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Sanofi to expand cost-savings push as earnings beat expectations

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Sanofi pledged to expand the cost savings plan at the centre of chief executive Paul Hudson’s turnround programme after beating profit expectations for 2020.

Strong sales of the French group’s flu shots in the fourth quarter helped offset lower demand for its cardiovascular and diabetes drugs as the spread of coronavirus prompted many to stay away from doctors’ offices and hospitals.

Sanofi, which is one of the world’s biggest vaccine makers, confirmed that it aims to get a Covid-19 shot to market by the fourth quarter. In December, it stunned investors and disappointed countries who bankrolled the jab when a dosing error in a clinical trial delayed the vaccine’s progress by three to six months. 

The mishap left Sanofi trailing competitors BioNTech/Pfizer and Moderna, whose vaccines are being administered to millions globally.

“We continue to work in parallel on our two Covid-19 vaccine candidates, with clinical trials starting in the coming weeks,” the Paris-based company said in a statement. 

Sanofi also on Friday promised an additional €500m in cost cuts to €2.5bn by 2022, and said the savings would be ploughed back into research and development to further its ambitions in immunology and oncology. 

Hudson’s plan for Sanofi has been to scale back in mature markets such as cardiovascular and diabetes and expand in more attractive areas such as cancer and speciality drugs. The shift will lead to 1,700 job cuts in Europe, mostly in France, prompting some unions to protest in front of its Paris headquarters this week.

But investors are waiting to judge whether the British chief executive, who joined in September 2019 from Novartis, will be able to revamp Sanofi. He has made several acquisitions and Sanofi has funds for more after raising around $12bn by selling its stake in US biotech Regeneron last year.

Sanofi shares have declined about 3 per cent since Hudson took over, while shares in rivals Merck and Pfizer are up about 0.6 per cent in the same period.

Sanofi on Friday confirmed its earlier goals to achieve operating margins of 30 per cent by 2022, up from 27.1 per cent in 2020, and for its top-selling drug, the eczema treatment Dupixent, to achieve more than €10bn in peak sales. 

Sanofi also said that it expects earnings per share to increase by “high single digits” on a constant currency basis in 2021. The company reported EPS of €5.86 per share for 2020, ahead of analysts’ expectations of €5.78, according to Barclays.

In the fourth quarter, revenue rose 4.2 per cent to €9.4bn, driven by Dupixent and what Sanofi described as a “record demand” for its influenza vaccines. Doctors had urged people to get flu shots to avoid overwhelming hospitals during the winter months.

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