Sanofi H1 2020 business EPS(1) growth of 9.2%(2) driven by transformation

Rhea-AI Summary

Sanofi reported its Q2 2020 results with net sales of €8,207 million, down 4.9% year-over-year. Specialty Care sales grew by 17.4%, primarily fueled by Dupixent®, which saw a 70% increase to €858 million. However, COVID-19 impacted sales in Vaccines and General Medicines, with declines of 6.8% and 12.7%, respectively. Business net income rose 3.6% to €1,601 million, while business EPS increased to €1.28. Sanofi revised its full-year 2020 business EPS guidance up to 6%-7%. Key regulatory advancements include Dupixent® approvals in China and for children in the U.S.

Positive

• Specialty Care sales increased 17.4%, driven by Dupixent®, which grew 70% to €858 million.
• Business net income rose 3.6% to €1,601 million.
• Business EPS increased 4.8% to €1.28.
• Free cash flow increased by 69.6% to €3,568 million.

Negative

• Net sales decreased by 4.9% year-over-year.
• Vaccines sales fell by 6.8% due to COVID-19.
• General Medicines sales dropped 12.7% partly from deferred elective procedures.

PARIS, July 29, 2020 /PRNewswire/ -- Sanofi (NASDAQ: SNY; EURONEXT: SAN)

Experience the interactive Multichannel News Release here:  https://www.multivu.com/players/English/8751951-sanofi-earnings-results-q2-2020/

Q2 2020 sales results reflect the strong performance of Dupixent^® more than offset by COVID-19 related negative effects on Vaccines, General Medicines and CHC

• Net sales were €8,207million, down 4.9% on a reported basis and a decline of 3.4%⁽²⁾ at CER.
• Specialty Care sales grew 17.4% driven by strong performance of Dupixent^® (+70% to €858 million).
• Vaccines sales (-6.8%) were affected by global confinements while in Southern Hemisphere demand for flu vaccines was strong.
• General Medicines sales down 12.7% partly due to confinement related deferrals of elective procedures and channel destocking.
• CHC sales declined 8.0% reflected unwinding of consumer stocking and lower pharmacy traffic as well as Zantac^® voluntary recall.

Q2 2020 business EPS⁽¹⁾ benefits from share revaluation gain and effective cost management

• Q2 2020 business net income increased 3.6% to €1,601 million and 5.6% at CER.
• Q2 2020 business EPS⁽¹⁾ was €1.28, up 4.8% at CER (€1.18 excluding revaluation on retained Regeneron shares).
• During the first half of 2020, cost savings of €990 million⁽³⁾ were realized.
• Q2 2020 IFRS EPS was €6.07, reflecting capital gain from sales of Regeneron shares.

R&D transformation, milestones and regulatory achievements

• Dupixent^® approved as the first biologic in China for moderate-to-severe atopic dermatitis in adults - first prescription on July 22.
• Dupixent^® approved for moderate-to-severe atopic dermatitis in children (6 to 11 years) in U.S. and positive CHMP opinion in EU.
• Sarclisa^® approved in EU for certain adults with relapsed and refractory multiple myeloma. 
• Pivotal IKEMA study evaluating Sarclisa^® in relapsed multiple myeloma met primary endpoint at first planned interim analysis.
• Libtayo^® demonstrated clinically meaningful and durable responses in advanced basal cell carcinoma.
• FDA granted priority review to sutimlimab in cold agglutinin disease.
• Collaboration agreements with Translate Bio, Kiadis Pharma and Kymera Therapeutics.

Full-year 2020 business EPS⁽¹⁾ guidance revised upward

• Sanofi now expects 2020 business EPS⁽¹⁾ to grow between 6% and 7%⁽⁴⁾ at CER, barring unforeseen major adverse events. Applying average July 2020 exchange rates, the currency impact on 2020 business EPS is estimated to be between -3% to -4%.

