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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Sanofi    SAN   FR0000120578


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Sanofi to Get Out of Diabetes Research -- WSJ

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12/10/2019 | 02:48am EST

By Denise Roland

The maker of the world's top-selling insulin has given up on finding new diabetes drugs.

Sanofi SA, which makes Lantus, said Monday it would stop investing in diabetes research after years of frustrated attempts to bring a fresh blockbuster to the market.

The decision is part of a broader strategic overhaul by new Chief Executive Paul Hudson, who hopes to reinvigorate growth at the French health-care giant by focusing on fewer, more specialized disease areas such as cancer -- mirroring a move being made across the drug industry.

Diabetes for years was a lucrative business for Sanofi but has more recently become a problem child. Uproar from patients about the price of insulin, and tough actions from insurers and pharmacy-benefit managers, has hurt revenue from the lifesaving drug in recent years. At the same time, a government investigation into insulin prices is under way, piling on more pressure still.

Sanofi's top rivals in diabetes, Novo Nordisk A/S and Eli Lilly & Co., have responded to those pressures by investing heavily in new classes of diabetes medicine. But Sanofi's attempts to do so have flopped. The most advanced treatment in its pipeline, a new type of sugar-lowering drug, trails far behind competitors, and Mr. Hudson said Sanofi would no longer launch the product because of the heavy investment required to catch up.

Sanofi also will end research into cardiovascular diseases, another area it has found challenging of late, with sales of its Praluent drug disappointing amid concerns over price.

"To be out of cardiovascular and diabetes is not easy for a company like ours with an incredibly proud history," Mr. Hudson said on a call with reporters. "As tough a choice as that is, we're making that choice."

Sanofi is one of the most diversified companies in the industry, spanning branded prescription drugs, vaccines and over-the-counter treatments. Within branded drugs, it produces medicines ranging from insulin to specialty medicines for rare diseases.

Mr. Hudson, a former Novartis AG executive who became Sanofi's CEO in September, is now setting about undoing some of that.

Instead, Sanofi will focus its efforts on a range of specialty diseases -- including hemophilia, breast cancer and multiple sclerosis -- and vaccines. Mr. Hudson highlighted Dupixent, an injected treatment for eczema and asthma that he said "has the chance to be one of the most successful medicines in the history of the industry."

Sanofi on Monday set a target to eventually hit EUR10 billion ($11 billion) in annual sales for Dupixent. The drug is on track to generate around EUR2 billion in 2019.

Sanofi also plans to separate its over-the-counter medicines business, which makes nonprescription treatments for common ailments such as colds and indigestion, into a stand-alone unit. The move, said Mr. Hudson, would give the unit more freedom to operate.

Mr. Hudson also unveiled plans to cut EUR2 billion in costs by 2022, and an aim to improve Sanofi's business operating income -- a measure of operating income that strips out certain one-time items -- to 32% by 2025, up from 25.8% last year.

Sanofi signaled its interest in oncology earlier Monday, when it announced the $2.5 billion acquisition of biotech Synthorx Inc., a deal that will boost its pipeline of cancer immunotherapies, or drugs that help the immune system fight tumors. Sanofi has a long history in cancer but has fallen behind in the latest rush to develop immunotherapies.

The break from diabetes will herald a new era for Sanofi: Diabetes has been a key pillar for Sanofi since its formation in 2004 with the merger of Aventis and Sanofi-Synthelabo. Aventis had four years earlier launched Lantus, which by the time of the merger was already the most widely prescribed insulin in the U.S.

Insulin is an old drug, used to treat diabetes since the 1920s. But Lantus represented a big leap forward in terms of convenience. It helps diabetes patients with the difficult task of managing their blood sugar between meals and overnight with just one injection a day.

Sanofi's diabetes franchise has been declining for several years amid intense pricing pressure in the U.S. and the launch of a lower-cost competitor. Despite that, Lantus is still Sanofi's biggest-selling product. Sanofi plans to hold on to the existing franchise.

Still, its decision to pivot away from diabetes, as well as cardiovascular medicine, toward specialty diseases is common in the industry.

Drugs for broad disease areas including heart disease and diabetes require large, expensive clinical trials and come up against more pricing pressure because of the sheer number of potential patients.

Drugs for specialty diseases, on the other hand, require smaller trials and can command higher prices. Cancer especially is attracting heavy investment from the industry because of a run of recent scientific breakthroughs, a permissive regulatory system that allows for smaller and faster clinical trials and the ability to charge higher prices.

Write to Denise Roland at Denise.Roland@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
FREEDOM HOLDING CORP 0.94% 14.98 Delayed Quote.3.03%
LONDON SUGAR 0.58% 399.8 End-of-day quote.11.15%
NOVARTIS -0.06% 92.72 Delayed Quote.0.96%
NOVO NORDISK AS 0.18% 414.3 Delayed Quote.6.96%
SANOFI -0.31% 91.9 Real-time Quote.2.87%
SYNTHORX, INC. -0.07% 68.03 Delayed Quote.-2.66%
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Financials (EUR)
Sales 2019 36 695 M
EBIT 2019 9 651 M
Net income 2019 4 095 M
Debt 2019 15 491 M
Yield 2019 3,41%
P/E ratio 2019 28,1x
P/E ratio 2020 20,4x
EV / Sales2019 3,57x
EV / Sales2020 3,43x
Capitalization 116 B
Duration : Period :
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Technical analysis trends SANOFI
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Income Statement Evolution
Mean consensus BUY
Number of Analysts 24
Average target price 98,41  €
Last Close Price 92,19  €
Spread / Highest target 23,7%
Spread / Average Target 6,75%
Spread / Lowest Target -13,2%
EPS Revisions
Paul Hudson Chief Executive Officer
Serge Weinberg Chairman
Jean-Baptiste Chasseloup de Chatillon Chief Financial Officer & Executive Vice President
Ameet Nathwani Chief Medical & Digital Officer
John C. Reed Head-Global Research & Development
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