Sanofi (SNY) Stock Continues to Gain on Key Drug Approvals
After declining in 2016, share price of French pharma giant Sanofi SNY has picked up in 2017.
This Zacks Rank #2 (Buy) stock has risen 21.1% this year so far, outperforming the return of the Zacks classified Large-Cap Pharma industry of 8.8%. Let us analyze the reasons for the share price increase
Back-to-Back Product Approvals: Many important pipeline drugs were approved/launched this year, which can boost sales in the next few years. Dupixent (dupilumab) was approved in March this year for the treatment of atopic dermatitis in the U.S. and is now available to adult patients in the U.S. The drug is under review in the EU for the same indication. We are optimistic on sales prospects of Dupixent, which could prove to be an important growth driver for the company. Dupixent is also being evaluated for the treatment of asthma and nasal polyposis in phase III studies and is being positioned by the company as a “pipeline in a product”.
Meanwhile, rheumatoid arthritis (RA) drug Kevzara was also approved in the U.S. in May this year and in Canada in February. Soliqua, a once-daily titratable fixed-ratio combination of Lantus and Lyxumia, was launched in the U.S. in Jan 2017 and is expected to be launched in Europe later this year.
Also, last week, Sanofi announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) has given a positive opinion, recommending marketing approval to Sanofi’s biosimilar version of Eli Lilly & Company’s LLY Humalog (insulin lispro).
Strong Q1 Results: Sanofi also began the year on a strong note as its first-quarter 2017 sales and profits increased year over year backed by strong Specialty Care (Genzyme) and Vaccines sales. While sales slightly missed estimates, earnings beat the same.
Four of Sanofi’s five key business units recorded growth while headwinds existed in the form of a loss of contribution from the Animal Health segment and a higher tax rate. The company’s multiple sclerosis (MS) franchise is doing well, generating annual sales of €2 billion. Vaccines benefited from strong pediatric combination sales.
Estimates Rise: The strong quarterly results and the back-to-back product approvals led to an uptick in estimates. Sanofi’s earnings estimates for 2017 went up 3.2% while that for 2018 moved up 1.2% in the past seven days. Sanofi’s earnings performance has also been pretty impressive, with the company reporting positive surprises consistently. The average earnings beat over the last four quarters is 5.10%.
Strong Fundamentals: Sanofi possesses a diversified product portfolio. It has a presence in several therapeutic areas including cardiovascular diseases, diabetes, oncology, and central nervous system disorders, among others.
Sanofi has several new products in its portfolio and candidates in its pipeline that can contribute to growth in 2017 and beyond. Products like Aubagio and Lemtrada(multiple sclerosis) have been doing well and the trend is likely to continue.
Meanwhile, Sanofi’s focus on streamlining its business and pursuing business development deals is encouraging. Sanofi has collaboration agreements/partnership deals with companies like Regeneron Pharmaceuticals, Inc. REGN, Alnylam and AstraZeneca plc AZN among others. It also possesses a strong vaccines portfolio, which has been consistently doing well. Promising pipeline candidates include sotagliflozin (SGLT-1 and SGLT-2 inhibitor for diabetes) and is atuximab (multiple myeloma).
Conclusion
Sanofi faces its share of challenges such as generic competition for many drugs including its blockbuster drug, Plavix and slower-than-expected uptake of new products like Praluent. Also, the outlook for its Diabetes franchise is bleak.
However, we believe that new drug approvals, a solid pipeline and aggressive savings will pave the way for growth this year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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