Sanofi

Hello everyone, this is Thomas Gusslaten from the Zenufi IR team. Welcome to the Q2 2025 conference call for investors and analysts. As usual, you can find the slides on zenufi.com. Please turn to slide number 3. 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 of different material. We encourage you to read the disclaimer in our slide presentation. In addition, we refer you to our Form 20F on File with the US SEC and our French Universal Registration Document for a description of these risk factors. As usual, we will be making comments on our performance using constant exchange rates and other non-IFRS measures. Numbers used are in millions of euros and for Q2 2025, unless stated otherwise. Please turn to slide number four. First, we have a presentation, then we'll take your questions. We have kept the presentation as short as in the past, as other companies report today, and we aim at keeping the call to maximum one hour, all included. With Q&A, we have Brian, Olivier, Thomas to cover our global businesses, as well as Roy, our general counsel, and Brendan, head of manufacturing and supply. 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 hand you over to Paul.

Well, thank you and hello everyone on the call. We delivered another strong quarter with double digit sales growth. Our strategic focus on innovation continues to drive our top line performance with significant contributions from our new launches, vaccines and duplexes. The performance of our growth drivers made us more confident in our full year business outlook. With that, we've refined our 2025 sales guidance to high single digit percentage sales growth at constant exchange rates. Let me highlight the performance of our new launches on slide six. In Q2, our launches generated close to €1 billion in sales, continuing the momentum we saw in Q1. Altubio extended its strong performance, increasing market share through patient switches. The presence of Bay Fortis in Southern Hemisphere countries was further expanded in Q2. Keep in mind these are smaller markets compared to our key launch countries in the Northern Hemisphere. Qfibia, following the FDA approval at the end of Q1, has recorded initial sales. Uptake has been as expected, and we're pleased to be able to offer an additional treatment option to healthcare professionals and patients living with haemophilia A or B. Together, these nine launches now represent 10% of our total sales, demonstrating our successful execution in bringing innovative medicines and vaccines to patients. DuPixen sales reached €3.8 billion, up 21% in Q2, driven by the continued strong demand and approved indications across geographies. Momentum has been driven by market growth across all indications, where biopenetration remains low, as well as by recent launches, including COPD. In the US, sales reached €2.8 billion, up 22.7%, as Dupixent continues to lead in both new-to-brand prescriptions and total prescriptions across all established indications. The CSU launch is off to a promising start, supported by positive feedback from physicians and patients, and broader payer coverage in the first two months. Outside the US, sales again exceeded the €1 billion mark, driven by volume growth in key markets. Eight years after its initial launch in atopic dermatitis, Dupixim continues to demonstrate strong and sustained growth, with bolus femfigoid being its eighth indication approved in the US. Our ongoing efforts in deepening biologic penetration and expanding indications support our ambition of reaching sales of approximately €22 billion in 2030, in line with previous communications at Q4. Our vaccine business delivered solid growth in Q2, with sales increasing by 10.3%, driven by the Bay Fortis expansion that I just mentioned, and benefiting from the effect of the late 2024-2025 flu season in the Northern Hemisphere. As a reminder, the larger portion of our vaccine business is in the second half of the year, due to the seasonality of flu and RSV in key markets in the Northern Hemisphere. Francois will provide our indication for 2025 Bay Fortis and flu vaccine sales in just a minute. Our vaccine franchise was further strengthened this quarter by several important R&D and regulatory milestones. A key example is the extended duration of protection for up to six months in the EU label of Bay Fortis. And we continue to invest in the future of vaccines, most recently entering an agreement to acquire Vice Bio. Vice Bio would represent a strong strategic fit with our ambition to develop vaccines that can protect against multiple respiratory pathogens. It would also add an innovative technology for combination vaccines, specifically designed for vulnerable groups such as older adults and those at increased risk of severe RSV and HMPV infections. Moving to slide 9, the completion of the Blueprint medicines acquisition just two weeks ago marked a major milestone in our strategic capital redeployment. Blueprint significantly strengthens our position in rare immunology diseases, particularly with Avakit in systemic mastocytosis, along with a promising pipeline. We are very encouraged by the strong performance of Avakit, reaching US$175 million in sales in Q2, While this performance is not included in the Sanofi Q2 financials, it underscores both the high unmet need and advocates' potential as the first approved medicine in advanced and indolent systemic mastocytosis. The addition of Blueprint brings an established presence amongst allergists, dermatologists, and immunologists, enhancing our ability to advance our own pipeline in immunology. With the acquisition now completed, I would like to formally welcome the talented teams of Blueprint to Sanofi. Together we look forward to the potential of Avakit as one of Sanofi's next blockbusters. Here I'd like to highlight our progress in sustainability leadership. We are proud that Time has again ranked Sanofi as the world's 10th most sustainable company across all industries and number one in pharma and biotech. A good example is the eco-design approach we're taking to reduce the environmental footprint of our medicines and vaccines. By 2025, all new medicines and vaccines will incorporate eco-design principles, extending to our 20 top sellers by 2030. We're already seeing impressive results with Dupixent, Trujillo, and Hexacin through optimized manufacturing, packaging, and production. Thank you. I'll now hand over to Francois, our CFO, for more details on the financials.

