Sanofi

You have joined the meeting as an attendee and will be muted throughout the meeting. This meeting is being recorded. Good morning, good afternoon, and good evening to everyone. Thank you for joining us to review Sanofi's fourth quarter and full year 2022 results, followed by a Q&A session. As usual, you can find the slides to this call on the investors page of our website at sanofi.com. Moving to slide three. I would like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. I refer you to our Form 20F document on file with the SEC and also our document d'enregistrement universel for a description of these risk factors. With that, please advance to slide four. Our speakers on the call today are Paul Hudson, Chief Executive Officer, Oumala Shrafian, Global Head of R&D, Jean-Baptiste de Chatillon, Chief Financial Officer, and the Global Business Unit heads, Brian Ford, Thomas Triomphe, Olivier Charmet, and Julie Van Angeval. For the Q&A, you have two options to participate. Option one, click the raise hand icon at the bottom of your screen. Or option two, submit your question by clicking the Q&A icon at the bottom of the screen. And with that, I'd like to turn the call over to Paul.

Well, thank you, Eva. And thanks, everyone, for joining our call today. Before we discuss the Q4 highlights, I want to start by updating you on another announcement we made this morning. Francois-Xavier Roger will join Sanofi, taking over the role of CFO effective April 1, 2024. I'm very pleased to welcome him at Sanofi. He's an accomplished and widely recognized finance executive with a proven track record in accelerated value creation. In fact, some of you may have met him already before, either in his role at Nestle or in the past at Takeda. He'll take over a finance organization that has been significantly modernized under JB's leadership over the past five years. JB has been instrumental for the successful execution of the first chapter of our play-to-win strategy and creating the growth opportunities ahead of us. With JB at the helm of our finance team, we have consistently delivered healthy top-line growth over the last years, a significant BOI margin improvement, and €2.7 billion of cost efficiencies that were all reinvested behind our growth drivers and pipeline. He also worked closely with Olivier and Julie on the simplification of GemMed and the standalone of our consumer health business, two critical projects that have delivered significant value for the company and shareholders. Many of you may not be aware about JB's longstanding personal commitment to charity work. He decided to devote the next stage of his career by leading a renowned French-based foundation, and I'm 100% certain of the positive impact JB will continue to have on people's lives. I would like to take the opportunity here to warmly thank him for his dedication and leadership. He's been a great partner to me, and dare I say it, a friend, and to the rest of the executive committee. Thank you, JB. 2023 marked a pivotal year for Sanofi, as we became a development-driven, tech-powered biopharma company. Our core growth drivers in specialty care and vaccines continue to deliver. The main driver remains Dupixent, which continued to deliver stellar performance in all approved indications and across geographies. Dupixent added €2.4 billion to the top line, or €2.8 billion as a constant exchange rate. 2023 also marks a very successful year for our vaccine business, with the launch of Bay Fortis, a real moment for our strategy and execution. In general medicines, our core assets kept growing. GBU sales were lower overall due to net price erosion, and we continue to actively manage our portfolio and divest non-strategic products. Moving to consumer healthcare, the business delivered more than 6% growth, driven by priority brands and the recently acquired QNOL, which is an excellent strategic fit for our business. As you know, last quarter we announced our intention to separate our CHC business following our earlier decision to create a standalone unit to fully unlock its value. This will also allow us to better focus time and resources as a pure-play biopharma company. We're in the process of reviewing potential separation scenarios and still believe that the path most likely to maximize shareholder value would be through a capital markets transaction to create a public-listed company headquartered here in Paris. Subject to market conditions, of course, the separation could be achieved at the earliest Q4 2024. In a nutshell, the strong performance of Dupixent and our key launches more than offset the anticipated impact of the loss of exclusivity of Abagio, our last major LOE for the remainder of the decade. Excluding Abagio, the underlying sales growth of our business was 8.1% in 2023, a fabulous underlying growth trajectory. Moving now to slide seven, which perfectly demonstrates our ability to be laser-focused when it comes to launch excellence as we turn Sanofi into a launch engine. Bay Fortis, Altuvia, and TZL generated sales of more than €700 million in 2023, far exceeding our expectations. Bay Fortis faced an unprecedented demand. While we've already been able to protect almost 2 million babies, this first season clearly confirmed the importance of our all-infant protection strategies. Ultuvio is capturing more than 50% of all switches in the United States hemophilia A market. And T-Zield created great excitement amongst clinicians as the first and only therapy to delay the onset of type 1 diabetes. These three transformational medicines joined a growing number of Sanofi's new product launches since 2019. New products generated over 2.2 billion euros in 2023 across different fast-growing therapeutic areas. These launches will add to our top line next to Dupixent for many years, and again keeping in mind that we will not face major LOE for the rest of the decade. As we remember from our R&D day on December 7th, we believe that we have everything it takes to become the leading immunology company. In addition to the recent pharma launches, we have a record number of medicines in our pipeline with potential blockbuster status, including three with the potential for over 5 billion in peak sales. We expect these launches to exceed 10 billion euros of sales by 2030. At the same time, Dupixel will keep being a once-in-a-career and a life-changing medicine, continuing to deliver a low double-digit sales growth CAGR until 2030. And finally, our growth driver vaccines will continue to power us forward with its leading positions in RSV, flu, pediatric combination vaccines, and other franchises, bringing more than €10 billion in sales by 2030. Moving to slide nine, we're very excited about Dupixent's potential to become the first biologic to treat COPD. And with our partner Regeneron, we're making rapid progress in submitting applications for approval in Europe, the U.S., and also China. And let's certainly not forget it's a PECIMAB or anti-IL-33 monoclonal antibody, which holds additional potential for COPD. Recent phase two results of this asset were highly encouraging, and the two large phase three trials are now nearing completion of enrollment. Pivotal results are expected in 2025. Together, Dupixent and Tepecumab have the potential to address a large COPD population with a limited overlap. We believe that these two medicines combined could have a peak sales potential of greater than €5 billion in COPD. Let me now share with you some of our key priorities for the year. Number one is to keep being laser-focused on the best-in-class launches. We're working closely with our partner AstraZeneca and regulatory authorities to increase the supply of Bay Fortis for 2024 and 2025 to meet this tremendous demand. For Altuveo, we continue to capture patient share in the U.S. haemophilia A market and drive geographic expansion after a very promising start in Japan. And for T-Zield, we will increase our efforts around the patient screening and enrollment in our support programs. And of course, the launch preparations for Dupixent and COPD are well underway. Number two, we keep moving swiftly on our pipeline priorities. We expect Tolly Bruton in phase three data for both relapsing remitting and secondary progressive MS around mid-year. We will initiate the planned trials for many of our promising immunology, neurology, and vaccine assets. Finally, on cost reallocation, we announced a few months ago a new set of efficiency initiatives across the biopharma business that will free up operational resources to support the accelerated R&D investments and unlock value creation opportunities. We continue to target savings of up to €2 billion from 2024 to the end of 2025 to fund innovation and growth. To sum it up, 2024 is a year of investment in science, including a lock-off pipeline, and positions for a strong EPS rebound in 2025. Let me conclude by highlighting some of our commitments to the fight against climate change. We're making clear progress on our trajectory to reach carbon neutrality by 2030, exemplified by our leveraging renewable electricity and expanding our eco-car fleets. As a reminder, our ambitions in 2030 and 2045 are vetted by the SBTI, the Science-Based Targets Initiative. We attended COP28 in Dubai last December in a push to elevate the need for stronger collaboration across healthcare systems. We are active contributors to the Sustainable Markets Initiative and have the privilege to lead the Patient Care Pathways Working Group, where we focus our efforts on how to reduce carbon emissions from health systems while improving health outcomes for patients. Well, I now hand it over to Hooman, Head of R&D, who will share more insights into our R&D priorities and milestones for this year. Hooman.

