Sanofi: chief must prove he can win R&D game

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Sanofi chief executive Paul Hudson began in sales jobs at groups including GSK. He now needs to draw heavily on those skills to convince investors that Sanofi has what it takes to develop a new breed of blockbuster drugs solo.

His job will be made harder by the fact that some investors have their backs up. Shares in the French pharma company are struggling to recover from their steep fall in October. Hudson spooked the market when he scrapped a 2025 margin target and announced he would spend more on research and development. He has since issued something of a mea culpa, admitting ahead of Sanofi’s investor day on Thursday that he should have better explained his plans.

Sanofi’s struggles go well beyond communication glitches. Investors remain nervy over its dependence on blockbuster asthma and eczema drug Dupixent. Sales of Dupixent are projected to top €20bn by 2030, up from €8.2bn last year. That would mean it would account for a third of total revenues by the end of the decade. Exclusivity rights run out in the early 2030s.

Investor doubts have weighed on Sanofi’s valuation. It trades at a forward price earnings multiple of 11 times. Roche and AstraZeneca trade on 12.4 and 16.56 times respectively. 

Sanofi insists it has 12 possible blockbusters in the pipeline, with a collective peak sales potential of €33bn to €60bn. If all were approved, that would easily replace Dupixient sales, although analysts at present only forecast peak sales of €8bn from the drugs identified, says Citigroup. Among those with the biggest potential are eczema treatment amlitelimab and multiple sclerosis drug frexalimab. 

The company spent €6.7bn on R&D last year. It plans to spend an additional €700mn next year. That is not eye-popping. Sanofi’s R&D spend last year was 15.6 per cent of revenues. At sector darling AstraZeneca, it was 22 per cent. 

Since taking the helm in 2019, Hudson has described his strategy to reboot Sanofi as “play to win”. Investors will require that his commitment to R&D actually leads to wins.