Sanofi Chief Executive Officer, Paul Hudson, commented:

"I'm proud of what the team delivered in the second quarter. Even with some headwinds from the COVID-19 pandemic, we achieved business EPS growth supported by continued outstanding sales from Dupixent^®, a focus on efficiency and smart spending, and the commitment of our people to patients and our strategic priorities. We also met important regulatory milestones, forged new R&D alliances, and accelerated our efforts to develop potential COVID-19 vaccines. With four new appointments, the management team at Sanofi is now complete and together we are focused on delivering our full-year 2020 guidance."

	Q2 2020	Change	Change at CER	H1 2020	Change	Change at CER
IFRS net sales reported	€8,207m	(4.9%)	(3.4%)	€17,180m	+0.9%	+1.6%
IFRS net income reported	€7,598m	—	—	€9,281m	nm	—
IFRS EPS reported	€6.07	—	—	€7.41	nm	—
Free cash flow(5)	€2,010m	+56.5%	—	€3,568m	+69.6%	—
Business operating income	€2,146m	+3.3%	+5.3%	€4,683m	+8.8%	+9.8%
Business net income(1)	€1,601m	+3.6%	+5.6%	€3,521m	+8.7%	+9.8%
Business EPS(1)	€1.28	+3.2%	+4.8%	€2.81	+8.1%	+9.2%
(1) In order to facilitate an understanding of operational performance, Sanofi comments on the business net income statement. Business net income is a non-GAAP financial measure (definition in Appendix10). The consolidated income statement for Q2 2020 is provided in Appendix 3 and a reconciliation of reported IFRS net income to business net income is set forth in Appendix 4; (2) Changes in net sales are expressed at constant exchange rates (CER) unless otherwise indicated (definition in Appendix 10); (3) Including around €110M related to COVID-19; (4) 2019 restated business EPS was €5.64, reflecting the discontinuation of equity method accounting for Regeneron investment; (5) Free cash flow is a non-GAAP financial measure (definition in Appendix 10).

R&D update⁽⁷⁾

Consult Appendix 7 for full overview of Sanofi's R&D pipeline

Regulatory update

Regulatory updates since April 24, 2020 include the following:

• In June, the National Medical Products Administration (NMPA) in China approved Dupixent^® (dupilumab) for the treatment of moderate-to-severe atopic dermatitis in adults whose disease is not adequately controlled with topical prescription therapies or when those therapies are not advisable. The NMPA identified Dupixent^® as an overseas medicine considered urgently needed in clinical practice, leading to an expedited review and approval process. Launch in China took place on July 22.
• In June, the European Commission (EC) approved Sarclisa^® (isatuximab) in combination with pomalidomide and dexamethasone (pom-dex) for the treatment of adult patients with relapsed and refractory multiple myeloma who have received at least two prior therapies including lenalidomide and a proteasome inhibitor and have demonstrated disease progression on the last therapy.
• The pediatric hexavalent vaccine, Shan 6, was submitted in India in June. 
• In May, the U.S. Food and Drug Administration (FDA) approved Dupixent^® for children aged 6 to 11 years with moderate-to-severe atopic dermatitis whose disease is not adequately controlled with topical prescription therapies or when those therapies are not advisable. Dupixent^® is the only biologic medicine approved for this patient population.
• In May, the FDA granted priority review of the Biologics License Application (BLA) for sutimlimab for the treatment of hemolysis in adult patients with cold agglutinin disease (CAD).
• At the end of July 2020, the R&D pipeline contained 83 projects, including 33 new molecular entities in clinical development (or that have been submitted to the regulatory authorities). 34 projects are in phase 3 or have been submitted to the regulatory authorities for approval.

Portfolio update

Phase 3:

