Sanofi CEO Paul Hudson.
Courtesy Sanofi
Before 2020, no messenger RNA-based vaccines had ever been tested in large-scale human trials, never mind approved by regulators. But in a short period in 2020, two Covid-19 vaccines based on the technology were designed, found to be effective, and authorized for emergency use.
That has led to a sense among investors that messenger RNA is the future of vaccines. Shares of biotechs specializing in messenger RNA have skyrocketed, with Moderna (ticker: MRNA) shares up 771% over the past 12 months. BioNTech (BNTX) shares are up 289% over the same period.
But Paul Hudson, CEO of Sanofi (SNY), one of the world’s largest vaccine makers, says that expectations that messenger RNA will come to dominate the vaccine landscape in the coming years are overblown.
“I think everyone’s getting very excited that there is a new platform,” Hudson told Barron’s on Monday. But he noted that some messenger RNA programs had struggled before the pandemic. “So before we all, you know, declare a fundamental shift … Where I’m excited about mRNA is in targets that have never been treated before.”
Sanofi is collaborating with the messenger RNA-focused biotech Translate Bio (TBIO) on a Covid-19 vaccine. The companies also signed a $425 million deal this past June, worth up to $1.9 billion in potential milestone payments, under which Sanofi obtained the rights to manufacture and commercialize infectious-disease vaccines using Translate’s technology.
“I think in a pandemic where speed is one of the key ingredients, I think we have to accept that in a single antigen pandemic, mRNA is probably the first go-to,” Hudson said. “But in regular times, I think we also have to be clear, that if you’re coming into a market with mRNA, say [the] influenza [vaccine market], and you’re competing with current influenza [vaccines], it’s very different when you have to compete with the standard of care with a well-characterized safety profile. So that bar is high.”
Sanofi sold €2.5 billion worth of flu vaccines in 2020, up 37.9% from the previous year.
When Hudson took over as the CEO of Sanofi in late 2019, the company was in need of a turnaround. Its Nasdaq-listed American depositary receipts traded at a multiple on the low end of its peer group. As Hudson said to Barron’s a few months after taking the job, the company had “sort of lost a little bit of its mojo.”
A year and a bit later, there are some signs that mojo is coming back. While the company’s Covid-19 vaccine programs have yet to bear fruit, sales of its eczema and asthma blockbuster Dupixent were up 54% in the fourth quarter of 2020 compared with the same quarter the year before. Sales of its flu vaccines were up 24.6%.
“You can see we’re making real progress,” Hudson told Barron’s on Monday. “We’re on track to be a leading company in immunology. We’ve signaled high single-digit EPS growth in [20]21 after a full year of a pandemic …s ahead of where I thought we thought we would be in normal times, let alone in a pandemic.”
The company’s American depositary receipts (ticker: SNY) still trade around 13 times earnings expected over the next 12 months, according to FactSet. That is below peers like Johnson & Johnson (JNJ), which trades at just over 17 times, but above Merck (MRK), at 11.5 times earnings. The stock is down 5.1% over the past 12 months.
When he arrived at Sanofi, Hudson signaled he would be narrowing the company’s research and development focus, initially announcing a plan to discontinue diabetes and cardiovascular research. The company has continued to focus on cutting costs, announcing savings of €1.7 billion in an earnings report last week, and the cancellation of a number of pipeline programs.
“Our pipeline is rejuvenating, our top line is coming with Dupixent, our efficiencies are allowing us to reinvest,” Hudson said. “I think it would be hard for people not to notice that we’re making progress.”
While other leading big pharma firms have pushed Covid-19 vaccines through the development process this past year in record time, Sanofi has stumbled. Sanofi’s lead vaccine candidate, developed in collaboration with GlaxoSmithKline (GSK), was an adjuvanted recombinant protein-based vaccine based on the same platform as one of its flu vaccines. The vaccine returned disappointing results in December; data from a Phase 2b trial is now expected in the end of April.
“We were a little disappointed a little while back,” Hudson acknowledged. But he noted that vaccine development timelines are usually many times longer than the 12 months in which the company’s Covid-19 vaccine has been under development. “I said to the team, a few weeks late, but we’re still three years early,” he said.
Without a Covid-19 vaccine of its own, Sanofi is helping to manufacture the Covid-19 vaccine developed by Pfizer and BioNTech.
In the midst of the pandemic, Hudson says, the transformation he sought for Sanofi is underway. “This company is really starting to gather speed,” he said.
Of the 26 analysts tracked by FactSet who cover Sanofi, 17 rate it Buy or Overweight, while eight rate it at Hold. One rates it at Sell.
Write to Josh Nathan-Kazis at [email protected]
