Sanofi SA

PAR:SAN

Earnings Call Analysis

Sanofi's Strong Q2 Performance and Upgraded Guidance

Sanofi delivered double-digit sales growth in Q2 2024 propelled by Dupixent, which achieved over €3 billion in quarterly sales, marking a 29% increase. Opella, their Consumer Healthcare business, also saw 10% growth. Based on robust first-half performance, Sanofi upgraded its earnings per share guidance. The company achieved several pipeline milestones and maintained stability in vaccine sales, excluding prior-year COVID sales. Gross profit grew double-digit, though gross margin was slightly down due to currency impacts. Operating expenses rose by 5.2%, driven by investments in R&D and marketing. Despite a higher tax rate and increased finance costs, business EPS grew 4%, with a positive outlook for the remainder of the year.

Steady Growth and Strategic Expansion

In the second quarter of 2024, we observed strong business momentum with double-digit sales growth at constant exchange rates (CER). A key driver of this growth was Dupixent, a standout performer that achieved over €3 billion in sales for the first time in a single quarter, driven by robust demand across various regions, particularly the United States, Japan, China, and Europe . Dupixent's impressive 29% growth underscores its expanding reach across approved indications, age groups, and geographies .

Financial Performance and Guidance

Gross profit showed double-digit growth, aligned with our sales performance, although the gross margin slightly declined due to unfavorable currency impacts and reduced COVID-19 revenues from last year . Operating expenses rose by 5.2%, reflecting increased investments in marketing, sales, and R&D, with R&D expenses seeing significant growth when excluding a one-time €200 million reimbursement related to Altuviiio . Despite higher tax rates and increased finance costs, business operating income grew by 8.3%, and EPS growth reached 4% . Based on this robust performance, we have upgraded our earnings per share guidance for 2024 to a stable outlook at constant exchange rates .

Pipeline Progress and New Approvals

Our pipeline continues to deliver with notable approvals and submissions. Dupixent received EU approval for treating COPD, marking a significant milestone as it became the first biologic medicine approved for COPD in the EU ahead of the U.S. . Additionally, fitusiran was submitted in the U.S. for hemophilia A and B patients, with an expected regulatory decision early next year. The approval of Altuviiio in the EU and progressing submissions for Sarclisa and others highlight our robust pipeline activity .

Focus on Flu Vaccines and New Partnerships

In vaccines, although we anticipate a low single-digit decline in flu sales due to softer vaccination rates, our overall sales guidance remains positive . We are excited about our partnership with Novavax to create a combination vaccine that merges COVID-19 and flu immunizations, expected to enhance vaccine efficacy and tolerability . Additionally, we are preparing to commercialize Novavax's COVID-19 vaccine starting next year .

Strategic ESG Initiatives

Sanofi's commitment to sustainability has been recognized, with Time Magazine ranking us as the world's seventh most sustainable company across industries and first in pharma . Our comprehensive carbon transition plan aims for carbon neutrality by 2030, with significant progress already made towards reducing emissions across our value chain .

Bright Outlook and Future Prospects

With consistent growth in new medicines and a strong commercial performance, we are well-positioned for continued success. Our strategic focus on innovation, combined with disciplined cost management, ensures we remain on track to meet our ambitious targets for the coming years. The upcoming RSV season presents a significant opportunity for Beyfortus, expected to achieve blockbuster status globally in 2024 .

Earnings Call Transcript 2024-Q2

[Thomas Larsen, executive]

This is Thomas Larsen from Sanofi IR Team. Welcome to the Q2 2024 Conference Call for investors and analysts. As usual, you can find the slides on sanofi.com.

Please turn to Slide #3. Here, we have the usual forward-looking statements. We would like to remind you that information presented in this call contains forward-looking statements, which are subject to substantial risks and uncertainties that may cause actual results to differ materially. We encourage you to read the disclaimer in our slide presentation.

In addition, we refer you to the Form 20-F on file with the U.S. SEC and our French registration document for a description of these risk factors. As usual, we will be making comments on our performance using constant exchange rates and other non-IFRS measures. Numbers used are million euros and for Q2 2024 unless stated otherwise.

Please turn to Slide #4. First, we have a presentation, then we take your questions. We have kept the presentation short as other companies report today, and we aim at keeping the call to maximum 1 hour.

For Q&A, we have Brian, Olivier, Thomas and Julie to cover the global business unit and Roy, our General Counsel. [Operator Instructions]

And with this, I'll hand you over to Paul.

[Paul Hudson, executive]

Well, Thomas, so much better when you do the intro. Thank you, and hello to everyone on the call. Our strong business momentum continued in the second quarter. We delivered double-digit sales growth at CER. We continue to execute on our pharma launches and we keep advancing our pipeline of new medicines. Our growth was driven by a strong quarter for Dupixent, 7 years into its launch and the broad-based performance of our new medicines.

