Sanofi SA

PAR:SAN

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Sanofi First Quarter 2021 Earnings Call. I would now like to turn the call over to Eva Schaefer-Jansen, Head of Sanofi Investor Relations. Please go ahead, Eva.

[Eva Schaefer-Jansen]

Good morning, and good afternoon to everyone. Thank you for joining us to review Sanofi's 2021 first quarter results followed by a Q&A session. As usual, you can find the slides to this earnings call on the Investors home page on our website at sanofi.com. Next slide. Moving to Slide 2. I would like to remind you that information presented in this call contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F document on file with the SEC and also our Document d'Enregistrement Universel for a description of these risk factors. With that, on Slide 3, I would like to introduce our speakers for today. So we have Paul Hudson, Chief Executive Officer; the Global Business Unit Leads, Bill Sibold; Thomas Triomphe; Olivier Charmeil and Julie Van Ongevalle; and Jean-Baptiste de Chatillon, Chief Financial Officer. Paul will make some introductory remarks followed by our GBU heads, who will review the first quarter performance of their respective businesses. Jean-Baptiste will provide an overview on the key financials, and we will then open for Q&A, where we will be joined by John Reed, Global Head of R&D. [Operator Instructions] And with that, I'd like to turn the call over to Paul.

[Paul Hudson, CEO & Director]

Well, thank you, Eva, and thanks to everyone for joining our call. Our performance in the first quarter is a strong proof point for how we're continuing to deliver on our Play to Win strategy. Sales and EPS grew by 2.4% and 15%, respectively, in constant currency. As you may recall, this strong performance is even more remarkable when you compare it with the first quarter of last year when about half of the sales and profit growth was driven by pantry loading in the COVID environment as patients stocked up on chronic disease meds and consumer health care brands. Driving the top line performance in the first few months of the year was another outstanding 46% increase in Dupixent sales, growing both in the U.S. and notably, ex U.S. Business momentum continued as well in vaccines with strong growth across core franchises, including 15% growth in PPH. So really a tremendous quarter, which reiterates our confidence in our growth drivers, and we are consequently affirming our full year guidance of high single-digit business EPS growth at CER, and Jean-Baptiste will provide details shortly. Before we move on to the update on our businesses, let me take a moment to reflect. It is now more than a year since the COVID pandemic started. I continue to be impressed by the relentless hard work from each and everyone at Sanofi, with people stretching beyond themselves to bring transformative therapies to patients and change the practice of medicine. Over the past year, I've had the opportunity to see in real-time the strength of Sanofi as a purpose-driven organization striving to do the right thing. While our priority remains to advance our own 2 COVID-19 vaccine programs, we recognize there are opportunities to increase supply and expand access to COVID-19 vaccines. And as such, without compromising other essential medicines and our own vaccine programs, we step forward to show solidarity in the industry and to continue to do our part in the fight against COVID-19. Turning to Slide 5, the pandemic has forced us to think and act for the short term, but we did not lose track of our long-term goal and ambition of simply changing the practice of medicine. Consequently, last year, we reflected on 3 core questions: how can we have the greatest impact? Where are we uniquely positioned to make a difference that can be scaled and sustained over time? And how do we embed our commitments into our long-term business strategy? In response to these questions, we reviewed and rethought our corporate social responsibility strategy as we presented it to you last October. Importantly, our ambition for this new approach is fully aligned to and embedded in our Play to Win strategy. On this slide, with the improved ranking in the Access to Medicine Index, we've taken a first step in the right direction, but we can -- we know we can do much more for society. Just earlier this month, we announced our newly formed nonprofit unit within the company, Sanofi Global Health, which we believe is the first truly global initiative to expand affordable access to those in most in need with a broad portfolio of medicines in many countries and across multiple therapeutic areas, while funding local support programs. On Slide 6, transitioning to our pipeline. RSV is a major public health issue for infants and the leading cause of hospitalization of infants in the U.S. and in many other countries around the world. RSV results in 16x more hospitalizations of infants than influenza during the first year of life. This week's joint news release with our RSV development partner, AstraZeneca, marks an important step forward in the fight against this pathogen. Nirsevimab has the potential to be a truly transformational medicine for young children, designed to provide all infant protection for all those entering their first RSV season. As you can see from the chart, nirsevimab is uniquely addressing the entire population of infants, no matter in what month they are born and protects them during their entire first RSV season. We believe that this is a distinct advantage over maternal immunization candidates as half of the infants hospitalized are simply born before the start of the first RSV season. We are looking forward to the full data publication for the MELODY trial and the readout of the MEDLEY Phase II/III trial in the coming months. We are planning regulatory submissions to start in 2022, which is 1 year faster than planned, and I'm proud of the organization and our collaboration to make this possible. On Slide 7 and staying on the pipeline, but focusing on oncology, we saw a busy quarter of positive news flow supporting all the progress to rebuild our oncology franchise. Bill will tell you a little more about the Q1 launch performance of Sarclisa and Libtayo. I want to take a moment to discuss with you the encouraging interim Phase I data we showcased as a late-breaker at AACR this month for SAR245 formerly known THOR-707. These data demonstrate that we can dose its meds even higher than we ever thought possible and further validates why we believe we have the best-in-class not-alpha IL-2. We're delighted to host you at our much anticipated ASCO event on June 4. While we are unable to provide the detailed agenda of the event today due to the ASCO regulations, oncology is a long term commitment of Sanofi, and I'm confident we can deliver outstanding patient benefit and compete successfully in this space. Turning to Slide 8, and with 2025 and beyond in mind, we continue to deploy capital to drive R&D transformation across our pipeline, as highlighted here, with 3 recent acquisitions and 3 recent business development deals focused on our priority areas of immunology and oncology. Allowing us to bolster our capabilities in areas where we continue to strengthen our competitiveness. With applications in both oncology and immunology, the acquisition of Tidal Therapeutics fits particularly well within our R&D strategy. The Tidal mRNA platform provides a novel approach to reprogram immune cells inside the body to genetically modify the patient's own immune cells to attack their cancer. On Slide 9, before we enter into the Q1 GBU updates, I wanted to highlight Sanofi's favorable position in the U.S. and China, where drug pricing is a focus of the government's health care priorities. While we may learn more about the details of the health care agenda of the new U.S. administration soon, we also acknowledge the anticipated new round of volume-based procurement in China, which we expect to be implemented during the remainder of the year. Specifically in the U.S., our portfolio is not only growing fast, but shifting increasingly towards specialty care with approximately 60% of this business through the commercial channels. At the same time, we continue to see the exposure to U.S. insulin pricing pressure gradually diminishing. We believe Sanofi is well positioned to actively participate in the ongoing policy discussions in the U.S. with the goal of making the health care system work better for patients by lowering out-of-pocket costs for the medicines they need while maintaining an innovation-driven market-based environment. Now turning to China, where sales grew 8% in the quarter, Bill will tell you more about the accelerated launch of Dupixent, while I would like to remind you of the commercial potential of the launches of Toujeo and Praluent due to their differentiated profiles. We will maximize the value of these brands leveraged by our digital customer engagement tools in this large Chinese market. We continue to expect Sanofi to grow sales in China in 2021, driven by launches, helped by our agile business model, and despite the potential impact from the expected VBP later this year. With that, I'm now turning it over to the GBU heads to provide more details on their respective businesses. Let's start first with Dupixent, and Bill, over to you.