• Results from the phase 3 trial evaluating the investigational enzyme replacement therapy, avalglucosidase alfa, were presented in June at a Sanofi-hosted scientific session. Avalglucosidase alfa met the primary endpoint demonstrating non-inferiority in improving respiratory function compared to avalglucosidase alfa (standard of care) in patients with late-onset Pompe disease (LOPD). These data will form the basis for global regulatory submissions anticipated in the second half of this year. The FDA has granted Breakthrough Therapy and Fast Track designations to avalglucosidase alfa for the treatment of patients with Pompe disease.
• Part A of the pivotal phase 3 trial evaluating Dupixent^® in patients 12 years and older with eosinophilic esophagitis (EoE) met both of its co-primary endpoints, as well as all key secondary endpoints. An ongoing Part B portion of the Phase 3 trial evaluates an additional Dupixent^® dosing regimen.
• Topline data for a pivotal, single-arm, open-label trial evaluating Libtayo^® (cemiplimab-rwlc), a PD-1 inhibitor, in patients with advanced basal cell carcinoma who had progressed on or were intolerant to prior hedgehog pathway inhibitor therapy were announced in May. Objective responses were seen in 29% of patients with locally advanced basal cell carcinoma (BCC) and in a preliminary analysis, objective responses were seen in 21% of patients with metastatic BCC. Approximately 85% of patients who responded to Libtayo^® maintained their response for at least one year. Sanofi and Regeneron plan regulatory submissions in 2020.
• The Phase 3 IKEMA trial evaluating Sarclisa^® (isatuximab) added to carfilzomib and dexamethasone met the primary endpoint at its first planned interim analysis. These results were presented as late-breaking at the EHA25 Virtual Congress in June 2020. Sarclisa^® added to carfilzomib and dexamethasone reduced the risk of disease progression or death by 47% compared to standard of care carfilzomib and dexamethasone in patients with relapsed multiple myeloma. These interim results will form the basis for global regulatory submissions later this year.
• A Phase 3 trial comparing Libtayo^® in monotherapy for first-line locally advanced or metastatic non-small cell lung cancer was stopped early due to highly significant improvement in overall survival. Libtayo decreased the risk of death by 32.4%, compared to platinum doublet chemotherapy, in patients that tested positive for PD-L1 in ≥50% of tumor cells. The data will form the basis of regulatory submissions in the U.S. and EU in 2020.
• The brain penetrant BTK inhibitor, SAR442168, (collaboration with Principia) entered into phase 3 in multiple sclerosis.
• Enrollment of the phase 3 evaluating sarilumab (Kevzara^®) in giant cell arteritis and polymyalgia rheumatica have been terminated.

(7) updates since April 24

• It has been decided not to pursue the collaboration with Daiichi Sankyo on a pediatric pentavalent vaccine in Japan.

Phase 2

• New, longer-term data for Libtayo^® (PD-1 inhibitor) from a pivotal phase 2 trial in advanced cutaneous squamous cell carcinoma (CSCC), the deadliest non-melanoma skin cancer, were presented during the virtual 2020 American Society of Clinical Oncology (ASCO) Annual Meeting. These results showed durable responses that deepen over time. Across all groups combined, complete responses (CR) are now 16%; in the metastatic group with the longest follow-up CRs are 20%.
• Long term interim data from the phase 2 open label extension study exploring the efficacy and safety of fitusiran, an investigational once-monthly, subcutaneously administered RNA interference (RNAi) therapy for the treatment of hemophilia A and B, with or without inhibitors, were shared in June in a late-breaking presentation at the World Federation of Hemophilia Virtual Summit. These data reinforce fitusiran's potential to restore hemostatic balance and to lower annualized bleed rates (ABRs) over a period up to 57 months.
• A phase 2 trial in non-small cell lung cancer with anti-CEACAM5 (SAR408701) and ramucirumab started.
• A next generation pneumococcal conjugate vaccine (collaboration with SK) entered into phase 2.
• Fluzone^® HD pediatric entered into phase 2.
• It has been decided not to pursue the combination of isatixumab and cemiplimab in relapsed refractory multiple myeloma due to insufficient additional efficacy over isatuximab monotherapy.

Phase 1

• The anti-CD38xCD28xCD3 trispecific monoclonal antibody, SAR442257, entered into phase 1 in multiple myeloma and Non-Hodgkin lymphoma
• BIVV001, a potential new class of factor VIII therapy for patient with hemophilia A, demonstrated positive Phase 1 repeat dose study results as reported at the World Federation of Hemophilia Virtual Summit earlier this month. The Phase 3 study in previously treated hemophilia A patients started last year.
• SAR442720 (a SHP2 inhibitor, collaboration with Revolution Medicines) in combination with pembrolizumab entered into phase 1 for solid tumors.
• SAR443122, a RIPK1 inhibitor (collaboration with Denali) dosed its first patient in a Phase 1b trial to evaluate the safety and pharmacodynamic effects of SAR443122 in patients with severe COVID-19.
• Sanofi has discontinued further development of SAR443060, a RIPK1 inhibitor (collaboration with Denali) in amyotrophic lateral sclerosis and multiple sclerosis and alternatively will advance development of SAR443820⁽⁸⁾.