Thank you, Paul. As we discussed with you in December at our R&D day, Sanity delivered an unprecedented cadence of positive news and important data readouts last year across major projects with blockbuster potential. By increasing our investments in R&D, we intend to fully capitalize on the growth opportunities ahead of us by prioritizing pipeline assets with meaningful growth potential and extending the opportunity to successfully launch meds. This year, we look forward to several important regulatory milestones and readouts from our pike. As already mentioned by Paul, we expect regulatory milestones with dupixin and COPD and pivotal readouts for tolobrutinib and relapsing MS and secondary progressive MS, as well as rilzabrutinib in ITP. For amyloid tilobab and rilzabrutinib, we're excited to learn the outcome of important phase two results in asthma later this year. Separately, we're preparing to submit the recent positive phase two results of Sarkozy and first-line transplant ineligible myeloma patients to FDA approval and expect the pivotal data for subcutaneous administration before year end, which would bring additional upside for Sanofi in this large market seeking convenient treatment options. As you will recall from R&D day, we highlighted our ambition to increase the number of phase three projects by 50% across immunology, neurology, and vaccines over the next two years, A significant number of these pivotal trials have already started to dose their first patients, including the first amlatilumab phase 3 trial in AD and phase 3 trials of prexelumab in both relaxing MS and secondary progressivants. We are progressing well and are evolving at the right pace as we expect to have more than 35 projects in phase 3 by 2025. Turning to phase 2, we are fortunate to have and initiate a significant number of projects presented at the R&D day, One example is Frexilumab in type 1 diabetes, where we started with a study assessing different doses and routes of administration. We're sticking to our strategy of combining strong, innovative science with opportunity to address patients' major unmet needs. You can also see the proof points of our progress in R&D productivity by moving our major assets, such as the oral TNFR1 signaling inhibitor and Lincecumig into mid-stage. They both fit our portfolio by providing promising solutions for multiple indications. We believe the increased R&D investment in pivotal pay-through programs and key phase two trials will offer long-term returns and benefit patients and shareholders. This is the essence of the play-to-win strategy. Moving on to slide 16, we provided a granular and concrete sense of areas that we are changing in Sanofi R&D, a recent investor event in New York. First, we talked about peak investments. Through dispassionate, data-driven evaluation of our pipeline, we're investing in only our winning late-stage assets to underwrite the long-term growth of Samsung. Accordingly, we'll drive our late-stage opportunities by launching multiple phase three trials in parallel. We need to increase investment in these long-term opportunities for us to drive real growth and value for our shareholders. And we will do that in a disciplined way. The second theme was that we must earn the right to do that. We're going to deliver portfolio focus across our breadth of platform sites and TAs. We continue to have the right to win in oncology, but in a focused way. We're uniquely positioned to win in immunology and inflammation. We have deep provenance in immunology, and it's a self-fulfilling prophecy that this leads to developing better immunology drugs and also doing research in immunology. Finally, pipeline sustainability. Although we've made good progress to improve our R&D productivity with a focus on greater quality, we now have to step it up by leveraging both in-house research and external innovation. Slide 17. As a great example of external innovation, let me take just one minute to talk about our recently announced acquisition of Inhibrix. It fits perfectly with our rare diseases portfolio overlapping with our immune-mediated respiratory franchise. As underlined at R&D Day, we continue to drive our successful R&D and keep our eyes open for immune-mediated disease in the periphery of what we do. When it closes, this deal will add, in Hembricks 101, to our portfolio, a recombinant human alpha-1 antitrypsin FC fusion protein for the treatment of alpha-1 antitrypsin deficiency, an inherited rare disease of the lungs and liver causing progressive tissue deterioration. The phase one trial showed strong data with a best-in-class profile, thanks to sustaining normal AAT levels and aiming for a better compliance to a potential monthly dosing regimen. The current standard of care is a plasma-derived AAT, leaving patients without sufficiently effective, well-validated treatment. As across our other rare disease therapies, we're committed to patients with AATD. The next readout is expected in 2025 for a potential launch in 2027 with a potentially rapid approval following FWL fast track designation granted last May. The blockbuster potential behind this asset is predicated on use by both existing patients and by the anticipated use by increased number of de novo patients that could benefit from the treatment. With great pleasure, I now hand over to the GBU heads to go through the respective business performance.

