Sanofi

Welcome to the Q1 2024 conference call. You can find the slides to this call on the Sanofi.com investors page. I'd like to remind you that the information presented in this call contains forward-looking statements, which are subject to substantial risks and uncertainties and may cause actual results to differ materially. I encourage you to read the disclaimer in our presentation. In addition, I refer you to our Form 20F on file with the SEC. and our document d'enregistrement universel for a description of these risk factors. I'm pleased to welcome our new CFO, Francois, to the presentation, and Francois will be followed by Hooman, our head of R&D on the pipeline. For Q&A, we have Brian, Olivier, Thomas, and Julie to cover the global business units, and Roy, our GC. For the Q&A, you have two options to participate. In Zoom, raise your hand or submit your question using Q&A. This will be explained later on a slide. Let's turn to the business. We are next to the start in 2024 with 7% sales growth in line with our fast-moving portfolio transformation. The growth was driven by launches, including new and existing indications for Dupixen, and this performance fully underpins our 2024 UPS guidance at CER. Dupixen continued to increase penetration in all approved indications, and we saw performance diversify further across all geographies, plus, of course, the usual U.S. reset of insurance plans. Farmer launches were led by Nix Weizheim and Altubia, with more details to come a little later. Launches also boosted the performance in vaccines, which they thought was making further progress, including in countries in the southern hemispheres. In consumer health, growth of 9% reflected the consolidation of the QNR acquisition, as well, of course, as organic growth. We're progressing the plan to separate this business, as discussed in the past. Overall, we're pleased with the ongoing portfolio transformation, which is becoming more visible. also in our cost lines with more resources going into the pipeline and less into SG&A. This is exactly the development we set out last year when we announced the next chapter of our strategy. Before moving on, I'd like to extend my thanks to all the Sanofi colleagues for their dedicated work and their commitment to patients, chasing the miracles of science to improve people's lives. Dupixen continues to perform a strong demand-driven growth. Fearing sales of more than 2.8 billion euros in the first quarter, sales of this unique medicine increased by 25% globally, fueled by the accelerated growth from indication expansions in the ex-US markets, where sales grew as much as 51%. With now more than 850,000 patients worldwide, the strong contribution from countries like Japan, China, and Germany highlights the tremendous growth potential for Duprixin across all indications and geographies. In the U.S., sales exceeded €2 billion in the quarter, up 17%. And as we can see every year, U.S. growth reflects the impact from the customary dynamics of the annual reset of insurance plans. Almost eight years into its initial U.S. launch, they topped with dermatitis. This effect underscores the large size and rapid growth that depicts them with its leadership positions in new prescriptions across all five approved indications. As we look ahead to Q2, we remain very excited about the outlook for Dupixent's outstanding commercial success across all geographies, supported by a regulatory progress towards launching multiple new indications in major markets. And with our strong Q1 performance, we're extremely confident in delivering our previously communicated objective of around €13 billion in sales for the full year. As one of the leading medicines in immunology, respiratory is a core disease area for Dupixent, well ahead of any other competing biologic medicine. Dupixent has established and maintained a distinct leadership position in new prescriptions amongst pulmonologists across asthma and chronic rhinosinusitis with nasal polyps in the US. We believe in the growing importance of pulmonologists in adopting biologics to treat respiratory diseases. We're also confident that their growing familiarity with dupixin in type 2 inflammation will play a key role in the adoption of dupixin as the potentially first advanced therapy in COPD in more than a decade, if approved. We also continue to build a growing body of scientific evidence around dupixin in addressing airway inflammation. In the VESTIGE study, which was recently presented at the Quadruple AI Congress, dupixin demonstrated reduced airway inflammation and mucus plugging in functional respiratory imaging in S. We have an ambition to potentially introduce a new standard of care with dupixin in COPD for patients with type 2 inflammation. As you may recall, significant regulatory progress has been achieved with dupixin's potential in COPD across key markets. We are preparing for a potential launch in the U.S. as early as late June, if approved by the