Sanofi

Welcome to the Q3 2024 Conference Call for Investors and Analysts. As usual, you can find the slides on tenube.com. Please turn to slide number three. Here we have the usual forward-looking statements. We would like to remind you that information presented in this call contains forward-looking statements which are subject to substantial risk and uncertainties that may cause active results to differ materially. We encourage you to read the disclaimer in our slide presentation. In addition, we refer you to our phone 20F on file with the US SEC and our friend's registration document for a description of these risk factors. As usual, we'll be making comments on our performance using constant exchange rates and other non-IFRS measures. Numbers used are in million euros and for Q3 2024, unless stated otherwise. Please turn to slide number four. First, we have a presentation, then we'll take your questions. As last time, we kept the presentation on the shorter side to allow for more questions, and we ended up keeping the call to about one hour. Q&A, we have Brian, Olivier, Thomas, and Julie to cover the global business, and Roy, our general counsel. For the Q&A, you have two options in Zoom. Raise your hand or submit your question using the Q&A function. With this, I'll now hand you over to Paul.

Thank you, Thomas. Nicely done. Thank you and hello everyone on the call. We reaffirm strong sales performance this year. The total of Q3 sales of 13.4 billion euro, a 16% increase in CR and estimated 11% excluding the impact of phasing. This robust double-digit growth illustrates the underlying strength of our portfolio. Tupixen continues to be driven by global volume growth across all indications and geographies, now reaching close to 3.5 billion euro in the quarter. Our vaccines business grew 26%. This increase benefited from an element of phasing in flu and Bayforda sales. However, the global rollout of Bayforda has provided a strong contribution as well. Our pharma launches have been performing very well with a 67% increase in sales. This is a result of strong performance across all eight medicines that we have recently launched and a clear illustration of the value those medicines bring to healthcare systems and patients. Appella's 8% growth was predominantly driven by the strategic acquisition of QNOL in the U.S., which has bolstered our presence in the consumer healthcare market. That is why, with confidence that we have once again raised our business EPS guidance for 2024 on Monday, this reflects our continued momentum and our commitment to delivering value to our stakeholders. On slide six, Depixen delivered another quarter of strong growth. It also reached the major milestone of improving the lives of more than 1 million patients currently on treatment around the world across approved indications, age groups, and geographies. Dupixent continues to hold the number one new to brand prescription market share across all its approved indications in the U.S. Outside the U.S., Dupixent is now approaching blockbuster status in a single quarter. This remarkable performance reinforces our confidence in our sales ambition of around 13 billion euros for the full year 2024. The recent consecutive approvals of the COPD indication in the U.S. and China on the heels of the EU approval four months ago speaks volumes of our ability to move decisively, execute, and meet the need for more treatment options. The expansion of Dupixent and CAPD will give hundreds of thousands of additional patients who are living with this devastating disease the chance to potentially improve breathing and a life with fewer exacerbations. Additional positive phase 3 redoubts in bullous phantagoid and chronic spontaneous urticaria will also, if approved, create additional near-term growth opportunities. Turning to slide seven, we will continue to execute on the three commercial levers that will propel Dupixent's volume demand and its growth longer term. First, the steady increase in the penetration of advanced therapies within the biologic eligible patient population. New market entrants of other biologics are expected to help drive market growth through improved awareness and adoption. Second, the geographic expansion with around 30 potential country launches across existing indications by 2026. Third, the expansion into new indications with high unmet need for large biologic eligible patient populations like COPD and CSU. Specifically in the U.S. market, we continue to strengthen patient access to support new indication expansion, including COPD and other new indications, and expand access across both commercial and government channels. We remain excited by the opportunities ahead of us and in the strong growth outlook for Dupixent. for which we continue to target a low double-digit sales increase at CAGA between 2023 and 2030 at constant exchange rate. Now, on slide 8, our strong growth in the quarter was accelerated by the outstanding performance of our newly launched medicines. With almost €3 billion in the first nine months, our launches have become significant contributors to Sanofi's accelerated top-line growth profile. Bay Fortis leads the way with sales of €645 million in Q3, showing an exceptional market uptake in its second season and underscoring the critical role it plays in all infant protection. With sales of €172 million, Altuveo further established its position as the new high efficacy standard of care in haemophilia treatment, demonstrated by patient switches from other factor and non-factor medicines. Other innovative medicines continue to perform well and are contributing to a total of 1.4 billion euro in sales for this quarter alone. These results show the power of our launch engine and how, with the right focus and sharp execution, we are increasingly delivering transformative treatments to patients around the world. Moving to slide nine, our leading respiratory vaccines have established new standards of efficacy. Beginning with Bay Fortis on the left side, we continue to build an outstanding body of evidence to further strengthen our position as market leader in all infant protection. A recent study demonstrates that Bay Fortis continues to protect infants against RSV hospitalization over a full six-month duration without waning efficacy. Furthermore, in the U.S., real-world evidence showed an 87% efficacy in reduction of hospitalization rates This reinforces the real-world effectiveness that Bay Fortis has consistently shown with more than an 80% hospitalization reduction in over 75,000 infants. Importantly, we've been able to secure supply to extend protection against RSV to millions of infants in about 20 countries where Bay Fortis is currently launched. To summarize, we're on our way to making Bay Fortis our next blockbuster thanks to its unique ability to provide all infant protection. Transitioning to influenza, we are glad to see that regulators have increased their focus on the quality of studies supporting the efficacy of flu vaccines by requiring large-scale randomized controlled trials against standard dose. As a reminder, this is what we've done for flu zone high dose. The only vaccine that has demonstrated statistically superiority to standard dose with a 24% superior efficacy in a randomized controlled trial with 32,000 participants. In contrast, the adjuvanted and mRNA flu vaccines of other companies still must pass that high bar with their ongoing studies. On my last slide, let me conclude with how we advance our ESG commitments in and beyond the workplace. As a responsible employer across the world, we're committed to ensuring a living wage for all our employees. This is why we've adopted the recognized standard of the Fair Wage Network, which guarantees wages above local benchmarks. And going beyond our workforce, our commitment extends to our key supply chain partners. By taking direct responsibility for our employees and partners, we are improving employee well-being and strengthening local economies. As always, when it comes to our commitment to society and our industry leadership, we hope that others will follow and help set new standards. That, and I hand over to Francois, our CFO.

