targets valued between €2 billion and €5 billion, the company's vision has "broadened." However, he emphasized that deal size is not the core consideration; the scientific strategic significance is key.
Faced with this mixed earnings report, the market chose to sell off directly. Despite the upgraded guidance, Sanofi's stock fell on Thursday, with a year-to-date decline of approximately 3%, significantly underperforming peers such as Novartis AG (NVS.US), GSK plc (GSK.US), Roche, and Merck & Co Inc (MRK.US), Garijo's former employer. Analysts at Barclays noted in a report that some investors had expected a more significant strategic update from the new CEO, but the lack of a "wow factor," coupled with the reduction in the R&D pipeline, was enough to offset the positive impact of the improved sales outlook on the stock price.
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