French pharmaceutical heavyweight Sanofi saw its shares tumble 9% in European afternoon trading on Thursday, positioning the stock for its largest single-day decline in nearly three years. The drop followed a conference call where newly appointed CEO Belen Garijo informed analysts that the company's drug development pipeline is facing difficulties, requiring urgent measures and potentially increased spending and deal-making.
Garijo, who took the helm at Sanofi in May, has the primary mission of addressing the impending patent expiration of its flagship product, Dupixent, an anti-inflammatory drug developed in partnership with Regeneron. She stated that the company has already initiated a restructuring of its research operations and will ramp up transactional activity to improve its medium-to-long-term growth outlook. The firm is currently reviewing its existing pipeline and does not rule out further cuts to some drug programs in the coming months.
Garijo admitted that Sanofi has historically "over-promised and under-delivered," which has damaged its credibility with investors. To tackle these challenges, the company has recently reshuffled its executive team and appointed a new head of research and development. It has also abandoned regulatory filings for an eczema drug acquired in 2021 for over $1 billion and halted the development of two other late-stage drug candidates.
The company expects to moderately increase R&D spending in the near term while potentially pursuing transactions simultaneously. Chief Financial Officer Francois Roger indicated that going forward, Sanofi will focus more on acquiring drugs that are already on the market or in late-stage development, rather than concentrating primarily on early-stage assets as it has recently.
Despite these long-term challenges, Sanofi reported strong second-quarter results. Revenue jumped 18% on a constant currency basis to €11.6 billion, fueled by growth from Dupixent and newly launched drugs, surpassing market expectations of €10.85 billion. Dupixent alone generated quarterly sales of €5.15 billion, a 28% increase year-over-year. However, the company's net profit for the quarter was just €343 million, a sharp decline from €3.94 billion in the same period last year. This was primarily due to a €1 billion write-down related to the termination of the amlitelimab candidate, while the prior-year period benefited from €2.7 billion in gains from discontinued operations.
Based on current performance, Sanofi has raised its full-year guidance, now expecting approximately 10% constant currency revenue growth in 2026, with operating earnings per share growing slightly faster than revenue, up from a previous forecast of high single-digit percentage growth. The company also lifted its 2030 sales forecast for Dupixent to nearly €25 billion, up from €22 billion, but lowered its vaccine business sales target for 2030 from €10 billion to €9 billion.