Over to you, Brian. Thank you so much, Umang. Now taking a closer look at specialty care, we once again delivered double-digit growth in the quarter, supported by outstanding performance of Depixen. As Paul mentioned earlier, strong demand for this exceptional medicine across all approved indications and geographies continues to be a core driver of specialty care. Our rare disease business was another important contributor in the quarter. Strong growth across Pompe, Gaucher, and Fabry products highlights our unique expertise in identifying patients and our ability to drive demand through new patient accruals. The rollout of Nexviazyme is the new standard of care in Pompeii, and Zympazyme and ASMD continue to be successful in global markets. In rare blood disease, we're very pleased with the continued strong uptake of Altuvio, another exciting launch in specialty care, and I'm going to update you a little bit on the insights of the brand's recent performance in just a minute. Now, we believe the continued double-digit growth in specialty care is particularly impressive against a backdrop of generic competition for Abagio, Sanofi's last meaningful LOE for the rest of the decade. Generic versions of Abagio have now entered all key markets, including Europe, in September. With almost 1 billion euros in sales in 2023, we continue to navigate the impact of generic erosion into 2024, including a particularly high base comparison for Abagio in the first quarter. Now moving to my next slide, Depixent sales reached almost 3 billion euros in the fourth quarter alone. As highlighted on the slide, four-year sales were up 34%, Driven by continuous robust growth in both U.S. and ex-U.S. geographies, almost seven years into the initial U.S. launch in atopic dermatitis, we've achieved and maintained leadership positions in NBRXs across all five approved indications, and we are confident to deliver around 13 billion euros in sales in 2024 as previously guided. We remain very excited about the outlook for the brand's outstanding commercial success and expect COPD to become another important road pillar over time. And as Paul discussed earlier, significant regulatory progress has been achieved with COPD across key markets, and we plan for a launch in the U.S. later this year. Now, as a quick reminder, on the left-hand side of the chart, you will notice, similar to what we have seen in previous years, and is as common for specialty biologics, Q1 growth usually reflects the impact of higher seasonal patient copay assistance program utilization associated with the annual resetting of insurance deductibles at the beginning of the year. We expect a similar effect to weigh on the reported sales in the first quarter of 2024. Now turning to my next slide, we saw strong momentum for Altubio in the fourth quarter. Altubio has become a top choice for switches in the hemophilia A market, now capturing more than 50% of all switches. And this is really driven by the brand's differentiated efficacy profile. Importantly, two of every three switches comes from competitive products, including an estimated 10% from non-factor Hemlibra. In addition to the gains in the number of U.S. patients, we also saw a geographic expansion with our promising launch in Japan late last year. And launched today, we have seen a broad uptake in the U.S., and many HCPs have even stated that their intent is to increase their depth of prescribing, which provides us with another encouraging indicator for the launch progress into 2024. And with that, I'll pass over to Thomas.

Thank you, Brian. Growing 21% year-on-year, our Q4 vaccine sales reached 2 billion euros. driven by the strong uptake of Bay Fortis, an impressive launch I will further elaborate on in my next slide. In flu, Sanofi continues to be the market leader, driven by our differentiated product portfolio, which represents the majority of our total flu sales. In line with Q3 earnings call comments, approximately 30% of our H2 to D23 flu sales were reported in the fourth quarter, generating 4% cells reduction year on year, as we saw lower flu immunization rate this season and an increased level of competition in the US market. Finally, we are very pleased by the Q4 performance of our pediatric franchise, which benefited from a favorable public order pattern in the US, despite Vaxelis cells not being recorded in our net cells. In Q4 2023, Vaxelis has become the US pediatric primary series leader and continues to gain share over the pentavalent vaccine. The next slide is focused on our RSV franchise. Starting with the left, you can see that the launch of B40s in the U.S. set a new record in terms of routine pediatric immunization uptake when compared to similar pediatric vaccine launches such as rotavirus and pneumococcal conjugate vaccines. With an average adoption rate of 38% in only six months after launch, Bay Fortis' performance illustrates the successful implementation of its first broad infant recommendations in the US, in France, and in Spain. We are very encouraged by the strong real-world clinical data generated in Spain, and we now look forward to rolling out Bay Fortis more broadly in 2024. But beyond the infant segment, the respiratory syncytial virus is also a significant burden for toddlers and older adults. We are developing vaccines specifically targeted to these two groups. And I'm glad to report that our vaccine candidates are making good progress. For total, our live attenuated intranasal vaccine candidate received EU prime designation in December, following US fast track designation in 2020. These designations do recognize the potential of our vaccine candidate to address a significant unmet medical need. As communicated at our vaccine day, phase three will start this quarter. For other adults, we initiated last November the phase 1, 2 clinical trial of our mRNA, RSV, and HMP vaccine. As highlighted then, we believe that our combo vaccine has a real potential to be first in class, and that its medical value compared to RSV standalone vaccines will provide a more compelling case to recommending bodies. The value of this combo is already recognized by the US FDA, which granted it the fast track designation in October 2023. If phase 1-2 results are positive, the phase 3 trial is planned to start by the end of this year. Overall, I'm thrilled by the phenomenal progress our RFV team has made in the last six months, building foundations for Sanofi to become the leader in the RFV franchise. Let me now hand over the call to Olivier.