[William J. Sibold, Executive Vice President of Sanofi Genzyme]

Thank you, Paul. Starting with Dupixent on Slide 10. Sales surpassed the EUR 1 billion blockbuster mark for the quarter. This new record in sales is the result of continuous strong U.S. demand, absorbing the usual net price adjustments at the beginning of the year, including co-pay assistance programs. Ex U.S. sales were extremely strong, reaching 24% of global sales in the quarter and crossing the EUR 250 million mark, now annualizing on their own at EUR 1 billion. This was all done against the backdrop of additional COVID-19 lockdowns, mainly in Europe. In the U.S., patient visits continued to be around 80% of pre-COVID levels. As we progress into 2021, we are planning to unlock additional growth opportunities for Dupixent expansion as we seek regulatory approvals for expansion into younger populations due to its demonstrated favorable safety profile. Our ambition to drive penetration in the younger populations will be accelerated by the anticipated FDA and EMA decisions for 6 to 11 year olds in their respective asthma indications and the pivotal data in 6 months to less than 6 year old with atopic dermatitis, now expected in the second half of 2021, several months earlier than originally planned as enrollment completed much faster. In addition, we are looking forward to the readouts in prurigo nodularis and chronic spontaneous urticaria in 2021, 2 additional dermatology type 2 inflammatory diseases with high unmet need. As you can see, we are building a worldwide mega brand with Dupixent, and we remain well on track to achieve our greater than EUR 10 billion peak ambition. On Slide 11, let me provide you with the snapshot of the continuing execution of Dupixent in non-U.S. markets, where we saw particularly strong growth in the first quarter, as mentioned a moment ago. To be successful with Dupixent, we were always confident that we would win worldwide, and we are seeing great momentum emerging across the globe. In Europe, adult AD is reimbursed throughout the EU5 with continued expansion into respiratory indications as well as younger populations underway. In Germany, Dupixent holds the #1 new patient market share position in asthma. Moving to other attractive markets in the rest of the world, in Japan, over the past 12 months, Dupixent has become the #3 pharmaceutical product and volume growth, and similar to Germany, now holds the #1 new patient market share position in asthma. Moving to China, the Dupixent adult atopic dermatitis launch has accelerated following its inclusion on the NRDL as of March 1. The initial uptick following the NRDL inclusion has been strong with greater than 1,000 new patients starting treatment in March, exceeding our own expectations. Our teams in China are driving hospital listings in key cities and improving awareness across patient and physician communities. Next, key milestones in our journey to unlock Dupixent's blockbuster potential in China include the expected decision for Dupixent in adolescents with AD in mid-2021. Wrapping up on Dupixent, on Slide 12, I would like to draw your attention to the success of Dupixent, specifically in the respiratory indications of asthma and nasal polyps. The chart on the right demonstrates how well the brand resonates with U.S. allergists and pulmonologists. Over the past 2 years, Dupixent has become the leading respiratory biologic in the U.S. in new-to-brand prescriptions in its approved indications. Now why is such a success in respiratory? Clearly, it is because of Dupixent's consistent safety and efficacy profile, and we are resourced to win. Type 2 inflammation drives greater than 80% of uncontrolled persistent asthma and Dupixent's unique mechanism of action inhibits IL-4 and IL-13 targeting underlying type 2 inflammation. Asthma patients on Dupixent have shown rapid and sustained lung function improvement as well as progressively declining exacerbation rates. In addition, certain patients with chronic rhinosinusitis with nasal polyps on DuPixent experienced significant reduction in nasal polyp size, nasal congestion severity and the need for systemic corticosteroids and/or surgery. All of this, we believe, is driving Dupixent's NBRx growth within respiratory as it reaches pre COVID, levels and we are looking forward to expanding into potential additional respiratory indications. Advancing to Slide 13 and turning to the specialty care franchises beyond Dupixent, the Rare Disease franchise continued to deliver growth in the first quarter with higher sales in all reported regions. We are the global leader in Pompe disease, and we believe that avalglucosidase alfa will establish a new standard of care for the disease. The FDA has notified us that the PDUFA has been extended for 3 months to August 18. We will be ready to launch this important medicine and expect broad market access globally, which underlines our 20-year dedication to this patient community. Within our Neurology & Rheumatology franchise, Aubagio confirmed its resilience with sales in the first quarter broadly stable, absorbing a high base for comparison and the entry of competition. Separately, Lemtrada sales were EUR 24 million in the first quarter, consistent with the prior 3 quarters. Strategically, both Lemtrada and Kevzara have been deprioritized with respect to commercial support. Rare Blood Disorder growth in the first quarter was marked by the anticipated lower sales to our collaboration partner, Sobi, and we expect the lower sales to Sobi to dampen our performance throughout the remainder of the year. Excluding the sales to Sobi, the franchise grew as much as 5%, supported by increased sales of Alprolix and Cablivi. As Paul alluded to earlier in his comments, we are encouraged by our oncology launches, Sarclisa and Libtayo. Oncology sales grew strongly in the first quarter, up 26%, more than offsetting the Jevtana decline following entry of generic competition in Europe, which began at the end of March. My final slide, Slide 14, provides a snapshot of the progress we are making in bringing innovation to patients with Rare Blood Disorders. As you know, we have a number of molecules that have the potential to transform patients' lives, including sutimlimab, which is developed for people suffering from cold agglutinin disease, a rare disease with no approved therapies indicated to treat this disease. Following the complete response letter we received from the FDA in mid-November 2020, we have been working collaboratively with both the FDA and our CMO partner to resolve the agency's concerns, and we are now planning to resubmit the sutimlimab BLA with the FDA in the second half of this year. Turning to our hemophilia programs. I am pleased to highlight that we are continuing to make steady progress in bringing fitusiran to all hemophilia patients as a potential treatment option. As of today, all health authorities relevant to the program have approved redosing of fitusiran, and a majority of patients have resumed dosing. We intend to share data from our initial pivotal trials at medical conferences in the coming quarters. Following our interactions with the FDA, we are planning for a U.S. submission in the second half of 2022 once data from the revised dose regimen are available. Among the other advances, let me just point you to the initiation of Phase III pediatric study for alfa, formerly known as BIVV001, which underlines its favorable target profile and well understood mechanism of action in hemophilia A. With that, I hand over to Thomas to update you on the Vaccines business.