Our vaccine sales were stable when excluding the effect of last year's COVID sales. The sales of Opella, the new name of our Consumer Healthcare business grew by 10%, with the U.S. wellness brand Qunol is the main driver in the United States. Based on the robust growth we've seen in the first half, we are confident about the stronger outlook for the remainder of the year, and that's why we are upgrading our earnings per share guidance for 2024, and François will provide more details in a moment.

Turning to Slide 6. Dupixent reached a significant new milestone for the first time. Sales exceeded the EUR 3 billion mark in a single quarter. This new quarterly sales record highlights continued strong volume growth across approved indications, age groups and, of course, geographies. Dupixent's growth of 29% in the quarter was fueled by its consistent and robust U.S. performance. Given the timing of July 4 Holy Week, we saw a slightly stronger volume trend at the end of June. The rapid expansion in key markets outside of the U.S., such as Japan, China and Europe further boosted Q2 performance, growing at almost double the pace of the U.S.

Looking ahead, we remain excited by the near to midterm growth outlook to Dupixent, which bolstered by a series of upcoming regulatory catalysts inside and outside the U.S. We recently obtained the EU approval for COPD, and we're looking forward to the U.S. PDUFA decision at the end of September, which is expected to be a significant driver for Dupixent's continued expansion. Overall, we remain on track for our target of around EUR 13 billion in 2024, in line with our low double-digit compound annual growth rate goal set from 2023 to 2030.

Now on Slide 7, turning to our launches and how we bring innovation to patients. Quarter after quarter, the growth of these new medicines increasingly contributes to our top line growth. François will explain the key contribution of these successful launches to the accelerated business dynamics in a minute. Growth of Nexviazyme due to patients converting from legacy treatments in Pompe franchise remains a key driver.

Most eligible patients in the U.S. are now on the new standard of care with Nexviazyme and patients continue to convert outside the U.S. Altuviiio annualized is launch to the end of March. Growth rates remain very strong with higher sales predominantly in the U.S., where it was driven by patient switches, of which an increasing majority came from medicines other than Altuvoct. Other medicines also did well in growth in absolute terms including Sarclisa's fast expansion in Europe and Japan.

As expected, Beyfortus sales in Q2 were low due to vaccine seasonality. Looking ahead to the upcoming RSV season in the Northern Hemisphere, we remain excited by the opportunity for Beyfortus to advance towards all interim protection and reached blockbuster status globally in 2024. As the world leader in flu vaccine, Sanofi has a pivotal role to play in bringing forward innovative solutions against this disease by addressing current challenges and building strategic partnerships. In May, we announced a new partnership to combine Novavax's COVID-19 vaccine with our differentiated flu vaccines with the goal to create a best-in-class combination.

This new combination include our flu vaccines that have proven efficacy in preventing flu infections and its severe consequences such as pneumonia and hospitalizations and of course, has received an ACIP referential recommendation. We believe our truly differentiated combo vaccine will demonstrate favorable tolerability compared to current COVID-19 mRNA-based combination vaccine candidates, ultimately driving higher vaccine rates. To clarify, we believe that combination vaccines developed by competitors that would compromise tolerability or proven level of efficacy with damaged vaccine confidence and further impact vaccination rates negatively.

In addition, Sanofi will commercialize Novavax's COVID-19 vaccine from next year and book the sales. Thanks to our leading commercial capabilities, we hope to be able to further drive broader acceptance of COVID-19 immunization. You're seeing the recent public concern about H5N1 avian influenza. We take responsibility in pandemic preparedness with 2 pivotal programs. Our egg-based protein adjuvanted vaccine is set to begin a study in Q3 in collaboration with BARDA and our mRNA pandemic flu program will enter clinical studies in the coming months. In summary, our commitment to innovation continues to drive our leadership in the flu vaccine market, ensuring we are prepared to meet current and future challenges.

Well, let me conclude by highlighting a separate positive note relating to our ESG commitment. Time Magazine recently ranked Sanofi as the world's seventh most sustainable company across industries and first in pharma. This ranking reflects the progress of our integrated ESG strategy. And thanks to our comprehensive carbon transition plan, we are now on track to meet carbon neutrality in 2030, in line with our science-based target initiative commitment. To achieve this target, we focus on key decarbonization levels presented on the slide.

For Scopes 1 and 2, 43% reduction of our activities was already achieved, and we are targeting 55% reduction by 2030. The Scope 3, 10% reduction was accomplished so far. We're aiming for 30% across the value chain.

With that, I hand over to François, our CFO.

[François-Xavier Roger, executive]

Thank you, Paul. Good morning, and good afternoon to all. Let me start with our sales development on Slide 11. We have delivered robust results in the second quarter with 8% reported growth and even 10% at constant exchange rates. Our growth is broad-based across businesses and geographies and hyperinflationary countries had only a limited contribution to our growth. We are delivering quality growth as you can see on the right-hand side. Our continued portfolio transformation is a key growth driver with strong performance from Dupixent and the ramp-up of our newly launched medicines. Other products also had a significant contribution.