Collaboration

• On July 9, Kymera Therapeutics Inc. entered into a multi-program strategic collaboration with Sanofi to develop and commercialize first-in-class protein degrader therapies targeting IRAK4 in patients with immune-inflammatory diseases.
• On July 8, the exclusive license of Kiadis' previously undisclosed K-NK004 program to Sanofi was announced. The agreement covers Kiadis' proprietary CD38 knock out (CD38KO) K-NK therapeutic for combination with anti-CD38 monoclonal antibodies, including Sarclisa^®. Additionally, Sanofi has obtained exclusive rights to use Kiadis' K-NK platform for two undisclosed pre-clinical programs.
• On June 23, Sanofi Pasteur and Translate Bio, a clinical-stage messenger RNA (mRNA) therapeutics company, agreed to expand their existing 2018 collaboration and license agreement to develop mRNA vaccines for infectious diseases.

(8) DNL 788

2020 second-quarter and first-half financial results⁽⁹⁾

Business Net Income⁽⁹⁾

In the second quarter of 2020, Sanofi generated net sales of €8,207 million, a decrease of 4.9% and 3.4% at CER. First-half Sanofi sales were €17,180 million, an increase of 0.9% and 1.6% at CER.

Second-quarter other revenues decreased 34.4% (down 35.5% at CER) to €231 million, reflecting lower VaxServe sales of non-Sanofi products (€185 million, down 39.4% at CER). First-half other revenues decreased 14.8% (down 16.9% at CER) to €574 million, including lower VaxServe sales of non-Sanofi products (€471 million, down 15.3% at CER).

Second-quarter Gross Profit decreased 7.0% to €5,778 million (down 6.0% at CER). The gross margin ratio decreased 1.6 percentage points to 70.4% (70.0% at CER) versus the prior year. The negative impact from net price adjustments of Plavix^® and the Aprovel^® family in China, U.S. Diabetes net price evolution and Vaccines more than offset the favorable effect from Specialty Care growth and industrial productivity. In the first half, the gross margin ratio decreased 1.0 percentage point to 71.3% (71.0% at CER) versus the prior year.

Research and Development (R&D) expenses decreased 14.8% to €1,352 million in the second quarter. At CER, R&D expenses decreased 15.1% reflecting a decline in Diabetes R&D expenses. In the second quarter, the ratio of R&D to sales decreased 1.9 percentage points to 16.5% compared to the prior year. First-half R&D expenses decreased 9.4% to €2,692 million (down 10.1% at CER). In the first half, the ratio of R&D to sales decreased 1.8 percentage points to 15.7% compared to the prior year.

Second-quarter selling general and administrative expenses (SG&A) decreased 7.9% to €2,265 million. At CER, SG&A expenses were down 7.1%, reflecting smart spending initiatives and the impact of the COVID-19 pandemic. In the second quarter, the ratio of SG&A to sales decreased 0.9 percentage point to 27.6% compared to the prior year. First-half SG&A expenses decreased 4.7% to €4,607 million (down 4.6% at CER). In the first half of 2020, the ratio of SG&A to sales was 1.6 percentage points lower at 26.8% compared to the prior year.

Second-quarter operating expenses were €3,617 million, a decrease of 10.6% and 10.2% at CER. First-half operating expenses were €7,299 million, a decrease of 6.5% and 6.7% at CER.