[Thomas Triomphe, Executive VP & Head of Sanofi Pasteur]

Thank you, Bill. Our vaccine business was an important performance driver for Sanofi in the quarter with growth observed in all 3 core segments. First, our world-leading pediatric combination vaccine franchise delivered more than EUR 500 million sales in the quarter, with 15% growth globally, and particularly strong U.S. Pentacel performance, driven by the timing of a shipment to the U.S. CDC. Second, strong demand for our flu vaccines in the southern hemisphere, drove 24% growth for this franchise. We believe this performance serves as a strong indicator for continuously growing flu vaccination coverage rates. Based on the preorders to date in the northern hemisphere campaign, we are confident in delivering another year of strong flu vaccine sales. Third, our meningitis franchise is off to a good start with plus 4% growth, supported by the launch of MenQuadfi in the U.S. I remind you that MenQuadfi is the only FDA-approved quadrivalent meningococcal vaccine indicated for all persons above 2 years of age. Finally, I'd like to share with you a few important milestones that are coming very soon. The first one is another U.S. launch. While Vaxelis sales from our joint venture with Merck will not be reported within our sales line, we are very excited to bring the first hexavalent pediatric combination vaccines in the U.S. market. This is expected to come in the second quarter of this year. With this product, newborns in the U.S. will finally have access to the convenience of a 6-in-1 vaccine reducing the number of shots given to newborns. The second milestone is another important pipeline update with the expected start of our first mRNA flue vaccine trial, Phase I trial, which we're on track to initiate in the middle of this year. This milestone do come on top of the exciting news regarding nirsevimab that we just heard Paul talk about. Nirsevimab is designed to provide protection for all infants entering their first RSV season. With a positive readout of the MELODY Phase III trial now already in-house, we will submit the data for this potentially breakthrough product 1 year earlier than anticipated. This potentially provide us with 2 season lead ahead of the competition, a real game changer here. Let's move on to Slide 16. Here, I want to provide you an update on the progress of our COVID-19 vaccine development programs. As you know, in February, we initiated our new Phase II trial for adjuvanted recombinant vaccine candidate developed in collaboration with GSK. This trial rapidly reached full enrollment, and we now expect the Phase II results in the very coming weeks. If the results are positive, we are planning for a prompt start of the Phase III trial with vaccine expected to be available in quarter 4 of this year. In March, we initiated the Phase I/II trial for mRNA candidate vaccine done in collaboration with Translate Bio. We are now expecting to share the results with you in Q3. At the same time, we are obviously progressing our preclinical work on the so-called variants in order to make sure that we can address the need for a sustained response to the global COVID-19 pandemic on an ongoing basis. With this, I hand over to Olivier.

