Sanofi shares fell sharply after the French drugmaker's new chief executive said the company is facing challenges to fill its medicine pipeline, signaling the need for higher spending and potentially deals.
Shares in Sanofi were down 9% in European afternoon trading Thursday, on track for their worst one-day percentage fall in nearly three years.
Belen Garijo, Sanofi's recently appointed chief executive, said the company is embarking on a revamp of its research-and-development operations, and that it would intensify dealmaking activity to improve its growth prospects over the medium and long term.
"I have to fully acknowledge the challenges confronting us and the need to act with [a] sense of urgency," Garijo told analysts on a conference call.
Garijo, formerly head of German conglomerate Merck KGaA, took the helm in May and was tasked with preparing the company for the future, with the patent expiration of its top moneymaker Dupixent--an anti-inflammatory drug jointly developed with Regeneron Pharmaceuticals--looming on the horizon.
Since then, Sanofi has reshuffled its executive team and named a new research-and-development head, decided to drop regulatory submissions for an eczema drug it acquired through a $1 billion-plus deal in 2021 and halted development work on two other late-stage medicine candidates.
Garijo said a review of the company's pipeline is under way and didn't rule out dropping additional medicines in coming months. The company will need to moderately increase R&D spending in the near term in parallel to any potential deals, she added.
Sanofi Chief Financial Officer Francois Roger said the company would have a greater appetite for buying drugs already on the market or at a late stage of development, instead of focusing mainly on early-stage assets as it has recently.
The company has benefited in recent years from fast-growing sales of Dupixent, which is approved for a range of respiratory and skin indications like asthma and eczema, but has become increasingly reliant on the drug.
Investors have doubts about Sanofi's ability to replace Dupixent sales once it goes off patent in a few years given that some of the drugs that the company saw as potential replacements disappointed in clinical trials.
In the past, Sanofi over-promised and under-delivered, which hurt its credibility in the eyes of investors, Garijo said.
The company now expects Dupixent sales to reach nearly 25 billion euros ($28.67 billion) in 2030, up from 22 billion previously. But it cut its 2030 sales forecast for its vaccines business to 9 billion euros from 10 billion euros.
For the second quarter, strong growth in sales of Dupixent and recently launched drugs helped Sanofi post an 18% jump in revenue at constant currency. Net sales came to 11.6 billion euros, against analysts' expectations of 10.85 billion euros, according to consensus estimates provided by Vara.
Dupixent sales were 5.15 billion euros, up 28% on year at constant currency.
The company reported a net profit of 343 million euros, compared with 3.94 billion euros for the same period last year. This included a 1 billion-euro hit from the discontinuation of its amlitelimab drug candidate, while the year-earlier results were boosted by a 2.7 billion-euro gain from discontinued operations.
Sanofi also raised its full-year guidance, projecting 2026 sales to grow by around 10% excluding currency changes, with business earnings per share rising slightly faster than sales. Its previous guidance called for sales to grow by a high single-digit percentage.
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