FDA, and plan for additional potential approvals in Europe and China by the end of the year. We're excited about the outlook for Dupixent's potential to become a breakthrough medicine for COPD, a leading cause of death worldwide. Dupixent is well positioned to potentially address the high event need in COPD with a strong clinical profile across two large phase three studies and more than seven years of real-world evidence data on safety across five approved indications. Dupixen addresses unmet medical need of a well-defined population of roughly 300,000 patients in the U.S. alone whose disease is driven by type 2 inflammation and uncontrolled despite standard of care therapies. COPD is a historically difficult disease area and a heterogeneous disease with multiple development failures in the last decade. Over time, many patients become resigned to their medical condition. With an experienced team that has a track record of development and commercial excellence in respiratory disease, We plan a targeted approach to drive the awareness and identification of COPD with type 2 inflammation among patients and pulmonologists. As we have seen with our launches across other major indications, the adoption of Dupixen as the first and only biologic in the COPD indication will require some time initially, and the inflection of cells growth is most likely to come in 2025 after the U.S. launch. We are confident that, if approved, COPD will become the next major growth pillar for Dupixent. And together with our second potential blockbuster developed for COPD, it's Ipecumab, we continue to expect peak sales of more than €5 billion for both products combined. Let's now move to the new launches, as Q1 further demonstrates our ability to execute successful launches and bring new medicines to patients. This quarter, all our new launches, including Wake Forest, made up close to a billion in sales, or 9% of our total biopharma business. Bayfordus continued its global rollout in the quarter with a launch in the Southern Hemisphere countries of all infant protection programs in some Australian states and Chile. As RSV is seasonal, Bayfordus will have a sales pattern like what many of you know from flu vaccines. And as Pfizer grew strongly from new patients, as well as patients converting from older medicines in the Pompey franchise, we're pleased with the overall growth and franchise sustainability. Ulterio is soon annualizing its launch. It has seen continued strong uptake, with most of the growth coming from other factor medicines than a lock tape, and even some uptake from patients not on factor medicines. It showed us how innovation can help to revitalize haemophilia and grow syncope's total share. Other launch medicines also did well in growth in absolute terms, including sarcleza approved in multiple myeloma. Taking a closer look at Bayfordus, What we're really focused on and proud of is the impact on improving public health and benefit to thousands of families. We've now real-world results from last year's implementation of broad immunization programs in the U.S., France, and Spain with Bayforders. The results are strikingly impressive. You can see the dramatic reduction of hospitalizations by the numbers on this slide. These real-world results are either consistent or even better than those from the clinical trials. The U.S. CDC recently published their effectiveness data for Bay Fortis at 90%. And in Europe, we've seen similar results for hospitalization reduction across France and Spain. Overall, following the first season in the three launch countries where Bay Fortis is used for all-infront protection, this means that nearly 40,000 hospitalizations have already been avoided for families. This is the impact that matters most. This also provides a perspective for Bay Fortis Global Health Benefit as we plan to launch in additional countries in H2. Together with AZ, we're working with the regulatory authorities and extending the manufacturing network to make Bayfordus more available for the upcoming season, as we're glad to see such enthusiastic demand. We're confident that where we will meet anticipated customer demand and look forward to extending all infant protection programs in the upcoming Northern Hemisphere RSV season. On my final slide, I wanted to highlight some progress in our ESG ambition exemplified by the work of our global health unit. Since its launch in 2021, the essential medicines from our GHU portfolio have supported close to 550,000 patients suffering from non-cumulical diseases in 31 countries with the objective to reach 2 million NCD patients by 2030. An additional differentiator is the meaningful work done by our teams to help building sustainable healthcare systems through partnerships with the ministries of health, trains of healthcare professionals, and our impact investment fund focused on supporting exclusive startups and businesses. I now have the great pleasure to hand over to Francois, our new CFO.

