Sanofi (SNY.US) Q3 profit far exceeds expectations; strong Dupixent demand cannot mask patent cliff concerns.

Sanofi raised its full-year sales and profit guidance for the second consecutive quarter, driven by growing demand for its blockbuster skin and asthma drug Dupixent. The French drugmaker said Friday that at constant exchange rates, sales are expected to grow by a low double-digit percentage this year, up from its previous forecast of 10%; earnings per share excluding certain items are expected to grow by a mid-to-high double-digit percentage. Data showed that Sanofi's third-quarter net sales were 14.444 billion, up 16.2% year-on-year, or 14.3% at constant exchange rates; of which Dupixent sales reached 5.7 billion (approximately US$6.4 billion), surging 34.8% year-on-year, surpassing 5 billion in a single quarter for only the second time in history, and also exceeding analysts' expectations of 5.2 billion, driving profit above expectations. Earnings per share excluding certain items were 3.55, far above analysts' expectations of 2.80. Dupixent's strong performance offset the impact of declining vaccine sales. The vaccine business was weak as flu vaccines and the RSV drug Beyfortus came under pressure in the U.S. market. In addition, Sanofi spent less than expected on drug sales and promotion-related expenses. Heavy reliance on a single drug makes the "post-Dupixent era" a focus However, Dupixent's sales performance also highlights Sanofi's deep reliance on the drug. The drug will begin losing patent protection in the early 2030s, and Sanofi has yet to find a credible alternative source of revenue. Dupixent was jointly developed by Sanofi and Regeneron Pharmaceuticals. New Chief Executive Officer Beln Garijo said in a statement: "The entire organization is focused on managing Sanofi's trajectory in the 'post-Dupixent era' over the next decade. Our top priority is to protect earnings through Dupixent's patent expiry." Garijo has halted development of several drugs she deemed to have poor prospects and plans to build the R&D pipeline in a more rigorous manner. She also replaced R&D head Houman Ashrafian with former Roche executive Paulo Fontoura. Investors await major acquisition as new drugs begin contributing incremental growth Investors are waiting for a major acquisition, likely of a late-stage development asset, to bring it to market in time to offset some of the lost Dupixent sales. Earlier this year, Sanofi and Regeneron said they would expand their collaboration, in a deal that could earn the U.S. drugmaker up to US$8 billion. Chief Financial Officer Franois-Xavier Roger said newly launched products now account for a higher share of sales contributions than ever before. Altuviiio, a new drug for hemophilia A, and Rezurock, a treatment for chronic graft-versus-host disease, both beat sales expectations last quarter. Roger also said Sanofi is looking for larger deals than in the past, with the main risk in the targets being commercialization. "The amounts involved are larger than what we have sought in the past," he said on a conference call with reporters. Roger said Sanofi expects to update its strategic priorities before the end of the year. Concerns about growth prospects have weighed on Sanofi's shares, which are down about 8% year-to-date. This follows disappointing results from several clinical trials, including an experimental atopic dermatitis drug called amlitelimab and a drug for a rare autoimmune disease.