Sanofi Is Finally Catching Up. How a Covid Vaccine Could Lift the Stock.
Few Big Pharma companies have proved able to catch the early wave of Covid-19 vaccines and ride it to success. But Sanofi is trying hard to show that there is a life after failure—or, as the company would prefer to put it, setback.
Rivals Pfizer (ticker: PFE) and AstraZeneca (AZN) showed the potential of cross-cooperation with smaller, nimbler partners—with Germany’s BioNTech for the former, and Oxford University for the latter—in developing and producing vaccines against a new virus in record time.
On the other hand, for Sanofi and partner GlaxoSmithKline (GSK), two of the world’s 10 largest pharma giants, it looked more like a process of hits and misses. A series of setbacks meant the vaccine had to be delayed, putting pressure on the French company’s stock. It also irked the rest of the European Union, which a year ago had ordered 300 million doses of the yet-to-be approved vaccine.
The jab is now in its Phase 3 trial, and Sanofi spokesman Nicolas Kressmann says the company has a good chance of producing its results “before the end of the last quarter at the earliest,” which means that if everything goes according to plan, regulators the world over will then approve it for distribution within days.
Sanofi has already started manufacturing its jab, Kressmann adds, so the group will finally be able to honor its commitments, including the EU contract shortly after regulators’ green light.
Sanofi’s shares (SAN.France) are down 13% since mid-February of 2020, before the pandemic started in earnest. GSK’s has fallen in similar proportion. Sanofi’s American depositary receipts (SNY) are down 5% in the same period.
Meanwhile Pfizer’s stock is up more than 30% and AstraZeneca has risen 6%, even though, in the latter case, it produces the jab at virtually no profit, and has been hit by doubts raised by some governments or drug regulators about its secondary effects.
Sanofi trades at 18 times earnings, slightly under Pfizer’s 19 but way below AstraZeneca’s 38. A poll of 26 analysts by French broker Boursorama shows that 13 have a Buy recommendation at a median price a little under 105 euros ($124). That’s 28% over the current price.
Sanofi beat forecasts in the second quarter on the back of its vaccines unit and eczema treatment Dupixent. It reported sales of €8.74 billion in the period, up 12.4% from the same quarter of 2020 at constant exchange rates, and net income of €1.7 billion, up 16.8%.
Under Chief Executive Officer Paul Hudson, Sanofi has been on an acquisition spree of late, thus following a common growth model in the pharma industry.
Last week it bought Kadmon (KDMN), a maker of transplant drugs, for $1.9 billion. Kadmon’s pipeline also includes drug candidates for immune and fibrotic diseases as well as immuno-oncology therapies.
A month earlier, Sanofi acquired its U.S. partner, biotech Translate Bio, for $3.8 billion. Both transactions were in cash, at comfortable premiums, of 79% and 56%, respectively, over the targets’ share prices. Translate Bio specializes in messenger RNA treatments, a technology used by Pfizer and Moderna for their successful Covid-19 vaccines. Kressman notes that Sanofi had explored mRNA with the U.S. biotech since 2018, in the treatment of infectious diseases, and that it will now develop its own coronavirus vaccine based on the technology.
Coming after Sanofi’s decision to create a 400-person “excellence center” on mRNA in Cambridge, Mass., and Lyon, France, Sanofi’s acquisition “actually makes a lot of sense, particularly in the context of recent setbacks for mRNA peers,” wrote Deutsche Bank analyst Emmanuel Papadakis.