[Olivier Charmeil, Executive Vice President of General Medicines]

Thank you, Thomas. In General Medicine, we are very pleased with the performance of our core brands in Q1. As you will remember, at our Capital Market Day on February 5, we identified a number of core brands which together delivered 4% growth during the period. If you exclude Praluent sales in the U.S., which are now sold solely by Regeneron, our core brands portfolio grew more than 6%. When you strip out the approximately 4 percentage point negative impact related to portfolio streamlining and a temporary supply constraint related to Aprovel, the noncore portfolio declined by only 6% during the period. Growth of the core brands was mainly driven by Lovenox, which continues to benefit from inclusion in WHO guidelines for the treatment of hospitalized severe COVID patients. Toujeo sales reached over EUR 250 million for the quarter and is on a trajectory to reach blockbuster status in 2021 for the first time. In China, Plavix grew in both volume and sales, and we continue to see growth in demand more than 1 year after its inclusion in the VBP. We are excited about the early launch performance of Praluent and Toujeo in China, and as Paul mentioned earlier, we believe that our launches and agile go-to-market model will enable us to drive growth in General Medicine in China in 2021, despite the potential impact from the expected next VBP wave. Taxotere and Eloxatin, which were combined approximately EUR 200 million in sales for the full year 2020 are included in the list of 60 drugs which was decided by the Chinese authority earlier this month, and we expect the implementation of the next VBP wave in early Q3. Biologics, including insulins, were not included in the new VBP list at this time, but we anticipate the insulin class may be reviewed by the Chinese authorities as well. To preempt your potential questions on our insulin business in China. Lantus sales were around EUR 450 million for the full year 2020. Toujeo, a well-differentiated label and is supported by medical guidelines related to the usage of basal insulin. I'm happy to highlight that as we speak, we are already working on new patient starts with Toujeo and switching patients and control on insulin to Toujeo. With that, I hand the call over to Julie.

[Julie Van Ongevalle]

Thank you, Olivier. I'm happy to share that we remain fully on track with the implementation of our strategic priorities and to focus on our growth brands as shared at the Capital Market Day in February. As you may have heard from our peers already, the beginning of the year was marked by a low incidence of cough, cold and flu, driven by social distancing measures across markets. Actually, the impact of the overall COVID environment on the CHC market has led third-party market intelligence providers to reduce the retail market growth outlook for 2021 to around 2%. On top of that, the first quarter of last year set a high basis for comparison across many of Sanofi's CHC brands, particularly again in cough & cold category, as well as pain and allergy due to consumer stocking up last year. Consequently, sales in Q1 this year were affected by lower demand in these categories, more than offsetting strong demand for brands in wellness categories and through e-commerce, favored by consumers during the pandemic and which have been our key focus since the beginning of the year as part of our strategic priorities. Importantly, we saw continued growth in the large U.S. market, where allergy sales increased driven by Xyzal, which was further supplemented by strong growth in digestive wellness. We now have almost 7 consecutive months of growth share gain in the U.S., and also see great momentum in other parts of the world, such as Central and Eastern Europe, for example. We're also excited to announce the U.S. launch of Zantac 360 degrees with famotidine. Zantac 360 is an all-in-one heartburn solution that both prevents and relieve symptoms, and will be available nationwide with full distribution in June this year. With that, I hand it over to our CFO, Jean-Baptiste.

[Jean-Baptiste Chasseloup de Chatillon]

Thank you. Thank you very much, Julie. On Slide 19, turning to our financial performance. Company sales increased 2.4% in the first quarter, which helped to drive double-digit EPS growth in the period. We delivered another quarter of P&L leverage, supported by gross margin improvement resulting from our favorable portfolio shift to specialty care products and the beginning of growing efficiencies within industrial affairs, while R&D spend increases in key asset development cost. In fact, it was offset by operational efficiencies and lower expenses on mature projects. But you can expect to see R&D spend increasing meaningfully in the remainder of the year. At the same time, our efforts to realize further efficiencies through smart spending initiatives have led to an incremental decline of approximately 1% in SG&A in the quarter, with, in fact, an increase in selling costs to support Dupixent expansion and a strong decrease in G&A. As we had highlighted to you already in March, we benefited from a onetime payment of EUR 119 million received from Daiichi Sankyo related to a former vaccine collaboration in Japan. Excluding this onetime payment, business operating income grew 8.4% resulting in a BOI margin of 29.3%, 100 basis points higher than the prior year. In addition, our EPS growth was supported by the anticipated lower effective tax rate of 21%, which we guided to in February as part of the full year financial guidance. Overall, business EPS of EUR 1.61 reflects our leveraged P&L and provide us with great confidence to achieve our financial outlook on a full year basis. Now on Slide 20, we believe that our strong performance in the first quarter puts us on the right path towards meeting our communicated midterm financial target with BOI margin of 30% in 2022. On our trajectory into 2022, we are confident in our ability to drive performance with continued momentum from Dupixent on leveraging our P&L through further efficiencies, specifically benefiting from improvements in industrial affairs. As for 2021, business EPS growth of 9.8% in the first quarter, excluding the onetime payment received from Daiichi, is a strong start to the year. We have been able to consistently grow EPS in 2019, in 2020 and now in Q1 2021. This is really reflecting the deep transformation we are going through to deliver sustainable growth. Notably, higher R&D spend is expected during the remainder of the year to fund our growth drivers and advance our broad development programs for our late-stage pipeline to create future value. Uncertainties remain for our business environment, mainly related to the pandemic and pricing policies in key markets, but it seems that as Sanofi, we are getting better and better to navigate this pandemic. On Slide 21, the summary. Based on our strong Q1 performance, we are increasingly confident in the financial outlook for the remainder of the year, and we maintain our expectation for high single-digit business EPS growth at CER. When we turn to foreign exchange, the impact is expected to be negative by minus 4% to minus 5% based on April average exchange rates. This compares with the estimated currency impact we communicated with the full year outlook in February of between minus 4.5% and minus 5.5%. So let's open the call now to Q&A. With that, I hand back to Eva.