Please turn to Slide 12. Gross profit showed double-digit growth in line with our sales performance. Gross margin was slightly down due to unfavorable currency impact of [indiscernible] and COVID-19 revenue last year. At constant exchange rates, our gross margin has slightly increased, mainly driven by improved product mix.

Total operating expenses were up by 5.2% as we invest in marketing and sales to support launches and in R&D. R&D expenses grew double digit when excluding the onetime EUR 200 million reimbursement from Sobi related to Altuviiio. We are fully on track with the step-up of our R&D spend by approximately EUR 700 million this year to land 2024 for around EUR 7.4 billion.

SG&A expenses grew substantially less than sales growth, generating a positive gross leverage impact on margin. Business operating income grew 8.3% and business EPS growth was up by 4%, driven by higher BOI, partially offset by the higher tax rate of 21% as well as increased finance costs from higher net debt.

Please turn to Slide 13. Based on our current performance in the first half of the year on a strong business outlook for the remainder of the year, we upgraded our earnings per share guidance for 2024 to stable at constant exchange rates.

Let me now give you a little more color on some key considerations for the balance of the year. On Beyfortus, we anticipate the first shipments in the Northern Hemisphere takes place in Q3. Regarding phasing, Q4 sales are likely to be higher than Q3 based on regulatory approval of the 2 additional filling lines expected in September. On flu, we anticipate a phasing with approximately 70% of sales in Q3 and 30% in Q4.

Total sales for flu are expected to decline low single digits versus last year due to an expected softer vaccination rates. Other items are similar to what we shared with you last quarter. So overall, we are pleased with our Q2 commercial and financial performance with sales growth of 10%, underlying improvement in gross margin, further cost discipline and the continued modernization across the company. This positive momentum in Q2 and the positive outlook for the balance of the year leads us to upgrade our guidance.

With that, I hand over to Houman for further positive news on the pipeline.

[Houman Ashrafian, executive]

Thank you, François. Slide 15, we've achieved several milestones this quarter, showing our continuous pipeline progress. Dupixent for the treatment of COPD was approved last month in the EU and this is the first time Dupixent has been approved in the EU ahead of the U.S. Further, it is the only biologic medicine approved to treat COPD anywhere.

Now Altuviiio is also approved in the EU under the name Altuvoct. We've received several accepted regulatory submissions, including priority reviews of Dupixent and CRS with MP and adolescents and Sarclisa in newly diagnosed transplant ineligible multiple myeloma with U.S. PDUFA dates in H2.

Additionally, fitusiran, our RNA antithrombin, the patients suffering from hemophilia A and B has been submitted in the U.S. with a likely regulatory decision early next year. In support of our drive to become a tech-powered biopharma company, we formed a recent collaboration with FormationBio and open AI to accelerate drug development, also supported by the collaboration with BARDA to advance the discovery and drug in immunology targets fitting perfectly with our research program STAT6, a key target in immunology.

Completing our focus on rare diseases, we've recently announced a development and commercialization agreement outside the U.S. with Fulcrum for losmapimod MAPK, a MAP kinase inhibitor and in facioscapulohumeral muscular dystrophy, a genetic neuromuscular disease characterized by progressive muscle weakness.

This medicine is in Phase III with an expected data readout by the partner at the end of the year. Moving forward with neurology, we have 2 recently announced -- we have also recently announced our exclusive license rate with [indiscernible] with 1 small molecule in Phase I, focusing on an area of huge unmet medical need, Alzheimer's disease. These regional activities are helping us to replenish our early-stage projects to ensure the sustainability of our.

Next slide, please. The ATS meeting in May, we presented high-dose Phase II data from the proof-of-concept withdrawal design study of rilzabrutinib, our advanced oral targeting both type 2 and non-type 2 inflammation in moderate-to-severe asthma. Week 12 treatment with high-dose rilzabrutinib resulted in a 36% relative risk reduction in the loss of asthma control events compared to placebo. This extended a 25% reduction observed in the low-dose cohort.

Additionally, we observed a rapid normally significant and clinically meaningful improvement in asthma symptoms and quality of life with a well-tolerated safety profile. These positive results demonstrate the potential of rilzabrutinib and add-on for uncontrolled asthma patients and are part of a broader set of studies to build on the positive Phase III data in ITP for the regulatory submission expected later this year.

