Hey Sanofi, you need to freshen up your pipeline, perhaps with M&A: report

Mergers and acquisitions deals consolidation
Gilead and Bristol-Myers Squibb have done a good job forming research pacts and making acquisitions to pump up their pipelines, but Sanofi and Pfizer need to do better on that front, a new report says. (Getty/Kritchanut)

In 2019, 78% of Sanofi’s sales were generated by products over 10 years old. And if the French pharma giant doesn’t act fast to freshen up its pipeline, it will still be relying on geriatric products five years from now: 75% of its sales will come from drugs that are a decade old.

That prediction, from the analysts at Evaluate’s Vantage, paints a challenging picture for Sanofi’s new CEO, Paul Hudson. Investors “must hope that the sweeping strategy review announced by [Hudson] signals the turning of this big pharma tanker,” Vantage said in a new report.

Vantage analyzed 18 Big Pharma companies and ranked them according to the proportion of sales coming from products older than 10. Sanofi came out on the bottom of this so-called Freshness Index, followed closely by AbbVie, which derived 75% of its sales from old products, most notably Humira. But AbbVie has something Sanofi does not, the analysts noted: the recent purchase of Allergan, which could help “freshen up” the company’s product portfolio.

Other companies rely heavily on old drugs, namely Pfizer, Novo Nordisk and Roche, all of which derive more than 70% of their sales from products more than 10 years old, according to Vantage. But Novo’s proportion of sales from old drugs should fall to 51% in 2024, the analysts predicted, while Roche should see its aged-product index drop to 55%, thanks to new product launches.

So what can Sanofi and Pfizer do to blast some air freshener into their pipelines? “Business development teams at Sanofi and Pfizer are surely under pressure to bring in new sources of growth as soon as possible—making both prime candidates for dealmaking this year,” Vantage said.

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Sanofi’s Hudson is well aware of the pressure he’s under to overhaul the company’s approach to innovation. In December, he unveiled a new strategy that includes a plan to pump up Sanofi’s business development efforts.

Hudson also vowed to exit diabetes and cardiovascular R&D and to deprioritize underperforming products, most notably two drugs launched under its partnership with Regeneron, cholesterol med Praluent and immunology treatment Kevzara. He’s also reorganizing the company into three units, specialty care, vaccines and general medicines. Hudson’s goal is to save €2 billion by 2022.

The impact of making strategic acquisitions shouldn’t be underestimated, however, the Vantage analysts suggested, pointing to Gilead Sciences as a prime example. Gilead claimed the top spot on the Freshness Index, with just 23% of 2019 sales coming from products over 10 years old. That number is expected to drop to 8% in 2024, thanks largely to the $32.8 billion the company has spent on licensing and acquisitions in the past five years.

At the recent J.P. Morgan Healthcare Conference, Gilead CEO Daniel O’Day cited M&A as a key part of his strategy for boosting innovation in R&D. He pointed to the $5.1 billion, 10-year research pact Gilead formed with Galapagos, which gave the company access to six clinical-phase projects and 20 preclinical drugs. That’s “the type of innovation we’re trying to drive,” he said during the conference.

RELATED: How the 8 biggest U.S. pharmas enriched their shareholders in 2019Bristol-Myers Squibb

Bristol-Myers Squibb came in a close second on Vantage’s Freshness Index, with 29% of last year’s sales coming from aging products. But its recent huge move on the M&A front—its $74 billion purchase of Celgene—presents a daunting challenge, Vantage noted. Celgene’s crown jewel, cancer drug Revlimid, “joins Bristol’s own aging products, Opdivo and Eliquis.”

Therefore Vantage predicts that BMS’s proportion of sales coming from older products will skyrocket to 86% in 2024, leaving the company with just one good option for freshening up the pipeline: “This company’s deal-making days … look far from over,” the analysts wrote.

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