[Eva Schaefer-Jansen]

Thank you, Jean-Baptiste. [Operator Instructions]

[Operator]

Yes. And the first question will be from Pete at Citi.

[Peter Verdult, Managing Director]

Yes, Pete Verdult, Citi. A few quick ones on the pipeline, please. Nirsevimab, great to see the trial read out early. I realize you can't talk to the data per se before publication, but you did host a rather detailed RSV R&D Day last year, and you gave a target clinical profile of at least a 70% relative risk reduction in RSV hospitalization. So just interested to feel how the data plays to that target profile? Secondly, on AMEERA-3 amcenestrant against physician's choice. Lots of focus, obviously, in the market. Can you perhaps help us handicap the study in terms of giving us a sense of the ESR 1 mutation status of the enrolled patients or the mix of prior treatments that they received in earlier -- in the earlier line setting. Any color there, appreciated. And then lastly, for John, just the CAR-NK platform that you recently acquired, looks really interesting. Just could you discuss why you think CAR-NK could be more exciting than CAR-T and when we might next see data points from that platform?

[Paul Hudson, CEO & Director]

Okay. Thanks, Pete. Appreciate it. So Thomas, what are you prepared to share?

[Thomas Triomphe, Executive VP & Head of Sanofi Pasteur]

Thank you for the question, Pete, on nirsevimab. You were mentioning a target product profile. Clearly, we are very excited by the latest news, and therefore, we believe we have a clear product for registration and for clear impact on disease. This is why we are very happy to announce that we are going to submit this product a year in advance in 2022 instead of 2023. It means that it gives us at least 2 years versus the competition, which I come back to it is maternal immunization, and I'll come back to why I don't believe it's competition. But we're very excited by the profile moving forward. Because it's going to be the first product, and I believe the only product in the coming decade, that's going to be a product that will prevent RSV in all infants. Again, I think it's very important that I highlight the importance of this. RSV is the #1 cause of hospitalization in North America or in Europe for all infants. And as you've seen before, 50% of those infants that are going to hospitals because of RSV are not born in season. So we really need to find a way to make sure that all those kids are protected. And it needs to be an all-infant protection solution. Maternal immunization has been referred by some of your colleagues. As you know very well, it could work potentially for kids that are born in season. But if you are born in the spring or in the summer, the probability that you get maternal antibodies transferred to a kid and sustained protection for the whole RSV season is very low. So we're super excited, and we are looking forward to share more data with you very soon.

[Paul Hudson, CEO & Director]

Thanks, Thomas. So we do think it's game-changing quite clearly, and it's for all infants no matter when they're born. I think that's very clear from Tom. We're excited about the data reading out. And the 2 year -- the 2 season advantage we have. John, AMEERA-3 mutation status, if you can. And then maybe a comment, I think it was on Kiadis, but I wasn't -- I didn't hear it clearly.

[John C. Reed]

Yes. Thanks, Paul. No, AMEERA-3, I mean, it's an ongoing clinical trial, so we won't be able to say much about that until we're at a data readout, et cetera. Of course, we're collecting data on ESR mutations. And the prior rounds of therapy will be reflective of what the eligibility criteria allow for. So I'm afraid I really can't give you much color on that, and you'll have to wait for data. The -- on the Kiadis platform, the NK cell platform, indeed, the reason that we think the NK cell platform has ability to surpass the CAR-T is really a couplefold. One is the ease with which one can come up with allogeneic solutions. So universal, one-size-fits-all solutions with with NK cells requires no genomic engineering. In our case, it's a matter of selecting donors with a certain type of characteristic than expanding those cells at industrial scale. And the first product opportunity actually is unmodified NK cells where the Kiadis colleagues had already generated some very promising clinical data in the context of relapsed and refractory AML, acute myelogenous leukemia. And show very impressive data with patients who were brought to complete remissions of some durability, and that was completely unmodified cells. Indeed, going forward, we envision doing various types of genetic modifications, including CAR expression. The second reason why we think the NK cell platform is attractive is because NK cells don't make some of the nasty cytokines that T-cells make, we believe there'll be a better therapeutic index. IL-6, for example, is not produced at retial levels by NK cells. So we believe we'll have a safer therapy as well.

[Paul Hudson, CEO & Director]

And John, thanks, Pete, great to have 3 pipeline questions, by the way, to kick off. Hopefully, we'll deserve even more of that focus over the coming months and years.

[Operator]

The next question is from Simon at Exane.