Slide 17. Turning to oncology and the recent ASCO meeting, we presented our important Phase III data from the IMROZ study, the newly diagnosed myeloma transplant ineligible patients. The primary endpoint is met with a statistically significant reduction of 40% in disease progression or death for patients treated with Sarclisa, VRd versus VRd alone, estimated 63.2% of patients had no PFS event of 60 months versus 45.2% for patients treated with VRD alone. This frontline use and transplant ineligible patients were formed potentially a third indication of Sarclisa with expected regulatory decision by September '27 in the U.S. Several additional studies are currently ongoing to further extend indications to Sarclisa, including the subcutaneous formulation.

Slide 18. On my last slide, I would like to highlight the exciting upcoming news flow for the next 18 months in support of increased R&D productivity. We plan 12 Phase III readouts, 13 submissions, 9 regulatory decisions, and we look forward to keeping you updated on the progress. Before handing back to Paul, I'd like to extend my sincere thanks to every colleague in the R&D team for the work they do for patients. We've undergone changes over the past month. We're well on track with the pipeline of new opportunities as we change [indiscernible] science to improve people's lives.

With this, I hand back over to Paul for Q&A.

[Paul Hudson, executive]

Well thank Houman and François. We'll now the call to questions.

[Operator Instructions] Remember, we're seeing many of you again early next week.

[Operator Instructions] The question will be ready and read by our panelists. Now I'll take the first question, Thomas?

[Operator]

The first question will come from the line of Graham Parry, Bank of America.

[Graham Parry, analyst]

So firstly, on Beyfortus, could you just confirm current guidance still only assumes the existing capacity and EUR 1 billion of sales with approval of expanded supply being upside to that? And then can you clarify the scale of the expanded capacity. So I think you talked about 2 lines adding to 1. So can we just assume that's sort of tripling? And can we read your phase and comment on Beyfortus more in fourth quarter and third quarter to mean that you might not have the manufacturing approved by the beginning of the season in September?

And then secondly, on Opella, just wondered if you could update us to the time lines in which you expect to be able to clarify to the market the root of separation so sale versus spend, perhaps just help us understand the factors that go into the decision between the 2 at this stage.

[Paul Hudson, executive]

I think there was 5 questions there, Graham, thanks. I don't know what I need to do. But anyway, Thomas, over to you.

[Thomas Triomphe, executive]

Thanks for the question, Graham. So a few elements to answer to your questions. First of all, we're confident Beyfortus will be a blockbuster in 2024. That's the guidance that we have provided and we are fully aligned with that. You remember the different messages we had provided previously, the fact that in order to increase supply we need, as you pointed out, we have 2 filling lines. We wanted to make sure that we will bring production at risk with our partner, AstraZeneca. And then we are submitting, of course, the regulatory applications for the regulatory bodies to approve those lines in due time.

So we are exactly on track with this plan, i.e., we have done production at risk as expected. We have done PPQ batches and [indiscernible] batches, and we have submitted to the different regulatory body, all the different regulatory applications for those lines. Now it's in the end of the regulatory bodies for the exact timing of the approval, which will enable the overall shipment of doses. But we believe that there's all the reasons to be confident about the accelerating review process of those lines and about the fact that we'll be able to move forward for the supply for the 2024 RSV season.

Now in terms of the indication we've provided on the split in quarters between Q3 and Q4, we have pointed out to the fact that we expect, again, within what we know today to have Q4 sales above Q3 sales. That's because here, while it's a seasonal product, there are some differences with flu, for example, where you have in flu vaccinations earlier of the season and that's it. Here for RSV, there's all the in-season born babies that are born in the month of October, November, December, January, February and March.

And that also accounts for a significant part of the demand. Therefore, with information we have today, we believe it's reasonable we expect Q4 sales to be above Q3 sales. Overall, confidently moving towards the coming out of the season and again confirming the guidance but it will be at least blockbuster sales for us in 2024.

[Paul Hudson, executive]

Thank you. François on Opella.

[François-Xavier Roger, executive]

Yes, Graham. on Opella. As far as the timing is concerned, we confirm what we have said before, which means we expect that transaction to take place at the earliest in the fourth quarter of '24 could be potentially in the first quarter of 2025. But I think it would make a big difference. I do confirm as well that we are still in a very competitive process with basically 3 options. 2 of them are public, either an IPO or a spin, and one of them is more sent to a private party. So the game is still totally open as we speak with 1 objective, which is value creation for shareholders. Maybe to help you a little bit, the 2 main items that we are looking at is clearly the valuation, the value as of today or whatever we could extract us value in the future as well under different configuration but it's very essentially value story.

We are taking into consideration, obviously, the execution risk, certainty of transaction versus uncertainty. That's part of what we are looking at. The good news I can share with you is one is that the process is any way between the different options very competitive. So which means that usually when you have a competitive process, you're in a better position to extract value. So we are very positive for what is the quality assets.

[Operator]

Next question comes from the line [indiscernible] from Barclays.

