Sanofi's market cap is in free fall, but the reaction is 'overdone,' ODDO BHF says

It’s been a challenging summer for Sanofi, with August being a particularly rough month for the company on the stock market. First the FDA put a partial hold on trials of its promising multiple sclerosis candidate tolebrutinib. Early this month, the company faced increased attention as litigation nears over its heartburn medicine Zantac. Then two weeks ago, the company said it would cease development of its breast cancer drug amcenestrant.

As a result, investors are fleeing the French pharma powerhouse, leading to a market cap drop of 17 billion euros ($17 billion). But analysts from ODDO BHF believe the reaction is overdone.

“These aspects do not, in our view, justify a 17 billion euro drop in market capitalization,” analysts Martial Descoutures and Damien Choplain, wrote in a note to clients.

Even in a “worst case scenario,” which would include the failure of tolebrutinib and an estimated €4 billion loss in the Zantac litigation, Sanofi’s valuation should be 37% higher, ODDO said.

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As for tolebrutinib, the drug acquired in the much-questioned $3.7 billion buyout of Principia two years ago and halted because of liver damage to some patients, ODDO points to the possibility of Sanofi presenting positive data—scheduled for the end of September—which could lift the hold and allow two other trials, which have already enrolled relapsing and remitting MS patients, to proceed.

“We think that an enrollment resumption before the year’s end should reassure investors,” ODDO wrote. “And we are leaving our sales estimates for the drug unchanged for now, (with) peak sales of 1.5 billion euro in 2029.”

Regarding the oncoming Zantac litigation—which also involves several other companies including GSK, Boehringer Ingelheim and Pfizer—ODDO says that Sanofi’s risk is “limited”, because it immediately withdrew the heartburn treatment from the market upon an FDA investigation.

At worst, ODDO says that if 50% of the Zantac complaints are proven and $250,000 were to be awarded per plaintiff, then a total amount of $12.5 billion would be awarded, which would come out to between $2 billion to $4 billion for the four major companies.

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ODDO doesn’t see much impact from Sanofi’s grounding of amcenestrant considering the selective estrogen receptor degrader's peak sales are estimated to be 320 million euros.

“The failure is mainly a reminder of the French group’s difficulties in delivering on its pipeline,” ODDO wrote.