[Simon Mather, Pharmaceutical Equity Analyst]

Sorry, Paul, not many questions, but I have 2 broader questions. Firstly, obviously, an extremely strong start to the year, even if you strip out the Daiichi payment and high comps from last year. Just wondering maybe if you could talk to the reasoning for a lack of a guidance upgrade at this early juncture. Appreciate it's early, so maybe things that we need to be aware of during 2021 that refrains you from increasing the guidance at this point in time. So maybe it's often pushes and pulls sometimes that is pretty helpful. And then the second question is on vaccines, specifically COVID-19. I mean, maybe if you could help us further understand the opportunity you potentially see now for your COVID-19 recombinant vaccine given the safety issues that we've seen from J&J and AstraZeneca. I appreciate that's small. It is something you previously planned 12 months ago using that methodology with a lot of risks. And maybe you can help us understand where you see the opportunity to go forward and whether or not the BARDA funding arrangement potentially still would impact some profitability in 2022. And then just on messenger RNA, Moderna 2 weeks ago, extremely bullish on their platform, talking about opportunities in other areas. Could you maybe just talk to your level of confidence with respect to Translate technology platform? It has been 12 months since you announced the collaboration, and we do know from looking at Moderna's data in the past on their RSV attempts that it's not a straightforward process. So maybe if you could talk to your expectations around in terms of Translate Bio, that'll be interesting.

[Paul Hudson, CEO & Director]

Simon, you made up for it with a good list of questions, so thank you for that. Definitely a strong start to the year and early, like you said. I think what people are trying to figure out is if there's anything unsaid, and it's really just about managing the business, so I'll hand it to JB to give you some context on that.

[Jean-Baptiste Chasseloup de Chatillon]

Thank you, Paul. Well, I think it's an opportunity to give a more precise message maybe on my side. We want to create value for the long term. So I mean, investing as we do in our early pipeline on broadening our Phase III study's spectrum is where we want to be. So you will see some increase of our R&D spend. Because, as we said in Capital Markets Day in 2019, that's where we want to spend the money on assets which are worth it. And that's the point, the sweet point we are getting to. So don't overread in our early quarter 1 good results. They are a long-term trend, and we want to accelerate our value creation and really be able to deliver growth for the second phase of the plan.

[Paul Hudson, CEO & Director]

Thank you. Thomas, there's a lot of vaccine questions. We keep it quite short because I want to get more questions in. But over to you on what role, I guess, will we have any broad comments on safety and maybe where we're at with TBIO and mRNA.

[Thomas Triomphe, Executive VP & Head of Sanofi Pasteur]

So on COVID-19, first, Simon, it's a pandemic, and let's be clear. We have to be modest. We're learning every day. So that's true for all the different vaccine steps that are in there. And we're going to keep learning every week. So -- but it shows that as long as the problem is not solved, it's not solved. And therefore, that's why we are full in. We are full in with our 3 partnerships of doing full impact for 3 different partners, and we are mostly full in with our development of our 2 own programs. Phase II coming very soon, we'll see the results. Of course, we'll come back to you very quickly with that. We have a very strong collaboration with HHS and the U.S. government to go to Phase III ASAP as soon as we have the Phase II results. And we believe it could be a very useful program with volumes coming in Q4. And we believe that there will be a 2022 booster doses that will be required, and we'll be there. Then on mRNA, I think you appreciated the Moderna vaccine today. I did too. I think it's showing the potential of this platform to actually create novel vaccines very exciting platforms to be able to go into vaccines development territories that we couldn't go before because of technology. Very excited about our partnership with Translate Bio. As you know very well, we're in Phase II right now on our COVID-19 product. We'll get the readout in Q3. We are moving forward as fast as possible also through mRNA, but very confident in this partnership. We believe it's a new frontier that has been crossed over and will make us have a lot of new vaccines down the road.

[Paul Hudson, CEO & Director]

Thank you, Thomas. Yes, and as said, I think we're very excited and very confident. Pandemic, of course, all these emerging side effects and different things are part and parcel because of the speed. In a regular season, say, flu, for example, the bar is even higher when there's standards of care already approved and that have to be beaten. So we're optimistic, I think. You hear it from Thomas and where we are with mRNA, about how we'll compete and how things will shake out.

[Operator]

And the next question is from Geoff at Leerink.

[Geoffrey Craig Porges]

Just maybe a couple on vaccines and one on Dupi. Thomas, on vaccines, congratulations on Vaxelis. It's only been about 25 years. Is there an opportunity for you to substantially increase your pediatric vaccine revenue because you have that hexavalent? And then secondly on nirsevimab, you've said in the past, we should expect pricing in the range of of pediatric -- sorry, of innovative vaccines. But could you just give us a sense is that the full schedule of innovative vaccines or single doses? Because obviously quite different. And then lastly, perhaps you could comment on where you are in the pentavalent meningitis program. It does seem that meningitis is doing well for you, but you seem to be behind the competitors in the pentavalent. And just wondering if that revenue for you is at risk long-term as we think about models.

[Paul Hudson, CEO & Director]

Did you -- I thought you asked -- there maybe a Dupixent question as well. But if you...

[Geoffrey Craig Porges]

Yes, so my Dupixent question maybe for you, Paul, is a lot of good things have happened with Dupixent. You've talked about COPD, there's a whole allergy program and strategy now that's been added, and obviously, there's some clouds over the competitors in that category. So why isn't -- and you're halfway towards EUR 10 billion already. Why isn't the EUR 10 billion way too low given all those developments?