Thank you, Thomas. General medicine sales in the fourth quarter showed a slight decrease of 2.4% to 3 billion euros. Our core assets grew by 6.3%, driven by Plavix, 2GEO, Resuroc, and Praluent, which was partially offset by lower sales of Mozobil due to generic competition, which started in the U.S. in July 2003. Sales of Resuroc in the U.S. continued to grow strongly, driven by increasing patient numbers as well as improved adherence rates. 2GEO Q4 sales delivered double-digit growth, driven by China, This largely offset lower sales in the U.S. due to a lower average net price. Sales of non-core assets decreased, mainly driven by lower launch sales in the U.S., which continued to be affected by a negative channel mix, as well as lower inventory and trade in anticipation of the 2024 list price decrease. For the full year 2023, GenMed sales decreased by 7.1%, due to the exceptional impact from the U.S. lantus decline, along with the VBP impact on lantus sales in China. As mentioned, TZIL continued its gradual uptake in type 1 diabetes. In November, we launched a well-received national screening campaign in the U.S. to increase awareness and encourage screening for at-risk individuals. As a result, screening grew 31%, driven by endocrinologists in 2023, And 168 patients were infused by the end of the year. The number of patients infused grew by 25% in Q4 versus Q3, despite the year-end early-day seasons. The full results of the product studies with newly diagnosed stage 3 type 1 diabetes patients were shared at the ISPAD Congress, and interaction with FDA and EMEA are ongoing. With this, I'm handing over to Julie.

Thank you, Olivier. Firstly, I'd like to start with an update on the separation of the CHE business, which, as previously announced, could happen in Q4 this year at the earliest. We're making solid progress on our journey to full business autonomy and continue to enhance our own internal talent pool with selective hires in key areas. The service agreements are being put in place, and we are establishing our digital infrastructure so that we can hit the ground running on day one. Regarding performance, Q4 marks our 11th consecutive quarter of growth, with sales up 8.5%, driven primarily by Prime. Excluding divestment and acquisitions, Q4 growth was around 5%. The Q9 acquisition, closed at the end of September, drove growth over 50% in our physical and mental wellness category. As you may recall, Q9 products focus on healthy aging in the U.S. I'm very glad that the Q9 is now part of our CHE business. giving us a fast-growing platform with which to compete in the important US VMS market. Last quarter, I introduced you to the 15 priority brands, which represent over 60% of our total net sales and over 85% of our growth in the past three years. In Q4 and in full year 2023, these brands were once again our major growth drivers, which resulted in a 6.3% growth for the full year, with good growth across all categories. Our largest category, digestive wellness, continues to perform strongly with double-digit growth and market share gains. And I would like to give you some more background on one of these brands in this category, Delcolex. Delcolex is the world's number one non-prescriptive laxative. Important to note is that one-third of the world's population suffer from constipation, yet nearly half still don't seek treatment with laxatives. This makes an attractive and substantial market opportunity. Docalex has been growing faster than the market for the past three years, executing on its repeatable model of growth, of which three main drivers are, one, the change in the focus of marketing to consumers, moving from our positioning from purely medical and functional solution to a more emotional communication, breaking down the taboo of constipation, whilst educating on how Docalex works naturally with your body. Second, launching innovative, more consumer-friendly, and gentle formats, such as chewables, that have driven category penetration. Last but not least, working with healthcare professionals, resulting in strong endorsements. With its simple, repeatable model of growth, I'm confident Docalex will continue to help consumers and gain market share. With this, I'm handing it over to Romer Tistar, CFO.

Thank you. Thank you, Julie. As you just heard, sales were up 9.3% in the quarter, driven by double-digit growth in specialty care on vaccines, to the extent on rare diseases where key drivers in the specialty care, while vaccine sales grew more than 20%. Neural medicine sales declined, decelerated, and CHC reported another quarter of growth at 8.5%. Looking at the Q4 P&L on slide 31, gross margin expansion was driven by our improved product mix on the stronger R&D expenses grew 6.6% at CER, mainly reflecting the continued progress of our vaccine pipeline, mainly driven by the mRNA development programs. This quarter, we also start recording a share of the Phase 3 development costs related to the recently announced collaboration with GEN-G on our potential first-in-class X-PAC vaccines. The BY margin decreased 1.7 percentage point to 23.7%, mainly due to a decrease in capital gains related to product disposals when compared to the same quarter last year. EPS was up 8.2% in Q4. Turning now to the full year group P&L on slide 32, we recorded an improvement in gross margin, of which almost 1 percentage point was due to COVID-19 vaccine-related sales and revenues. The product mix also contributed to gross margin expansion, partially offset by lower OBAGEO sales due to generic competition on lower net prices of launches in the US. Operating expenses grew roughly in line with sales, and our business operating margin remained stable at constant exchange rates. EPS for the year grew 5.4% in line with our full year 2023 guidance. On slide 33, Our board is proposing an annual dividend of 3.76 euro, which represents a 5.6% increase over last year. Our progressive dividend policy remains an important part of our capital allocation policy. We have launched some different efficiency initiatives presented in Q3 with the objective to reallocate up to 2 billion euro savings. We will focus on the programs with first or best-in-class potential reallocating resources on growth drivers on strategic therapeutic areas. We will also leverage procurement to generate additional savings. Lastly, we will modernize the commercial delivery by optimizing our country setup, expanding the hub strategy to increase centralization while refocusing R&D on most critical sites on technology platforms. On slide 36, we are providing an outlook for both the full year Full year 2024 sales, we expect Dupixent to reach 13 billion euros on the vaccine franchise to grow mid-single digit, driven by the ongoing launch of the focus. The Obagio LOE will continue to impact, mainly in H1. The planned GEDMED divestments will lower the top line by around 300 million euros. On full year 2024 P&L, we expect the growth margin to decrease slightly due to the absence of COVID-19 sales and revenues. OPEX is expected to grow due to roughly 700 million euros step up in R&D, while HPNA expenses are expected to remain stable. Finally, as announced in Q3, the ETR will increase to 21% due to the implementation of PILART. The dynamics in Q1 will differ from the overall year, mainly due to high base effects in vaccines on GenMed Obagio on top of the Dupixent sales annual step-up in U.S. copay, as already mentioned by Brian. Similarly, on the P&L side, I remind you of a high level of capital gains generated in Q1 2023. So, advancing to my final slide, slide 37, we expect full-year 2024 business EPS to decline in the low single digits at CER, Excluding the impact of the tax rate change, the free year 2024 business EPS would be roughly stable. On foreign exchange, we see a negative currency impact of minus 3.5 to minus 4.5 based on January 2024 average exchange rate. 2024 is a year where we are resetting the company for long-term value creation, and we expect a strong EPS rebound in 2025. Let's open the call now for Q&A.