[Unknown Analyst]

[indiscernible] from Barclays, asking questions for Ms. Xiaobin Gao. We have 1 question for flu vaccine. Can you please share with us the time line for the COVID-19 and plus flu vaccine on the preparation with Novavax. In addition, how would you comment on the perspective of flu vaccine over solo flu vaccine? Also noticed you have an mRNA flu vaccine in Phase I. How would this candidate provide potential synergy or other impacts on your current product launch?

[Paul Hudson, executive]

Thank you. Thomas?

[Thomas Triomphe, executive]

Thank you very much, [indiscernible], a few elements in your question. First point, I understood you got questioning on the partnership with Novavax and more specifically about the combination vaccines where we have, you understood very well, we really want to make sure that there is no compromise either on safety or efficacy. And we believe that the combination is only worth if you at least as good or better than the best stand-alone products separately. That's exactly what we want to do with the vaccine. It's a bit too early to talk to you about specific time lines. That's why we have not shared anything about this but it's probably not crazy to think, but following this partnership, we want to go fast, and we intend to start clinical operations this year in 2024 on this combination vaccine.

That's for the combination vaccine. Now you -- I pointed to a couple of elements, which are very important. First of all, you had the questions on our mRNA flu project. And you had a question about is it synergistic or not? A few good points there. On mRNA flu, you've seen in the pipeline appendix but we are moving our Phase I mRNA flu from 1 product to another product, very simply fully in line with what we were discussed at the investor event last year where basically we were showing that the first generation of mRNA flu are not moving the needle. Basically, first generation mRNA flu are generating flu titers, flu antibodies, but the efficacy is not known, and the level of safety is definitely not at level of safety and tolerability of the current standard of care flu.

So that's why we claimed at that time but we want to go to the next generation of harmony. And that's exactly why we are doing with this new contract, wanted to go to the next stage of mRNA flu because if you're not improving standard of care, there's no point of moving further development. And that's why we believe our approach to mRNA flu and our approach on combination vaccine is the right ones. Of course, you've seen the difference with some others but there is a big compromise on tolerability and maybe on efficacy. We don't think it's a winning recipe.

Last but not least, you understand that putting all this together, we see a synergistic effect and not a cannibalization effect. We are leaders in industry today but we will be again leader tomorrow.

[Operator]

So your next question comes from the line of Seamus Fernandez, Guggenheim.

[Seamus Fernandez, analyst]

So I wanted to just drill into expectations for the COPD launch hoping you could just provide us with a little bit of color on the trajectory of growth. We saw very strong growth from Dupixent in so many other launch categories but this is a uniquely large one. And I just wanted to get some color there. And then just as a separate question, can you give us your thoughts on the -- where you think the CD40 ligand asset has the most appropriate opportunity outside of multiple sclerosis?

[Paul Hudson, executive]

Okay. Brian, COPD.

[Brian Foard, executive]

Well, thank you so much for the question, Seamus. We are really excited about the COPD line. Obviously, we just remind everybody that we just received approval in Europe, first ever advanced therapy to be approved in COPD, third leading cause of dead worldwide. Really important moment for us in the company and certainly for patients. As it relates to the uptake, the good news is we're already in this particular physician population day to day basis with asthma. The good news is also this disease state, as we've highlighted, is driven by underlying type II information, and that is also very similar to asthma. So the storyline is still very strong.

The opportunity will be for us to find these patients and make sure that we get them into the treatment centers to make sure that we are able to get them introduced to therapy soon. As we said, we think that most of the growth will hit us in 2025 and we'll begin the launch this year, and most of growth will be in 2025.

[Paul Hudson, executive]

Thank you. Houman, CD40 ligand?

[Houman Ashrafian, executive]

Yes, thank you for the question. Outside the multiple forms of multiple sclerosis, where this may be relevant confidence around the use of this node, both in Type I diabetes and in transplant -- stroke transplant rejection is the most obvious place where the biology direct.

[Operator]

The next questions come from the line of Jo Walton with UBS.

[Jo Walton, analyst]

If I can return briefly to Beyfortus. I think we can work out for ourselves the level of demand in the U.S., and assuming that you have capacity, how you might deal with that. But can you give us a sense of where demand is building outside of the U.S. Will there be significant new countries that you can supply this year? Or will other major markets really come in next year? So it's really trying to get a sense of the U.S. ex U.S. split. And on fitusiran, which is now a filed asset, could you remind us where you think that's going to fit in the hemophilia space, please?

[Paul Hudson, executive]

Jo, nice to hear loud and clear. Thomas, over to you on Beyfortus.

[Thomas Triomphe, executive]

On the geographies, thanks for the question, Jo -- you remember that last year, we were already focusing on 3 large countries, namely the U.S., Spain and France. So those, of course, will remain in balance and really moving forward. In addition to this, we will be opening this year a few countries. I'm not going to name them also. So I hope nobody will be best if I forget a couple of them.