[Paul Hudson, CEO & Director]

Well, maybe I'll take that one first before I pass to Thomas. So it's not that long [indiscernible], everybody thought it was too high. So as we push on -- we take nothing for granted. Every day is game day with Dupixent because we know the next few years, we know the IL-13s are half the answer, literally, missing the IL-4 component. We know the emerging real-world data and clinical data on the JAKs. So we know there's challenges. We take nothing for granted. We have a lot of work to do. We have incredible clinical development program, we're incredibly disciplined commercially. You just heard from Bill what's happening in China. So we've guided to 10-plus and maybe it's the plus that you're talking about. And over time, maybe we'll give you a bit more detail on that. And maybe I'll go back to Bill, if he wants to add anything to it. Thomas, so quite detailed questions, but I think important questions on Vaxelis on the pentavalent meningitis. But I also think you should get to the pricing on the one-and-done in RSV.

[Thomas Triomphe, Executive VP & Head of Sanofi Pasteur]

Yes, thank you, Geoff. So on RSV pricing, very clearly, we're talking about premium innovative vaccines. Full schedule. It's a 1 dose treatment -- 1 dose, sorry, preventive measure with nirsevimab, but it's comparable to a full schedule because you want to make sure that you have the same impact on disease. So that's very clear here. On Vaxelis, thank you for the congratulations. As you were mentioning, it took a while. But I think it's very important to mention that this is very important because we're going to be able to bring 6-in-1 in the U.S. You know that some have tried before and didn't -- were not successful to do it. It's going to be the first 6-in-1 with very exciting antigens. Of course, price premium plays a role in there. You probably remember that it's a JV with Merck, and therefore, we are not booking into the sales lines. But I think it's important to mention that it has a very important positive impact, of course, on the vaccines BOI margin ratio. And that the BOI in total value, in absolute value, is expected to remain stable when you look at the Pentacel versus Vaxelis. And of course, I insist on the fact that our full year guidance on our growth for vaccines completely includes the launch of Vaxelis in the U.S. Why we are very excited because what we've seen in the past is that 6-in-1 versus 5-in-1 have been able to gain market share significantly. Those have been launched 2 decades ago in Europe. Very exciting that we can provide those in the U.S. And I think it's going to be up for a very high start. And finally, on MenPenta. You probably have seen that we're entering our MenB program into Phase I/II right now, so -- which gives you a hint on the fact that we're going towards MenPenta right after. So we are definitely following that one. I don't think the 2 MenPenta are being developed are of significant concern when we're looking at their midterm sales. Why? Because with MenQuadfi that we are launching now in the U.S. We believe we have the best 4-in-1 meningococcal vaccine, ACWY, and that's going to be a backbone that will be very important moving forward. We now want to add the best MenB maybe to have the best menpatal.

[Paul Hudson, CEO & Director]

Thank you, Thomas. I appreciate it.

[Operator]

We will take Jo from Crédit Suisse.

[Jo Walton, Managing Director]

A few questions on your emerging drugs. On Sarclisa, we've seen that that's gone from -- it's gone to be bigger ex U.S. than U.S. very quickly. Is that the bolus of sales into new markets as you launch? Is it underlying demand? If you could just tell us a little bit more about the progression of that product, please? And also your strategy for Libtayo, it's at the moment, not really very differentiated. You could be in the lead with the adjuvant CSCC indication, but clearly, you started at around the same time as KEYTRUDA. So you could be fit at the post there. So just a little bit about your strategy going forward there, please. And could you please -- just 2 quick other ones, could you just tell us a little bit more about why there was a PDUFA delay for your new Pompe drug? Just to be sure it wasn't anything to do with any of the data. And for Jean-Baptiste, I wonder if you could tell us about marketing costs going forward. It was probably -- as we go through the rest of this year, how realistic is it for you to be able to keep that overall SG&A number at under -- at a decline rather than growth?

[Paul Hudson, CEO & Director]

Okay, well, I'll just quickly take the PDUFA one. Then Bill, then JB, and we can provide more if needed. But really, we're going for a broad patient population. There's been a request for more data. It's been a very encouraging and positive conversation. There's a delay of course, there's a lot of challenges worldwide for how everybody runs their organizations. But we're feeling very confident. And Bill said upfront, we're excited about what it will bring to patients. Bill, Sarclisa, Libtayo? It's very early, I mean, to be talking about Sarclisa, but do you want to make any comments ex U.S. versus U.S. for Sarclisa and then Libtayo?

[William J. Sibold, Executive Vice President of Sanofi Genzyme]

Yes, look, I think it has to do with the ability to launch on a global scale quicker. In the past, you used to have to wait a long time to be launching in the various geographies. Ex U.S. is off to a very strong start as well. I think the important thing to kind of capture Sarclisa is that now that we've had our second approval within 12 months in both the U.S. and the EU based on the IKEMA study results, so that's in combination with Kd. We see the commercial potential increasing from about 13% of the market, Jo, to 35% of the market. So I think if you look ahead, this unlocks the market some. The U.S. launch happened like simultaneous with the lockdowns that took place with the pandemic. And so we're very optimistic about where the future has to hold with the market nearly tripling with these new -- pardon me, new approvals. Regarding Libtayo, we really see it as being the leader in non-melanoma skin cancer. I think the recent expansions that we've had including BCC, it really is off to, I think, a very strong start for us. So that's where we expect that we're going to stay and become leaders.

[Paul Hudson, CEO & Director]

Thank you, Bill. JB, marketing costs, remainder of the year?