Thank you, Paul. Good morning and good afternoon to all. Before I start, let me clarify that financials for this quarter include opera operations. Now let me discuss our strong sales momentum. Our top line growth was strong at 15.7% in Q3 at constant exchange rates, with sales reaching 13.4 billion euros. This performance was partially supported by the early shipments in the flu season and before too strong momentum. Excluding this phasing benefit, we still achieved an underlying double-digit growth estimated to be around 11%, similar to what we achieved in Q2. Our solid growth in Q3 was broad-based across businesses and geographies. The strategic decisions we have made across our business units are delivering attractive results and give us confidence to continue delivering strong performance in the coming quarters. Now moving to the group P&L. Gross margin improved by a full percentage point in the quarter, driven by a positive mixed effect, partly offset by currency impact, and the obligio loss of exclusivity. Higher R&D expenses are aligned with our committed increase for 2024, reflecting our continued investment in innovation. SG&A grew substantially less than sales, underscoring our focus on operational efficiencies. Business operating income saw a significant increase of 19.9% in the quarter, primarily driven by higher gross profit and operating leverage. Our business EPS increased by 17.6% in Q3. Previewing our business outlook for Q4, we expect continued solid year-on-year growth, although at a lower level than in Q3. Do remember that there is one less invoicing than in the U.S. in Q4 versus Q3. Befortus Q4 sales are projected to be in line with their Q3 level, supported by the approved additional industrial capacity. We expect Befortus sales to reach around 1.5 billion euros in 2024, a remarkable performance in its first full year of marketing. For Q4, please remember that we had around 400 million euros of one-off COVID revenues in Q4 2023, as well as the associated margins. We confirm our full-year guidance to increase R&D costs by around 700 million euros this year, and we will also marginally increase our investments in sales and marketing to support sales growth with a specific focus on digital investments. For the full year 2024, we expect flu sales to decline by a low single-digit percentage due to a soft vaccination rate while we continue to gain market share. The total vaccine franchise is now expected to grow by a high single-digit percentage. Our insulin franchise, more specifically Luntus, is very resilient and sales are stabilizing. We expect divestments to reduce sales by about 300 million euros in 2024, and we anticipate capital gains from divestments to be around 400 million euros in biopharma only. Growth margin is expected to decline slightly in Q4 and for the full year due to one-offs last year, such as COVID revenues and Obagio sales. As disclosed earlier this week, we upgraded our guidance with 2024 business EPS, expected now to grow by at least a low single-digit percentage at constant exchange rates from previously around flat. This reflects a strong business performance over the last two quarters, and this reflects our confidence in our outlook. Turning now to Opela, this transaction marks an important strategic step for Sanofi to become a pure-play and science-focused biopharma leader. On Monday, we announced that we entered exclusive negotiation with CDNR to sell a controlling stake of Opela. Sanofi will keep a significant stake in the company to support Opela in their independence journey and to retain part of their future value creation. We eventually selected the private option, namely partnering with a world-class PE firm, as it creates the highest value for our shareholders. The valuation at 16 billion euros easy is very attractive. The 14 times 2024 estimated EBITDA is equivalent to the trading multiples of industry peers. We expect the transaction to close in the second quarter of 2025 at the earliest. The expected proceeds from these sales will be redeployed in accordance with our capital allocation policy, ensuring we continue to invest in growth assets and deliver value to our shareholders. Regarding share repurchases, we are fully aware of shareholders' expectations, and we will provide more specific details as we get closer to the receipt of the cash proceeds. On the other hand, we always look at external growth opportunities to complement our attractive pipeline. We are more thinking of bolt-on acquisitions, and we are not working on any large acquisitions, as evidenced by our willingness to maintain our current strong credit rating, basically AA and A1, or almost AA. We will also consider how to inform investors and analysts in the future about the business performance of Opela, as this will be a significant investment on our balance sheet. That concludes my presentation. I now hand over to Oman for further positive news on the pipeline. Thanks, Francois.