We will now open the call to your questions. As I can see, many raised hands. Please limit your questions to two each. When you will be notified that you are called, please make sure that your line is open and your microphone is unmuted.

Can we have the first question, please? Yes, the first question comes from . Hi, can you hear me?

Can you hear us? Yes, can you hear me? Yeah. Great, thank you. So maybe my question would be on Bay Fortis, just to get a bit more color on where you are with manufacturing and the ability to meet demand this year and whether you would anticipate perhaps some demand for second season vaccination. And are you able to now show, given your high vaccination rates in some countries, can you show that the emergency room, you know, entry for RSV has gone down. Like, do you have that sort of data to support the use of the vaccine? And that would be the first question. And then, obviously, I would like to extend thanks from everyone to JB for all the conversations over the years. Thank you, JB. Congratulations on the move. And I guess a question for you would be, what words of advice you would pass on better?

Well, thank you, Louise. I think it's very gracious of you to say that, JB. We'll give him a moment or two to think about words of advice. Before that, Tom, I will come to you and break forward. And perhaps if you're Open, you could share some of the data from Galicia as a guide to what it might look like. I know they've been publishing some of that, but the supply for B4 is 20-24 hours.

Great point indeed. So as you've seen from the Q4 results, we are very happy with the strong B4 launch in Q3 and Q4 with more than 400 million euro sales in Q4. I start by that because I think that's showing that the implementation of all infant protection programs is highly feasible and goes very well with the record update in six months. Now, back to your question first on the supply elements. As we discussed previously, clearly Sanofi and AstraZeneca are working very hard to extend the manufacturing network, packaging sites, filling sites. And as always, and that's why we're not going to be very precise today, as always, first you need to qualify the lines and then make them registered by the different regulatory authorities. That's the work that is ongoing right now in order to be able to completely, I would say, de-bottleneck the supply and have the full supply for the season 2025. For the season 2024, we see an increase in supply, and I think we can share here together that our expectation is to reach blockbuster status for B40s in 2024. To be more precise, it's a bit too early. Again, as we ramp up the supply progress, and as we get further with regulatory authorities, we'll come back to you. Your second point is extremely important, and I really thank you for asking that, because at the end of the day, the reason why we are in this industry is to really make sure that we have an impact in terms of clinical efficacy, that actually babies don't go to hospitalization or don't go to VR. I really ask everyone, if you guys have a moment, to look at the Galicia data, which is referenced on our slide there, Have a look there. I know that it's not the end of the season, but the Spain data is very important because unlike the U.S. or France, which have a partial vaccination coverage rate this year, the actual Spain data is in a country where there is about 90% coverage rate. And you will see that they show extremely impressive data where you can see that the hospitalization rate this year in Bilbao is less than eight months of age, i.e. eligible to be fortuitous. the hospitalization rate is extremely low. While for babies that are above one year of age, i.e. susceptible to normal RSV infection because they were not protected, actually it's a high RSV season for them. RSV disease is there. When you receive B4 tooth, it's not there. You don't go to hospitalization. We'll provide you more data at the end of the season, obviously. Second season. Second season, the product is indicated for your first RSV season, except for a very small population of infants that are either specific heart conditions or specific lung conditions. It's usually, depending on the population, about 1% of the newborn population for which B4-2 is indicating for the second season. So it's retargeting for the first season. But interestingly, as you have seen, we have an RSV toddler intranasal vaccine that we are targeting to bring just after B4-2s. for the kids, for the second and third season, to be available and protected.

Thank you, Thomas, and congrats again on an amazing launch. JB, you've had some time to reflect on what advice you would give. You've certainly given me plenty of advice while we've been together, so I'm sure you're not short of something.

No, I'm not short, but first, thank you very much, Louisa. I'm a bit, you know, a lot of emotion for me today. Of course, the financials of the company are better, but what counts is that the pipeline on the science and innovation we have now in our hands, where if I add the arrogance of an advice, it would be really to make the most of it. Really make the most of it and bring them to fruition, develop them all in. That's what we have decided. That's what we should do. And, of course, Paul, G&A, as you know, has to be kept under... No, all right, all right, you know.