But to tell you the key ones, we expect a few provinces in Italy to launch [indiscernible] program. We expect Germany, you've seen the sticker recommendation to move forward on vaccination. We expect other European countries such as Ireland, Belgium and Portugal, which have also provided some recommendation. So that gives you a bit an example of how we will expand this year on.

[Paul Hudson, executive]

And maybe I'll just add that Beyfortus is not the reason for the upgrade in guidance today. So that's a positive overall. I apologize for anybody offended by Thomas' language. Houman, over to you on fitusiran.

[Houman Ashrafian, executive]

Thanks for the comment on fitusiran. Based on the mechanism of action, we believe that is applicable to all patients with hemophilia and will likely be used broadly. I'll come back to it in a nanosecond. The real issue is the major unmet medical need today in hemophilia B, especially with inhibitors. And I suspect that the immediate use of this medication will be in that group but will certainly extend more broadly. It's important to remind everybody that this is a highly differentiated therapy but very clear data.

The factors that make this an important part of the landscape of the hemophilia treatment is that it's a low-volume treatment with really tolerable profiles of injection 6 to 12 times a year compared to the manifold number of treatments for further treatment categories. And importantly, there's no cold chain. And like antibodies, this is very easy to provide worldwide. So in many ways, this is a highly differentiated therapy, and we are optimistic about it out.

[Paul Hudson, executive]

Yes. Thank you. It does have a great profile. We accept that there'll be some tailoring, titrating not uncommon with this patient population but it has a really great and compelling profile.

Next question.

[Operator]

The next question comes from Tim Anderson with Wolfe.

[Timothy Anderson, analyst]

Just on tolebrutinib, just update on timing and then really what the most likely base case expectations should be? I guess, I'd like to distill it down to a single question, do you think tolebrutinib will be approvable in some form or another based on the upcoming readouts? Or could it be a total zero?

[Houman Ashrafian, executive]

Thanks for the question. No update on the timing as we discussed late August, early September this year, consistent with what we've said. I'm mindful, of course, of our reporting obligations, and we will be deeply conscious of how we provide a data flow at the top of mind, just in terms of speculating on the outcomes of the trials, of course, I can't do that. But I have to say we're optimistic about the path for those drugs. And I would really point out simply that currently in multiple sclerosis, there's a huge unmet medical need and secondary progressive disease and in Phase II, we had really interesting results. So going forward, we'll see the results very soon.

[Paul Hudson, executive]

Yes. And I think we know that, the fact that we crossed some blood brain barrier in a meaningful way. We'll find out when we get the results, whether that is applicable to the readouts in the studies, and we'll see when that differentiation holds. So we say on original time lines. Next question.

[Operator]

The next questions come from the line of Luisa Hector. Berenberg.

[Luisa Hector, analyst]

So it's on Dupixent and expansion into more indications. So first of all, with CSU and doctors we speak to, firstly, absolutely love the Dupixent. But they're also confident there is an effect in CSU. So I'm just wondering, how we should think about Study C? Will it be sufficient for approval? What's the profile you're aiming for and how you put that in the context of the broader pipeline, rilzabrutinib, et cetera? And then perhaps just a comment on the UC Phase II when should you have the induction data in-house?

[Paul Hudson, executive]

Okay. Thank you, Luisa. Brian, Dupi indication expansion that we see.

[Brian Foard, executive]

Okay. I think, Houman, is going to talk a little bit about the profile potentially. But just as you said, and I like -- I love what you said, when you talk to patients, how much they love Dupixent and physicians how much they love Dupixent. You're absolutely right that dermatologists are excited about the potential expansion into CSU. We need a trial to read out positive, and then we'll file for this. We, by the way, just to let you know, our first launch in CSU is actually in Japan, a little bit earlier this year, and it's gone exceptionally well, still early days. But again, I think it further reinforces the profile that we bring to the dermatologist community who are treating multiple of these disease states that we have today. So again, we look forward for the data readout and bringing this to patients all around the world.

[Houman Ashrafian, executive]

Yes. I mean, Luisa, nice to hear your voice and thank you for calling. Study C, more like the Study A, we have high hopes for efficacy in patients.

So TL1A, thanks for the question for that. As you will have seen, as an example of the potency of the collaboration and what we bring to the table in collaborations when Sanofi comes to the table in immunology, we have accelerated the study by 3 months. We finished early, we overperformed. We're optimistic about both this disease class and the differentiation of this TL1A, particularly based on its raw horsepower and potency but also its ability to distinguish between DR3 and the Decoy 3 receptor, which make this a highly unique version of the TL1A molecule.

We anticipate results, I think, has been described in Q4 of this year. And we're using this trial to both guide dosing but also indication. And just to call it out, we've enjoyed the relationship with our partner Travere. And from this point through the end of this result, we'll pick up the [ backlog ] on the Phase III.