Thank you, Paul. I'm pleased to have joined the team here at Sanofi earlier in April, and I'm looking forward to interacting with all of you in the future. Sales were up 7% in the quarter. As Paul mentioned, growth was driven by our ongoing portfolio transformation towards biopharma medicines, with Dupixent sales up by 25%, and the new launches, including Befortis, up by 150%. Excluding the impact of Obagio loss of exclusivity and COVID-19, growth was 12%. This analysis does not aim at removing all headwinds, but simply illustrates what the new Sanofi may look like in the future. Our gross margin at 73.5% was down by 2.6 percentage points, mainly due to Obagio and due to the absence of COVID-19 vaccine sales this year. In addition, the quarter was impacted by a one-off inventory adjustment to reflect declining standard costs. R&D expenses increased by 12% at constant exchange rates, in line with our ambition to invest more in our pipeline. Resources are being deployed to advance less-stage immunology and neurology projects. SG&A increased by less than 3% below half of sales growth, illustrating our strategic reallocation of resources. Our business operating margin decreased to 27.2%, mainly due to the gross margin decline, the step-up in R&D expenses, and an increase in the profit sharing with Regeneron. As expected, EPS was down 7.4% in Q1, also partly impacted by a higher tax rate. Just one word on cash flow. It will be impacted in 2024 by our lower business operating income and by the phasing of rebate payments in the U.S. related to prior year sales. Let me now give you some additional information on our coming quarter. In Q2 2024, we expect Dupixent and the new pharma launches to grow further while we continue to see the impact of the Obagio loss of exclusivity in Europe. Of note, we don't expect any Bfortus sales in Q2 due to early delivery in Q1 in some southern hemisphere countries, while shipment in northern hemisphere countries are not expected before the second half of 2024. For the full year 2024 sales outlook, we expect Dupixen to reach around 13 billion euros and the vaccine franchise to grow mid-single digit, with Bfortus anticipated to reach blockbuster status. The Obagio loss of exclusivity will continue to impact the top line, mainly in H1. Finally, planned divestments will lower ourselves by around €300 million over the year. For the full-year P&L, we expect our gross margin to decrease slightly due to Obagio and the absence of COVID-19 sales and revenues this year. OPEX is expected to grow, with about €700 million step-up in R&D, while SG&E expenses are expected to remain stable. Finally, our tax rate will increase to around 21% due to the implementation of the OECD Pillar 2. We confirm our full-year 2024 expectation of a low single-digit decline of our business EPS at constant exchange rates. Excluding the impact of the higher tax rate, the full year 2024 business EPS is expected to be roughly stable. On foreign exchange, we see a negative currency impact to EPS of around 6% based on April 2024 average exchange rates. As a reminder, we continue to anticipate strong business EPS rebounds in 2025, And as we have mentioned earlier, in 2024, we are transforming the company for long-term value creation. With that, I now hand over to Oumam.

Thank you, François. We've seen substantial positive pipeline progress already in Q1, where we continue to deliver a consistent news flow of clinically important data in scientific publications and congresses. For ExcellaMaps, encouraging phase 2 data in most risk ratios, It was recently published in the New England Journal, but updated with data from the 48-week open-label extension, which were presented last week at the AAN conference, supporting our commitment to MS patients. In atopic dermatitis, we have the potential to further establish our leadership with amlatilumab, where we presented the Phase IIb data at AAD. where a largely sustained effect of amlitalimab on atopic dermatitis symptoms was demonstrated after 52 weeks of dosing. Later, I will further talk about the data presented from these two pipeline projects. On the regulatory side, we've reached an impressive pace of approval with two of them for Dupixent and multiple indications within different countries. FDA discussions regarding Dupixent's SDLA in COPD are ongoing. under the priority review process, as Paul has mentioned. As usual, it's always possible that the FDA could require additional information to complete the priority review of our submission to finalized labeling. As a reminder, there is currently no biologic treatment approved in COPD, underlining our commitment to make Dupixent available to as many patients as possible as quickly as possible, and supporting the ambitions for Dupixent that Paul has already outlined. Amlotelemab, our non-depleting OX40 ligand monoclonal antibody, has shown potential best-in-class efficacy with a durable clinical response rate after 52 weeks from the stream AD phase 2B study. The responder percentages reflected in the IGA 0-1 and the EC75 scores, which are both surrogate endpoints for AD, were maintained and still significant, in fact, following the withdrawal from the drug at week 24. As you can see from the bar chart, that's week 52, results on and off medicine are similar, which shows the persistence of response suggesting the potential normalization of inflammatory T-cell activity and potential effect on type 2 and