So, you know, I took some of the opening comments, but I think we've all worked well as a management team, but JB and I particularly well. And we've pushed each other pretty hard, to be honest, over the time. And it's been necessary to try and have as much discipline as possible whilst making sure we take advantage of opportunities. I think your comment about pipeline... It's extraordinarily well made. We've made sacrifices to be in a position where we have it. Don't squander it, I think is what you're saying, and you're right. I think for those that should be interested, of course, we'd announce the cost-saving program. I think you need to know that aligned with JB's wishes and comments, we go full ahead for the reallocation of that. That doesn't blink. One of the reasons why I'm excited to work with Francois Xavier is because he picks up this well-run machine, but with the same intensity. And I think that's very important for people to understand. We won't squander it, JB. OK, next question.

The next question is from Joe Walton, UBS.

Joe?

Joe, can you hear us?

UBS team?

OK, let's move on, and we'll come back to you.

Can you hear me? Yes. Ah, I'm sorry. I have a question on the consumer side, please. Just looking at any progress on the RxOTC switch trials that you're doing for Tamiflu and Cialis, just thinking as to whether they will, you know, how visible they will be at the point of separation going forward. And secondly, just on the timing of your COPD launch, I know that you've filed and you don't yet know the timeframe of that review. Do you have a priority review voucher? Could we assume that you would use that for such an important launch? Many thanks.

Okay, thanks, Jo. Great to be connected. So, Julie, updates on the switches?

Sure. So, as you know, we have already launched Cialis together in the UK, and since our last call, we have now also received approval for Nowhere in Ireland. For the U.S., we have been conducting certain studies to support our strategy to lift the clinical hold. Those studies are now complete, and we're looking forward to discussing the results with the FDA over the coming quarter and hope to gain alignment with them on the next steps. And on Tamiflu, there is no update at this time.

Yeah, I think, Julie, I mean... You know, it is very much a conversation with the FDA, but I think it's fair to say what was expected of us to be done, we've done. So now we find out whether it will be enough. And that's, you know, we've gone further than others, but we'll find out. So certainly progress on Cialis. I don't know whether we want to go to Brian then next on COPD. There was a question about the voucher and assumptions around launch.

Well, first and foremost, thank you so much for the question. We're really, really excited about this next potential opportunity. As you may recall, back in August, the FDA went in quite a unique move, granted us breakthrough designation at that time, and that was off of the first trial. Since then, as you know, we've read out the second trial. Both trials positive in exacerbations. We filed. We announced that we filed as of December the 27th, and so we are awaiting regulatory feedback or feedback from the agency as we speak. We are anticipating, as we said earlier in the pre-setup that we did, that we will be launching in 2024. Still to be determined whether or not it will be a priority review or not, but we will see. Okay. Thank you.

Anything else? No? Yeah. Okay. Good. Thanks, Chad. Next question.

The next question is from Kim Anderson.

Thank you. Yep. A couple questions on Bay Fortis, if I could. Can you describe the longer term of opportunity and how it parses out by geography, meaning U.S. versus ex-U.S. Is this one of those products where it will be most likely, you know, most sales coming from the U.S. as it often is with different products? And then second question, is your views of potential competition from Merck? They have this product Clostrovumab in phase three data. in the back part of the year, implies a launch in 2025, also monoclonal. Any first impressions of that product based on what you know today?

Thomas, breadth of launch, and some thoughts on that.

So, to the risk of disappointing you, Tim, I might not give you a spreadsheet with a detailed forecast by geography over the coming years. But of course, we are very encouraged by the Q4 launch of this year. As said before, we are doing everything and we're confident supply will not be an issue. And we're looking broadly in terms of geography. You have noticed that we just got the registration before this in China. And we expect to have the registration before this in Japan in the coming few months. And we will progressively start launch in China and in Japan at the end of 2024. So we're really going, as we named it, for an all-infant protection. It will be a progressive rollout. Geographies such as China, as you've seen it with multiple vaccines, do take time. So it will be a progressive slow-down. But the opportunity, if I look at the mid to long term, could be significant. This year, in 2023, the sales are about two-thirds U.S., one-third EU. And that might be a fair representation for the short term. But again, RSV is everywhere, and we want to go for the geography for the city one step at a time. For the competition aspect, there are two players, as you know very well, one which is already licensed. This is about maternal immunization, but I think it's very clear. The fundamental difference between Befortus and maternal vaccines is that Befortus is designed to protect all infants. The maternal vaccines cannot by design. And back to the previous question from Louisa, please have a look at the Galicia results. When there is more than 90% coverage rate in an infant, the impact against hospitalization is impressive from your one. And for the other products, you know, the Merck product is in phase three. We cannot comment on it. We don't have data about the phase three. The only thing I can say that I do believe that the bar has been set in terms of standard of care. And if you look at the profile of the Fortis not only in the efficacy, which is impressive as part of the Galicia data, but also in terms of safety. And we're talking here about the most fragile part of our population here, the newborns. The safety profile of Ofnir Semimav is just pristine. So I think that's a high bar. Now let's look at the phase three results from the Merck product.

Okay, thank you. Thanks, Thomas. Thanks, Tim. Next question.

The next question is from Peter Welford from Jefferies.

Thanks for taking my question. First of all, just Bay Fortis again. I wonder if you could comment at all about the phasing. You made a comment the first quarter you don't have supply, but I think at the same time you are delivering some doses still to the US, if I'm not wrong, that sort of carry over. But should we then anticipate Bay Fortis sales dip and then rise again before the winter season? Or I guess, do you have any plans at all for the southern hemisphere to that also we should be considering during those middle two quarters. And just curiously, the statistic near 2 million that was given, was that the US alone or is that across all the regions so far where Bay Fortis has been launched? And then the second question, which is one for JB, just on the P&L. The increase in other operating income during the quarter, you referenced in the release something to do with litigation-related payment. I wonder how much of that is to do with it, or could you just quantify a bit what it was that led to a significant increase in the OOI in the quarter, perhaps relative to expectations? Thank you.

