Sanofi CEO Paul Hudson's new 'Play to Win' pivot sends stock plunging

Sanofi acolytes are none too happy with the latest chapter of CEO Paul Hudson’s "Play to Win" strategy. After unveiling the pivot alongside third-quarter earnings Friday, Sanofi’s stock plunged nearly 20%, with one analyst group suggesting the plan came “at the wrong time.”

Friday, Sanofi reported third-quarter sales of 11.96 billion euros (about $12.66 billion), missing consensus estimates of 12.09 billion euros, according to analysts at ODDO BHF.

Sanofi’s revenues were buoyed up by specialty care and vaccines, which grew 13.5% to 4.6 billion euros and slipped 0.6% to 3.1 billion euors, respectively. Specialty care naturally benefited from the ongoing strength of immunology star Dupixent, which generated 2.85 billion euros over the three-month stretch. The company’s new hemophilia A therapy Altuviiio also performed well during the quarter, helping to offset the sting of Aubagio generics in the U.S., Sanofi said in a release.

On the immunization front, Sanofi’s bread-and-butter flu vaccine business was hurt by low shot uptake. On the bright side, however, Sanofi’s new RSV antibody for infants, Beyfortus, managed to generate 137 million euros in a short period after its launch.

Sanofi now expects Altuviiio and Beyfortus, alongside Tzield to delay the onset of stage 3 Type 1 diabetes, to bring in more than 500 million euros combined sales in the second half of 2023, Sanofi chief Hudson said on an investor call Friday.

"Play to Win" update

Sanofi’s third-quarter earnings coincided with a new chapter in Hudson’s "Play to Win" strategy, which previously put the focus on growth drivers like Dupixent and vaccines. And as in 2019, when Hudson first rolled out his original plans, cost cuts and business overhauls are once again on the horizon.

As part of the pivot, Sanofi now plans to hive off its consumer healthcare business—potentially as early as next year’s fourth quarter. The standalone company will be headquartered in Paris, Hudson said on the call. 

Consumer health spinoffs are becoming a trend in the industry, with Sanofi's plan following similar moves by GSK and Johnson & Johnson, which respectively spun out their consumer health arms into the standalone companies Haleon and Kenvue.

Further, Sanofi is rolling out a new round of cost initiatives, aiming to save a total of up to 2 billion euros from 2024 to the end of 2025. Most of that extra cash will be used to fuel R&D and to drive the performance of approved drugs, the company said.

On the nature of the cost cuts, Sanofi said that it intends to “improve its cost structure” and launch “efficiency initiatives” across its biopharma business. 

Specifically, Sanofi aims to save about 700 million euros by prioritizing best- or first-in-class pipeline assets, as well as by actively reallocating its pipeline resources from areas like oncology to immunology, the company said (PDF) in an investor presentation accompanying its earnings call. 

Future guidance

Sanofi also reiterated its 2023 guidance and telegraphed expectations for the next two years. This year and next, Sanofi expects to chart mid-single-digit business earnings per share (EPS) growth, which analysts at ODDO BHF noted as a “disappointment.” 

Sanofi also ditched previously established 2025 guidance, choosing to focus on reinvestment rather than a target of a 32% operating profit margin in a bid to foster "long-term profitability."

Meanwhile, Sanofi is sticking by its goal to generate more than 22 billion euros in immunology sales and more than 10 billion euros in vaccine sales by 2030.

In a note to clients, the ODDO BHF team noted—correctly—that Sanofi’s share price was likely to come under pressure Friday morning, with much attention paid to the group’s new guidance. The plan's reveal came at the "wrong time," according to the analysts, who said they were "extremely surprised by the timing of these announcements."

During the company’s earnings call, many questions were turned toward Sanofi’s pipeline and the company’s rationale behind its R&D investment. Executives largely shelved the questions, telling investors to wait until an R&D Day planned for Dec. 7. That will come about four years to the day after Hudson unveiled his initial shake-ups at Sanofi.