Thank you, Paul, and hello to everyone. As highlighted earlier, net sales increased by 10.1% at constant exchange rates in Q2. This growth was primarily driven by immunology, by our pharma launches, and by Befortus. Growth margin improved by 1.5 percentage points, largely led by an improved product mix and efficiencies. R&D expenses increased by 17.7% due to the lower base of comparison last year, with the one-time reimbursement from Sobi. Underlying R&D expenses excluding this reimbursement increased by around 7%. We expect a moderate increase of R&D expenses in H2. Business EPS was 1.59€, up 8.3%, reflecting on strong sales performance and improved gross margin. Let me make a few comments beyond Q2 and discuss H1. SG&A is increasing in H1 at around half of the rate of our sales growth, and 70% of the increase in SG&A goes to sales and marketing investments to support growth that we have and future launches that are coming. Business EPS in the first six months of the year is up 12%, which is fully supporting our expected strong EPS rebound for the full year 2025. Moving to the next slide. In Q2, we continued to execute our capital allocation priorities. After having received in April around 11 billion euros from the sale of a controlling stake in Opella, we have been actively redeploying this capital. Indeed, we have announced the acquisition of DrainzBio DR0201, Vigil Neuroscience, Blueprint, and last week, ViceBio. These acquisitions are perfectly aligned with our strategy and meet our three main expectations. First, strategic fit within our core therapeutic areas. Second, scientific relevance offering differentiated medicines and vaccines. And third, financial attractiveness. Three of our four announced acquisitions reflect our interest in early-stage assets. While Blueprint is at the higher end of our targeted range, we are confident in its strategic value, playing both in rare diseases and immunology areas, and we are confident as well in its future financial returns. As previously indicated, early stage opportunities remain our primary interest. However, we always retain the flexibility to slightly expand beyond our pre-established interest when compelling opportunities arise with attractive business cases. Looking ahead, we retain further capacity for business development on M&A while remaining committed to our AA credit rating. In parallel, we are executing our €5 billion share buyback programme in 2025, with over 80% already completed as of today. We remain firmly committed to completing the full programme by the end of this year. Moving to the next slide, I would like to highlight two key components of our ongoing financial performance, namely the Regeneron Development Balance and the AMVUTRA royalties. First, it is important to note that the profit-sharing payments to Regeneron are increasing in direct correlation with DuPixent profit growth. These payments are partially offset by the development balance compensation we receive from Regeneron. As a reminder, Sanofi has historically funded a larger share of DuPixent development costs compared to our partners. Under the agreement, Regeneron reimburses up to 50% of this cumulative cost by deducting them from our profit-sharing payments. Based on current projections, we anticipate this development balance to be fully reimbursed by the end of 2026. This reimbursement arrangement is expected to result in a negative year-on-year BOI impact for Sanofi of approximately €300 million in 2026, followed by a more substantial negative BOI impact of approximately €800 million in 2027. From 2027 onwards, R&D costs incurred will be shared within the same year. Second, new royalty streams are emerging as an increasingly important margin driver. For example, Amvutra was recently approved for a new indication in both the US and EU, with royalty rates up to 30% of sales. As illustrated on the right-hand side of the slide, the expected royalty revenue of this medicine, based on external consensus, will have a significant contribution to our financial outlook, probably until the end of the decade. Let me now give you a little bit more color on some key considerations for the balance of the year. Beportus had a strong momentum in 2024 with high vaccine coverage rates in many markets. We anticipate modest growth for 2025, with Q4 sales likely to be roughly similar to Q3. For flu, while we anticipate gaining market share, total sales are expected to decrease by a mid-teens percentage versus last year due to competitive forces, in particular in the US and in Germany. We anticipate a sales split of about 75% in Q3 and 25% in Q4. For the full year 2025, operating expenses may increase slightly due to the previously announced acquisitions. Forex impact is now estimated to be around minus 4% on sales and around minus 6% on EPS. Other items are similar to what we shared with you last quarter. For the full year 2025, we are now expecting sales growth at a high single-digit percentage at the upper range of our previous guidance. This refinement of our sales guidance is not linked to Blueprint, which is consolidated by the way from mid-July 2025, but it is linked to the underlying performance of our business. We confirm our EPS guidance of a low double-digit percentage growth at constant exchange rates, This is also an implied upgrade of our EPS guidance, as we now absorb a few hundreds of millions of additional costs from the newly acquired businesses, largely in R&D. Finally, we are navigating through a dynamic world with a lot of uncertainties from potential US tariffs and EU exports. However, as all the details are still limited and not fully settled yet, we will update you along the way. I now hand over to Ouman, who will provide an update on the progress of our innovative pipeline. Thank you, Francois.