So maybe some thoughts on Q1, what you can share on phasing. and have the distribution of the almost 2 million doses that we've got out there already.

So on the first question, the RSV disease is, of course, a very seasonal disease. And therefore, you will see that it will be a cadence if you wish. And each country will have their cells in Q3, Q4. South hemisphere countries will have their cells in Q1, Q2. Due to the supply limitation and the fact that we are in the process of ramping up supply, I would expect in 2024 that Q3 and Q4 are the key quarters for B42s. You will see, as it was communicated by the White House, some small sales with the delivery of products in January. And we are looking for a couple of countries, maybe, for south emissary entries. But again, from a significant sales perspective, it's really about Q3 and Q4 for 2024. And back to the point you mentioned, to be very precise, on the approximately 2 million doses of 2023, 2024, so it includes the season, so it includes January, February. It's really total, i.e., U.S. plus Europe.

Okay, JB, the other end.

Yeah, thank you. Well, you realize that the project is very readable on the impact on our P&L, but effectively, more specifically, we had a few here and there, tens of millions of provisions that we had to pass in Q4, scattered topics, nothing in particular. Okay, good. Thank you. Next question.

So the next question is from Richard Walter, JP Morgan.

Hi, thanks for taking my question. Question on IMBRX 101 or the Inhibrix product. I think Inhibrix was highlighting the first readout at the end of 24. So could you talk through the difference in timing with your second half 25 timing and whether we will still see some initial data ahead of maybe the final data on the 25? And then a question on flu, please. Obviously, flu vaccine hesitancy, and we've been hearing about increased competition, I think you referenced it too. So are we back to a situation of sort of over capacity for the flu market outside of high dose and outside of very old adults? So should we expect price pressure going forward? How should we think of the flu seasons going forward? Thanks very much.

Okay, good. Maybe Herman, do you want to comment?

Yeah. So Richard, thank you for the question. The short answer is, in terms of operational outcome, we expect the results in 25. I don't have any further comment on that. And we look forward to seeing those results. There are other elements to this as we bring the molecule in once the deal is closed.

Okay, good. Thomas, getting plenty of air time today. Flew, maybe comments on high dose. and the differentiation piece and the thoughts on what it could mean for pricing in standard dose?

It's an important question, Richard, and I would think the continuation of what we have observed over the past few years, the situation in the market overall is that there is definitely ample supply versus the demand, and that's been accelerated by the decrease in flu VCR over the past couple of years, especially in North America for various reasons. I think one point to have in mind, though, is that it's very linked to the fact that there has been very moderate flu seasons in terms of disease. And as you know very well, VCR gets softer after three or four seasons that are lower, and suddenly VCR comes back after the first big hit. I'm saying that because right now we're in Western Europe with an increase of flu disease, and the U.S. will not be immune to that. So that's for the overall situation. Of course, we had anticipated that. That's why we came earlier with differentiated flu vaccines. We have the two differentiated flu vaccines in our portfolio that have significant data, significant data that are showing impact in terms of improved protection versus infection compared to standard dose, which none of the competitors have. That's what we call protection beyond flu. And that has brought the success of these differentiated flu vaccines, but represents still in H2 2023 more than 60% of our flu cells. So to summarize, I would say overall for standard dose, price pressure is my expectation. You're correct. But we're seeing still ample room for trajectory of differentiated flu vaccines, such as fluvalidose, efuelda, or fluval.

Okay. Thank you. The next question, please.

The next question is from Reverend Barry, Bank of America.

Great, thanks for your questions. So first question is just on Altuvio. I think you had quite a lot of patients on free drug in second and third quarter. Just if you give us an update on how many patients are actually on free drug or bridging programs in Q4, and then how you'd expect that to progress into 2024. And then separately on the, excuse me, on the Inhibrix asset, I recall Inhibrix It indicated that the FDA wanted some data linking functional AT levels going to normal levels with some sort of clinical outcome as a sort of precursor to filing on the basis of functional AT level for accelerated review. And then they still had to agree a clinical outcome. endpoint for the confirmatory trial. So if you could just give us an update on where you think that process is, is that data generated, and what do you think the clinical endpoint that will be needed for approval will be? Thank you. Thank you, Graham. Brian, I'll turn to you.

Yep. So first and foremost, as you all know, we have this 30-day program, which has been quite helpful for us. We've seen that about 90% of the patients that go into that program get converted to commercial, which is really fantastic. And as you have said, it is going to go down. It was at 20% previously for the patients that have gone through the program. It's at 14 now. We anticipate it to go down to between eight and five. And probably it'll stabilize somewhere around the five range in the coming years.

Thank you, Brian. Hooman?

Thanks for the question. Excellent question. Just to call out we don't own the asset yet. So we're beginning to dig into that question. As you will fully appreciate, there are ongoing discussions with the FDA. both in terms of, as you said, bioavailability and bioequivalence with native alpha-antitrypsin and the right endpoint, where we're deep in those discussions. And in fact, even last week, we were in conversations with the Alpha-1 Foundation patient group to consider exactly how we move this forward. Thank you for the question, and watch this space. Thank you.

So the next question is from Simon Baker from Redburn. Simon? Okay, so maybe I move to the next question from David.

Hi, can you hear me, sorry? Yes, we're good. Yeah, hi, thank you, sorry. Can you please provide more color on your view of the potential of CACM5 as a target, given the recent to submit the last sign failure? And second one, again, on Bay Fortress, we've seen this strong uptake in the U.S., but is there Any group or a pair of channels or regions more strongly represented than others that you see? Thank you.

OK, thank you. CCAM5, given the data, maybe some thoughts on the different payload, and is it still a valid target?

