mid-December, Sanofiof (SNY 0.82%) When regeneron pharmaceutical‘ (REGN 1.85%) The immunological drug Dupixent received more positive regulatory news. The European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) has recommended approval of this drug to treat patients with eosinophilic esophagitis (EoE) aged 12 years and older.
Dupixent is considered a mega blockbuster (over $5 billion in annual sales). It may be months before the indication is approved, but two questions come to his mind: And what impact will the approval have on Sanofi’s sales?
To answer these questions, let’s look at the results of Dupixent’s Phase 3 clinical trial and the EoE market in the European Union.
Powerful therapy for progressive disease
EoE is a lifelong inflammatory disease that damages the esophagus and prevents it from functioning properly. The esophagus is the tube that carries food from the mouth to the stomach.
Patients with EoE have an immune system response that causes an accumulation of a type of white blood cell called eosinophils. Severe cases of the disease may even end up using a feeding tube to ensure that calorie intake and nutrition are adequate.
The most common first-line treatments for EoE are acid blockers called proton pump inhibitors and corticosteroids. These treatments help adequately control symptoms in approximately 70% of patients with EoE. But for the remaining 30%, there was little else they could do. That is, until she recently got approval for her Dupixent in the US for her patients over the age of 12.
The same clinical data that led to approval for the US indication may eventually lead to approval in the European Union. EoE patients were enrolled in a phase 3 clinical trial. These patients were randomized to receive 300 milligrams (mg) of her Dupixent weekly or 300 mg of placebo weekly.
Approximately 60% of patients receiving 300 mg weekly Dupixent achieved disease remission based on week 24 eosinophil counts. This is 10-fold higher than the 6% remission rate in the placebo group, demonstrating Dupixent’s effectiveness.
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meaningful commercial prospects
Dupixent has proven to be a breakthrough treatment for EoE patients. And I fully expect this to lead to strong sales potential for indications in the European Union.
There are an estimated 50,000 people with uncontrolled severe EoE in the European Union. Given that Dupixent is the first treatment approved specifically for his EoE in that market, I would argue that a patient share of about 80% is achievable, which is his 40,000 patients.
The majority of patients do not end up paying full price for the drug. Dupixent has an annual list price of just under $41,000 in the US.
Let’s say the annual list price is $20,000, because medicines typically cost about half as much in the European Union. It will also coordinate negotiations between pharmaceutical companies and health insurance companies for a net annual list price of $15,000 per patient.
After splitting with Regeneron, Sanofi’s revenue will increase by $300 million. Measured against his $46.5 billion earnings that analysts expect from Sanofi in 2022, this equates to his 0.6% increase in earnings. By itself, this is not a huge growth catalyst. But with 81 projects in the company’s pipeline, we’re slowly building up.
That’s exactly why analysts expect Sanofi to achieve annual profit growth of 12.3% over the next five years. To put this into perspective, that growth rate is almost double his industry average of 6.7% for pharmaceutical manufacturers.
Give investors everything they want
amid a 19% drop S&P 500 Sanofi’s stock was flat last year. Investors typically expect to pay a premium for businesses with promising growth prospects like Sanofi. Surprisingly, the 10.8 price/earnings ratio is slightly lower than the pharmaceutical industry average of 12.6.
And if you’re looking for income, the 3.6% dividend yield is double the S&P 500’s 1.8% yield. Moreover, given that the payout ratio is expected to fall below 36% over the next 12 months, this dividend is very safe. These factors combine to make Sanofi an excellent choice for nearly every type of investor.
Cody Kester does not have a position in any of the stocks mentioned.The Motley Fool does not have a position in any of the stocks mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.
