Key Takeaways:
Current Price: $44.8 Price Target: $51
Position Size: 1.56% 1-year Performance: -8.6%
Sanofi reported 3Q18 sales results 3& above expectations thanks to a strong rebound in vaccines (strong Flu shipments with $985M in sales +4% y/y, and recovery in Pediatric $511M in sales, +18% y/y) & in Emerging Markets. Regeneron added positively to its income, helping the 8% EPS beat vs. consensus. Sanofi raised its 2018 EPS outlook from 3-5% to 4-5%, as the strong momentum in Vaccines should continue in 4Q18, as guidance was raised to mid- to high-single-digit growth. Sales of Praluent (cholesterol drug) reflected the continued significant payer utilization restrictions in the US and limited market access in Europe. Sanofi’s Diabetes business continues to struggle (down 11% y/y – Lantus had $897M in sales, down 20% y/y), but the recent Bioverativ and Ablynx acquisitions should help drive growth going forward. Dupixent in Immunology is reaching an attractive level ($225M in sales, up 200%). Aubagio that treats multiple sclerosis, grew 12% ($426M in sales) and is the second biggest selling drug. Overall results were reassuring that Sanofi could return to top and bottom line growth after a couple years of disappointment.
Thesis on SNY:
- Sanofi is approaching the end of its patent cliff, and is well position to grow earnings
- ROIC and ROE are likely to improve from current levels
- Underappreciated pipeline, with eighteen new product launches expected over the next four years
- Attractive dividend yield, valuation and capital allocation
$SNY.US
[tag SNY]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109