[Operator]

The next question comes from the line of Florent Cespedes of Bernstein.

[Florent Cespedes, analyst]

Florent Cespedes of Bernstein. Two quick questions. First, a follow-up on Beyfortus. If you have the approval of the 2 manufacturing lines later this year, could you tell us how do you see the capacity for 2025? Will it be twice the current level you have today? So some color on this front would be great.

Second question for Houman. Which are, in your view, most important Phase II projects that will read out until the end of next year in your portfolio? It would be great to have this comment.

[Paul Hudson, executive]

Thomas, on Beyfortus.

[Thomas Triomphe, executive]

So on Beyfortus, we didn't give any specific number on capacity. But if we have the [indiscernible] lines approved, which we will. I think we will be in a situation in 2025 to correspond to the demand. So I don't see any supply there. Of course, it's -- I understand the short-term focus on supply from everyone very clearly. But of course, you understand also that we need to build the demand over time. The registration is to be followed after by a recommendation body. So in every country, new recommending bodies will look at the file one after another. And I think we'll see a ramp up from there on. But capacity, we should be good.

[Paul Hudson, executive]

Thank you. And Houman, the question about which is your favorite child?

[Houman Ashrafian, executive]

Yes. Thank you. Thank you for the question. I won't pick out my favorite child. I'll try and be brief and thoughtful about this answer, which is, firstly, we've got a number of vaccine trials reading out. I don't want as we go through this to forget those excellent vaccine trials to read out to the board at end of next year. In terms of classes, you'll know that we've got an excellent accompaniment to our ITP franchise with wAHA on autoimmune hemolytic anemia with rilzabrutinib, that's an extremely exciting result.

Luisa kindly referred to our TL1A product. I think that is going to be exciting for us, both now and with Travere. And then going into next year, the IRAK4 that we've gone in partnership, the oral small molecule TNFR1 signaling inhibitor, which could be transformative. We'll wait with great interest, both safety and efficacy. And finally, and not least, not forgetting our energy franchise, our alpha-1 antitrypsin fusion protein is going to be an impact -- it's going to have an important milestone next year. I haven't missed any out on purpose. I just want to call out that all of our franchises immunology, neuro, rare and vaccine are firing on full thrust.

[Operator]

The next question comes from David Risinger, Leerink.

[David Risinger, analyst]

Yes. And congrats on the strong second quarter execution. So I have 2 questions, please. First, assuming itepekimab generates compelling results in Phase III next year, could you please characterize the magnitude or multiple of its sales potential in COPD relative to Dupi in COPD? And second, could you also comment, Paul, on China's interest in Beyfortus and whether there's a potential path to launch in China late decade?

[Paul Hudson, executive]

Okay. Brian?

[Brian Foard, executive]

Okay. So first, thank you so much for the question. In reference to COPD. As we have framed COPD before, there's about 2 million patients across the G7, really to suffer as we talk about this kind of that high unmet need go, if you will. This particular patient population, we're going to be bringing 2 therapies, at least to this particular patient population. Dupixent, as we said, which is very soon, itepekimab is next. Itepekimab, as we shared with you before, is largely non-type 2, it will play in type 2 as well, but all previous smokers. So these 2 drugs are really going to nicely sit together. And I think as we've contextualized this before, roughly around EUR 5 billion in peak sales across the 2 assets.

[Paul Hudson, executive]

Thank you very much. Thomas, China, Beyfortus.

[Thomas Triomphe, executive]

China Beyfortus, indeed, there is interest in China for Beyfortus. But let me maybe provide some light on this as many MNC vaccines here in this specific case of an immunization, we expect Beyfortus will be private out-of-pocket market, that's very important to have in mind, which means progressive ramp-up. We are starting from a base in China where the disease awareness is close to zero. Will need the next couple of years to build that up. As you know very well, Beyfortus has been registered in China. So now we are in the phase of actually engaging with medical professionals, defining the pathway moving forward disease awareness and then activating parents for out-of-pocket market.

[Paul Hudson, executive]

And we were -- in China recently with some senior officials, you can see the interest building significantly. So we look forward to opening that opportunity when it presents itself.

[Operator]

The next question comes from Gary Steventon with BNP Paribas Exane.

[Gary Steventon, analyst]

First question is just on vaccines. You're reiterating the mid-single-digit growth target and also the Beyfortus blockbuster addition but there is a more refined low single-digit decline for flu, which is probably a bit weaker. So the question is on kind of where the other moving parts in vaccines are, which still support the mid-single-digit outlook? Is that purely just greater confidence in passing the Beyfortus blockbuster target or setting flu? Or is there something else in the wider portfolio to think about?

And then secondly, just on Dupixent. Could you just talk to how the performance of the approved indications is trending and that relative contribution to the unchanged EUR 13 billion target for this year and just whether there's any particular pockets of strength or weakness by indication relative to your expectations in that Dupixent number?