Second-quarter other current operating income net of expenses was -€8 million versus -€91 million in the prior year. In 2020, this line included an expense of €239 million (versus a €159 million expense in the second quarter of 2019) corresponding to the share of profit to Regeneron of the monoclonal antibodies Alliance, reimbursement of development costs by Regeneron and the reimbursement of commercialization-related expenses incurred by Regeneron. Other current operating income net of expenses included a gain of €157 million related to a revaluation of retained Regeneron shares  in support of the ongoing collaboration with Regeneron. First-half other current operating income net of expenses was -€255 million versus -€193 million in the first half of 2019.

The share of profit from associates was €2 million in the second quarter versus €7 million in the second quarter of 2019. Following the sale of its Regeneron stake at the end of May 2020, Sanofi restated its previously reported non-GAAP indicator (Business Net Income) and excluded the effect of equity method of accounting for Regeneron investment in 2019 and Q1 2020. The Q2 2020 business P&L does not include any effect of the equity method of accounting for Regeneron investment in this line. In the first half, the share of profits from associates was €11 million versus €10 million for the same period of 2019.

In the second quarter and the first half of 2020, non-controlling interests were -€9 million and -€21 million versus -€5 million and -€15 million for the same period of 2019, respectively.

Second-quarter business operating income (BOI) increased 3.3% to €2,146 million. At CER, BOI increased 5.3%. The ratio of BOI to net sales increased 2 percentage points to 26.1% versus the second quarter of 2019. Over the period, the BOI ratio of segments were 37.4% for Pharmaceuticals (up 6.4 percentage points), 19.0% for Vaccines (down 7.6 percentage points) and 29.8% for CHC (down 10.6 percentage points). First-half business operating income was €4,683 million, up 8.8% (up 9.8% at CER) and included €990 million of saving initiatives (including around €110 million of savings related to COVID-19). In the first half, operational excellence and deprioritized businesses generated savings of €320 million and €300 million, respectively while smart spending initiatives realized €370 million. In the first half of 2020, the ratio of business operating income to net sales increased 2 percentage points  to 27.3%.

Net financial expenses were -€92 million in the second quarter versus -€96 million in the same period of 2019. First-half net financial expenses were -€167 million versus -€150 million in the first half of 2019.

Second-quarter and first-half effective tax rate was stable at 22.0% versus the prior period. Sanofi continues to expect its effective tax rate to be around 22% in 2020.

Second-quarter business net income⁽⁹⁾ increased 3.6% to €1,601 million and increased 5.6% at CER. The ratio of business net income to net sales increased 1.6 percentage points to 19.5% versus the second quarter of 2019. First-half 2020 business net income⁽⁹⁾ increased 8.7% to €3,521 million and increased 9.8% at CER. The ratio of business net income to net sales increased 1.5 percentage points to 20.5% versus the first half of 2019.

(9) See Appendix 3 for 2020 second-quarter consolidated income statement; see Appendix 10 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.

In the second quarter of 2020, business earnings per share⁽⁹⁾ (EPS) increased 3.2% to €1.28 on a reported basis and 4.8% at CER. Excluding the gain on the revaluation of the retained Regeneron shares, business EPS was €1.18, down 2.4% at CER. The average number of shares outstanding was 1,252.2 million versus 1,248.5 million in the second quarter of 2019.

In the first half of 2020, business earnings per share⁽⁹⁾ was €2.81, up 8.1% on a reported basis and up 9.2% at CER. The average number of shares outstanding was 1,251.7 million in the first half of 2020 versus 1,247.2 million in the first half 2019.

Reconciliation of IFRS net income reported to business net income (see Appendix 4)

In the first half of 2020, the IFRS net income was €9,281 million. The main items excluded from the business net income were:

• An amortization charge of €883 million related to fair value remeasurement on intangible assets of acquired companies (primarily Genzyme: €295 million, Bioverativ: €170 million, Boehringer Ingelheim CHC business: €101 million, Aventis: €68 million) and to acquired intangible assets (licenses/products: €44 million). These items have no cash impact on the Company.
• An impairment of intangible assets of €323 million related to several projects including Diabetes.
• Restructuring costs and similar items of €758 million related to streamlining initiatives in Europe.
• A pre-tax gain of €129 million arising from the divestment of Seprafilm to Baxter.
• A gain of €7,225 million related to the sales of the majority of Sanofi's Regeneron shares completed on May 29.
• A €1 million tax effect arising from the items listed above, mainly comprising €302 million of deferred taxes generated by amortization and impairments of intangible assets and €232 million associated with restructuring costs and similar items and -€475 million of tax related to the sale of Regeneron shares. (see Appendix 4).
• €313 million corresponding to the share of income related to equity accounting from Regeneron until May 29, 2020. Sanofi non-GAAP indicator (Business net income) does not include the share of income related to equity accounting since it ceased to be an associate on May 29, 2020.
• An income of €30 million net of tax related to restructuring costs of associates and joint ventures and expenses arising from the impact of acquisitions on associates and joint ventures.

Capital Allocation

In the first half of 2020, free cash flow⁽¹⁰⁾ increased by 69.6% to €3,568 million, after net changes in working capital

(-€306 million), capital expenditures (-€534 million) and other asset acquisitions¹ (-€334 million), disposal proceeds¹ (€682 million), and payments related to restructuring and similar items (-€458 million). Over the period, acquisitions² were €2,245 million (related to Synthorx) and proceeds from disposals² net of tax were €10,512 million (related to sales of Regeneron shares). As a consequence, net debt decreased from €15,107 million at December 31, 2019, to €7,680 million at June 30, 2020 (amount net of €15,969 million cash and cash equivalents).

¹ Not exceeding €500 million per transaction.
² Amount of the transaction above €500 million per transaction.

(10) non-GAAP financial measure (definition in Appendix 10).

To access the full press release of the 2020 Q2 results, please click here.

Forward-Looking Statements

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are statements that are not historical facts. These statements include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates", "plans" and similar expressions. Although Sanofi's management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Sanofi, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include among other things, the uncertainties inherent in research and development, future clinical data and analysis, including post marketing, decisions by regulatory authorities, such as the FDA or the EMA, regarding whether and when to approve any drug, device or biological application that may be filed for any such product candidates as well as their decisions regarding labelling and other matters that could affect the availability or commercial potential of such product candidates, the fact that product candidates if approved may not be commercially successful, the future approval and commercial success of therapeutic alternatives, Sanofi's ability to benefit from external growth opportunities, to complete related transactions and/or obtain regulatory clearances, risks associated with intellectual property and any related pending or future litigation and the  ultimate outcome of such litigation,  trends in exchange rates and prevailing interest rates, volatile economic and market conditions, cost containment initiatives and subsequent changes thereto, and the impact that COVID-19 will have on us, our customers, suppliers, vendors, and other business partners, and the financial condition of any one of them, as well as on our employees and on the global economy as a whole.  Any material effect of COVID-19 on any of the foregoing could also adversely impact us. This situation is changing rapidly and additional impacts may arise of which we are not currently aware and may exacerbate other previously identified risks. The risks and uncertainties also include the uncertainties discussed or identified in the public filings with the SEC and the AMF made by Sanofi, including those listed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" in Sanofi's annual report on Form 20-F for the year ended December 31, 2019. Other than as required by applicable law, Sanofi does not undertake any obligation to update or revise any forward-looking information or statements.

Media Relations:
Ashleigh Koss
908-981-8745
Email: Ashleigh.koss@sanofi.com  

Investor Relations:
Felix Lauscher
+33 (0)1 53 77 45 45
Email: IR@sanofi.com  

 

 

 

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SOURCE Sanofi

FAQ

What were Sanofi's Q2 2020 sales results?

Sanofi reported Q2 2020 sales of €8,207 million, down 4.9% year-over-year.

How did Dupixent® perform in Q2 2020?

Dupixent® sales increased by 70% to €858 million in Q2 2020.

What is the business EPS for Sanofi in Q2 2020?

Sanofi's business EPS for Q2 2020 was €1.28, up 4.8% at CER.

What is the full-year EPS guidance for Sanofi for 2020?

Sanofi revised its full-year business EPS guidance to grow between 6% and 7% at CER.

How have COVID-19 effects influenced Sanofi's sales?

COVID-19 negatively impacted sales in Vaccines and General Medicines, leading to declines.