[Jean-Baptiste Chasseloup de Chatillon]

Yes, I think Jo's question was also beyond maybe the remaining of the year because for this year, it's the same trend. We are really looking to go deep in G&A and going on stimulating our growth engines. But looking beyond this short-term period with a normalization of the situation of COVID, we think we will not just keep most of our gains linked to COVID, but we will go on with our savings opportunities. That will offset a natural rebound because, yes, we will be back on the ground, and there will be some costs kicking in again. But that will be absorbed by our extra savings because I still identify with the teams many, many opportunities. So in the midterm, we will see some increase of the selling and general expenses, not so much because of post COVID. But because we will see our top line growing, and we will be preparing for launches of new drugs. And that's where we want to be. But we think we have -- we are in a very good spot to contain any rebound from a post COVID era, on going on with extra savings that will more than offset those -- this restart that we will see.

[Operator]

The next question is from Graham from Bank of America Merrill Lynch.

[Graham Glyn Charles Parry]

So I've got a couple on amcenestrant and one on your SHP2. So on amcenestrant, obviously, you're expecting the AMEERA-1 CDK4/6 combo data fairly soon. That's a single-arm study. So just wondering what you think is an appropriate benchmark that investors should be using to look at the response rate. So for example, CDK4/6 fulvestrant second line combo trials have shown response rates ranging from mid-20s to low 40s. So is that the right sort of range we should be referencing? Or would you point to differences in patient populations in the trials? And then secondly, your events slide show Phase III start decision on early breast cancer in the first half. What are the gating factors? And what's that decision going to be based on? So you're getting interim looks at your AMEERA-4 trial results because I think the final result studies were delayed until 2022. And then thirdly, on your SHP2, so you had some monotherapy data presented by your partner Revolution Medicines at the ACR. I just wonder what your thoughts on the data, the profile opportunity and combinations for that product would be and your level of excitement about that project.

[Paul Hudson, CEO & Director]

Thank you, Graham. John, a bunch of questions on amcenestrant, including response rates if we're going to share the gating. Do you want to have a quick -- give a quick answer?

[John C. Reed]

Yes, thanks, Graham. The -- on the combination with the CDK4/6 inhibitor class, I think as you suggested fulvestrant plus palbociclib, for example, would be a good benchmark. The thing that's a bit challenging there though is that the number of prior lines of therapies and what those therapies were has a big impact on what the outcomes might look like. So you'll have to also normalize for that when you look at the data. Regarding AMEERA-4, that's the lead up to the adjuvant study. We did get off to a slow start because of the pandemic, but have decided that we'll be able to get the answers we need with probably about half as many patients as we originally thought so that we won't delay moving into the adjuvant setting. So we feel like we're going to catch up essentially by virtue of being able to get to what we need with fewer patients essentially in that study. And then was your last question about...

[Paul Hudson, CEO & Director]

SHP2.

[Graham Glyn Charles Parry]

Yes. It's SHP2.

[John C. Reed]

SHP2. I'm Sorry. Yes, so the interrogation of the SHP2 molecule, the partnership with Revolution Medicines is very exciting for us. We are doing combination studies right now with Amgen's KRAS inhibitor, which is one of the combos that at least preclinically has been very exciting. We have studies undergoing with other combination partners that makes sense, including not only playing the signal transaction side of the equation with things like osimertinib combos and MEK combos. But also looking at the possible immuno-oncology angle by virtue of the fact that SHP2 does get recruited to the cytoplasmic tail of PD-1 when PD-1 is activated in T-cells, so there is also a a way to think of that. Another side of the coin here, thinking about immuno-oncology, and that study is underway as well.

[Paul Hudson, CEO & Director]

Thanks, John.

[Operator]

We will take Richard from JPMorgan.

[Richard Vosser, Senior Analyst]

First question, just on Dupixent back there. How are you seeing the uptake in the sort of pediatric AD patients relative to the early stages that you saw in the adult? Is there any sort of acceptance levels that you're seeing that that's greater or something that can help us think of the uptake potential there to boost growth? Second question on tax reform, Paul, you mentioned health care reform, but just on the tax reform impacts, of course, the tax rate is down this year to 21%. But how should we think about the U.S. impacts on Sanofi? And then finally, just back on nirsevimab, I think, Thomas, you suggested benefit across all types of patients. Can we just have an idea if the benefits are sort of very similar across those patients conserved of what we've seen in the Phase II? Anything you're going to help with there would be great.

[Paul Hudson, CEO & Director]

Okay. Yes. Thanks, Richard. So just quickly preterm and full term, we know already, but Thomas, over to you, on nirsevimab.

[Thomas Triomphe, Executive VP & Head of Sanofi Pasteur]

Clearly very good impact for all infants, preterm, full term, synergies relevant, nonsynergies relevant, we're confident moving forward.

[Paul Hudson, CEO & Director]

Thank you. JB, tax and how well we're going to manage any changes in the U.S.

[Jean-Baptiste Chasseloup de Chatillon]

Yes, we're looking at what's happening currently. So discussions are happening, and we think part of it will go through. It's not clear which part. In the meantime, we are clearly benefiting from a very positive trend in our other -- in our ex U.S. tax centers. So all in all, it's a bit early to tell you where it will land, but I'm quite hopeful that we will go on finding new ideas to improve our effective tax rate.

[Paul Hudson, CEO & Director]

Thank you. And then Bill, Dupixent update, peads AD.

[William J. Sibold, Executive Vice President of Sanofi Genzyme]

Yes, strong just like it was in adults, and I think it's just further proof of the really strong safety and efficacy profile of the product.

[Operator]

So the last one will be from Laura.

[Paul Hudson, CEO & Director]

But thank you, thank you to everybody. I would look forward to seeing you again at the next results, if not before.

[Eva Schaefer-Jansen]

Thank you, and have a good day. Bye-bye.

[Operator]

Goodbye.