non-type 2 biomarkers. These important data support the viability of the 12-week extended dosing interval, which will improve the patient's treatment paradigm and potentially expand Sanofi's presence in AD and beyond has been interpreted by some to hint at potential disease-modifying activity. The opportunity of treating patients by treating this core central pathway with consistently good safety in both parts of the study signals that amlitalimab has the potential to reach much beyond AD and become the pipeline in a prompt. The cleanest AE profile in this class may reflect the importance of non-depleting mechanisms differentiating amlitalimab. The enrollment of all four studies phase 3 studies, is on track for the first regulatory submission expected in 2027. Now switching to Frexelamab, our CD40 ligand antibody, high-efficacy, non-lymphocyte-deflating potential MS treatment, also has a pipeline and a product potential with multiple indications under development. Most importantly, in relapsing remitting MS, the 48-week data from the Phase II open-label extension study has shown a sustained reduction of disease activity monitored by mean number of gadolinium-positive type 1 lesions occurring, appearing at each MRI. As you can see on the bar charts, patients who have switched from the placebo arms to the Frexalamab arms, both IV and subcut, have shown an impressive decrease of disease. It's important to mention that nearly every patient on Frexelomab IV had no new lesions presented at a near-to-zero annualized relapse rate at 48 weeks. Eighty-seven percent of participants completed the extension, and Frexelomab once again proved to be well-tolerated with an acceptable safety profile. Phase III studies on relapsing remitting MS and NR-SPMS have been initiated, and the first regulatory submission is expected in 2027. Prexelomab has the potential to provide additional benefits to patients and extend Sanofi's presence in multiple sclerosis. Switching gear now, turning to Rilzabrutinib, our oral BTKI, one of our 12 priority medicines. As you can see, we're developing this medicine in multiple indications, such as in ITP, in rare hematological diseases, but also in our main key therapeutic area, immunology, including asthma and chronic spontaneous urticaria. We were pleased to announce earlier in the week a positive readout of the LUNA3, phase three study in ITP, a rare autoimmune bleeding disorder characterized by abnormally low levels of platelets, persistent and disabling fatigue, and increased hemorrhage. These results confirmed the positive phase two data with additional details to be presented at forthcoming medical meetings and a regulatory submission later this year. Alongside this positive news, we also received more Phase II data on asthma, this time at the high dose, confirming the previous positive trends. We are very excited by the opportunity to present the data at the ATS conference next month. We can't wait to see it. Positive data in the third indication CSU were presenting in February at the AAIAI annual meeting with phase 3 starting later this year. These data sets are important stepping stones of our R&D transformation journey, emphasizing our commitment to rare diseases and to unlocking the important potential for BTK inhibitors, and also highlighting the value that our experience in immunology can bring to the development of a medicine that started its life in another company. Having recently reshaped our overall oncology strategy, we want to cover this in a little greater detail. Our strategy is one of selectively investing areas where we believe we have a chance to make a meaningful difference based on our expertise in immunology. Our aim is to focus on critical, unmet medical needs for patients, benefiting from immune mechanisms and related mechanisms of action, such as our NK cell engagers and using our technologies and platforms with the ABCs or the nanobots. I would like to end this slide on the positive news for the cancer community, where we are pleased by the recent positive U.S. development supporting the use of minimal residual disease, or MRD, as clinical endpoint in myeloma. Recognized by the FDA, this can potentially bring new effective treatments to patients earlier. We currently have Sarkleta RCD38 with a best-in-class potential and approvals in more than 50 countries as an option in the relapsed myeloma setting. Last December, the readout of the ICSIA study marked the fifth positive Phase III study, and second positive in transplant-eligible newly diagnosed multiple myeloma patients, where 77% of patients reached MRD negativity versus 67% in the comparator arm. The Sarclisa group had a 60% higher chance of achieving this data. Additionally, we had the MROS Phase III study, which was positive, and we look forward to sharing the latter in an upcoming medical congress To end my part of the presentation on a positive note, showing our ongoing commitment to deliver clinical data in the service of patients, I would like to highlight the upcoming Phase 3 and Phase 2 readouts, as well as regulatory submissions occurring in 24 and 25. News flow will increase and become busier as we move into 2025, supported by the step-up in R&D investments that Francois just mentioned. I'm enthusiastic and impatient at the same time as the news flow keeps on getting richer and better. Thanks to the clinical studies, we're constantly starting. With this, I hand back to Paul.