Sanofi

Company Update:
Sanofi’s Q3 26 sales and business operating income (BOI) were c.8% and c.26%, respectively, ahead of consensus. Sales were c.10% ahead of AV’s estimates.

Sales came in at €14.4bn, jumping c.14% at constant exchange rates (CER) and c.16% reported, due to FX tailwinds.

BOI and ‘Business’ EPS galloped c.20% each to €5.4bn and €3.55/share, respectively. The key immunology drug, Dupixent (c.39% of sales; +35%), remained the largest growth driver. Besides sales beat, lower-than-expected R&D expenses also contributed to the profitability beat. While lower R&D expenses do not smell well at the first instance, for Sanofi it was because of the termination of some pipeline projects in Vaccines – a part of the management’s efforts towards portfolio streamlining.

For 9M 26, sales, BOI and ‘Business’ EPS rose by c.15%, c.21% and c.21%, respectively.

Consequently, the management again upgraded its 2026 outlook, as sales are now anticipated to grow by a low-teens percentage (vs. around 10% previously), and business EPS (before share buybacks) by a mid-teens percentage (vs. slightly higher rate than that of sales previously).

Overall, we may revise our estimates somewhat higher, and we maintain our BUY recommendation. However, the management needs to act with urgency to chase external innovation, without essentially overpaying for it, in order to provide answers to Sanofi’s trajectory after Dupixent loses patents in the early-2030s. Until that happens, a re-rating may not kickstart/sustain.

Expert Opinion:
These are excellent results. Concerns regarding the replacement of Dupixent are unchanged but we believe this is more than priced in the current share price.  Sanofi is the cheapest stock within our Pharma coverage with a PE27 of 10.2x and a dividend yield of 5.5% for 26 and 5.8% for 27. This is a 50% discount to the sector average. Despite the concerns on Dupixent replacement, we would buy the stock.