Thanks for the question. Excellent question. We continue to believe, based on both our precision medicine computational biology approach and classical illuminated chemistry, that CCAM5 is a highly specific and highly expressed target. Its density profile is well-suited to an ADC approach. If you call out correctly, the previous molecule with a DM4 payload sadly did not provide the high efficacy bar that we put in order to serve patient value. We believe, for a number of basic biological reasons, that the TOPO1 payload on the current molecule both at preclinical level, but also now in clinic, shows significant promise. The short answer is we remain optimistic about CCAM-5 ABCs.

Thank you. And Bay Fortis, in particular. Great.

So I assume, Simon, you're talking about the payoff coverage in the U.S. First of all, a significant part of New Pound's coverage is through the VFC program. So for the public part, it's really covered, as you know, very well. And for the private medical side of things, I didn't check very recently, but a few weeks ago, we were already way more and way above 90% payer coverage in the U.S. just a few months after the storm. So I don't see any problem at all in terms of payer coverage. It doesn't prevent that there might be a few practitioners or a few HCPs that, of course, want to go slowly because we want to make sure that they will be reimbursed and properly covered. But what we've seen in the U.S. over the past few weeks, I think it's now something from the past. I'm very confident for 2024 in the U.S.

Yeah, just to build on someone's question, of course you referenced the U.S., but maybe to share some of the enthusiasm you've been seeing from different countries in Europe,

Well, definitely. I think that you know that it's well known that in Europe, if you look at plenty of previous historical benchmarks, vaccine entries in Europe normally takes a few years in terms of progress, because there is a recommending body, there is an reimbursement decision, and it's usually staged. We are seeing a lot of European countries that are trying to accelerate that process in order to make sure that BF2 goes earlier for protection.

Thank you, Thomas. Next question.

The next question comes from David Riesinger from .

Yes, thank you very much. So I wanted to say thank you and best of luck to you, JB. And I have two questions for Paul and you, please. First, can you provide color on the outlook for spending growth in 2025 and also discuss the potential for operating leverage beyond 2025? Thanks very much.

Thank you, David. Okay, JB.

Yeah, thank you very much. Yes, I can try to do that because the equation is pretty simple and I can lay it out for you. We enjoy a steady growth and this is with us for many years ahead now with no Eloise in front of us and you heard both mentioning this underlying growth that we are enjoying when you neutralize the impact of Obagio. So it's pretty easy to see that we are going to enjoy this growth. We said that we would increase in 24. That's why there is a bit of a crush in 24, because we increased 700 million R&D, while other programs are still running, like tolibritinib, COPD, large multiple phase III programs. Those programs will end in 25, and the oncology to INI reallocation plus our efforts in terms of cost reallocation will fully kick in in 25. So, flat OPEX 25 versus 24 with a clear top-line growth, this will trigger liver age. Now, looking beyond this, beyond 25, If we've done, if we've taken the decision of going all in in developing our pipeline, it's ready to break the ceiling of growth rate on profitability that Sanofi has experimented in past years. So we will see where it goes. But as I said, we are going to enjoy a long run of growth on a clear opportunity to create value and go through the LOE of Dupixent with So 3 to 5, 2 to 5, a 3 to 5 asset with 2 to 5 billion pixels potential. And you've seen in the R&D days that we have more than what it takes already. And you've seen also that we're relentless in adding to our portfolio inorganically, as we've just did in Averix. Thank you, JB. Next question, please.

The next question is from Gary Stevenson from XMV. Gary? Gary, can you hear us?

Maybe we'll move to the next phone.

Okay, so we'll come back to Gary. So let's move to Rajesh Kumar from HSBC. Rajesh? Okay, it seems like... So do we have Gary online? No, so I think I have also a question written in the box. So I'm going to read it out. It's from Florence Espedes from Societe Generale. So the question is for CHC. So there is one question. Could you elaborate on the dynamic in Europe, the decline in Q4, and US? What is the organic growth? And is it still possible to raise price in the US? And then there is another question on 2025. What are the drivers and challenges for 2025? How confident are you with the consensus EPS growth in 2025?

Okay, good. All right. Well, then, Julie, Europe dynamics, U.S., and price flexibility, and then JB will come back to the EPS rebound. Okay.

So, and then there was, yeah, on Q4. So, I think maybe on Q4, I think there's three factors that are important to notice that have impacted our growth versus definitely consensus. It's, first, some further divestments of our non-core brands as part of our plan to simplify our portfolio, and we're coming to the end of that program. We'll still have some impact in 2024. As for the performance in the U.S., it's explained first by a softer market dynamic, but also some underperformance of our brands, and actions to improve performance on these brands is happening as we speak, especially in the allergy and pain categories, while the addition, obviously, of QNOL is strengthening our position to deliver future growth in In the U.S. Europe, we have strong positions. I think our strength overall is that we have more than 60% of our business that is driven by leadership, brands that have leadership positions in their respective markets, with all still a lot of potential to grow, thanks to mainly penetration as well as innovation. That helps. And prides are a room for pricing. room for pricing. Obviously, there's less room for pricing than in the past, but we see that our category overall is a little bit more resilient, especially the OTC category is more resilient than many other consumer categories.

Thank you, Julie. JB, maybe your last comment.

Well, it will be a shortcut. With 25, the strong rebound is coming pretty naturally on a pretty mechanically. So yeah, confidence is high.

Thank you, JB. Wise words. So thank you to everybody. Thanks to those that connected today and for everybody that played a part. We've positioned ourselves well with the blockbusters that we have ahead of us with our launch performance. We have to keep delivering the now and wait for our readouts and celebrate our successes from launches. So thank you very much.

Thank you. You may now disconnect.