[Paul Hudson, executive]

Thank you, Gary. I think we've sort of touched on the relative moving parts from flu and Beyfortus and et cetera. But Tom, any additional color to add?

[Thomas Triomphe, executive]

Yes. So Gary, I don't think there's any magic recipient there. So blockbuster status for Beyfortus low single-digit decline on flu, not driven to our own performance, which we expect will be strong, but not driven by the overall, I would say, market performance in terms of flu vaccination rate. We are at the end -- getting soon at the end of the prebooking season in North America, and we see a bit in plan with last year but the vaccination rate is probably on the soft side of things, which is why we've made that perspective.

On the other parts of vaccines, it's well in line with what we said before, some slight growth in our, I would say, classical endemic products or boosters and on the other hand, Dupixent, you know very well that while in the BOA perspective, we're doing well. Vaxelis in the U.S. is not booked in our sales performance. So when the product is doing well in the U.S., it does not come in the side but more comes in the time line. I would say, expected for the other parts of the business.

[Paul Hudson, executive]

Thank you. And you saw, but we will likely gain share in the flu market, even at the vaccine coverage rate is low. So the operationally, we're in good shape. Brand performance of Dupixent in currently approved indication.

[Brian Foard, executive]

Yes. Thank you so much for the question, Gary. First and foremost, I'd say it's heavily demand-driven right now from a patient standpoint. We're in a great position where we're seeing expansion not only in our core indications that we've been launched in but also in those core indications across geographies everywhere as we've launched into those new occasions around the world. So I'd say we're really benefiting again, as Paul outlined on the very first slide that it is TRx demand.

It is all about new patients on therapy or patients staying on therapy across all of our indications and across all the geographies. And that puts us really in a good position, again, to reconfirm, as Paul said earlier, our guidance on Dupixent of around EUR 13 billion for this year and which sets us up nicely for the guidance that we've given of double-digit CAGR -- low double-digit CAGR rate through 2030.

[Operator]

The next question is from Simon Baker with Redburn.

[Unknown Analyst]

This is [ Charlie ] speaking on behalf of Simon Baker. Just 2 questions from myself. One was about your appetite for radiopharma? And if you had any changes in your approach that would explain the better performance in the older broader portfolio?

[Paul Hudson, executive]

Okay. I missed the second question.

[Unknown Analyst]

Sorry, if you had any -- have there been any changes in your approach that would explain the better performance in your slightly older portfolio?

[Paul Hudson, executive]

Okay. Thank you. On radioligand therapy, Houman, if you want to make a quick comment?

[Houman Ashrafian, executive]

Thank you for the question. The reason this, of course, is radioligand a therapy is -- had a recruit essence of interest. We remain watchful in this space and are thoughtful about making into truly differentiated therapies but there is nothing that we currently have going on in our portfolio.

[Paul Hudson, executive]

Thank you very much. And just to add to that, that we remain very committed to the core therapeutic areas. We've made trade-offs to stay very focused. So a broad answer to a very specific question, we would have to feel there was something adding to make us want to go outside of what we do because we are really focused on the areas that we want to win and play.

I think, Olivier, I don't know what prompts the question, but I do know that you've been in a radical modernization of the Gen Med business and has seen the benefits from that. Maybe I want to share a bit of your secret sauce?

[Olivier Charmeil, executive]

Yes. So we are happy with the performance of the old portfolio even if during the quarter, we had some positive momentum on, which is a windfall on Lantus, which reflects the fact that we had a very low base in 2023 and of course, also to the unavailability of one of our competitors. But stepping back, I think we pay -- we benefit from the efforts that we have been doing in bringing more focus. And you know that the focus we have brought it in terms of simplification of our portfolio back 4 years ago, we had close to 400 product families. Now we are on 100. We are benefiting also from that we are simplifying our geographic footprint and deciding to go to a distributor model.

And the last point is really about resource allocation. We have redirected our resources and we take out some resources on the portfolio that can drive growth. On the -- so strong, strong momentum. We move more and more in digital in order to make sure that we continue to take out some resources and to maximize the value of this business. So overall, a very good trend, very specific situation in the U.S., but we are overall very happy with the performance.

[Paul Hudson, executive]

Yes, I've got to compliment Olivier and the team on this because this reinvention and this modernization, the radical transformation is pretty extraordinary, and we did hold a capital markets a few years ago and talked about our ambition and we declared that we wanted to try and bottom the business out and stock, we're turning to growth in a more efficient way. We're not declaring victory far from it. There's lots of puts and takes. But I would say the indications early indications are great, so thank you for the question.

[Operator]

The next question comes from Ben Jackson with Jefferies .

[Benjamin Jackson, analyst]

So firstly, on contracting for Dupixent for 2025, are you able to give us any color on how the discussions with Bayer have been going considering the Part D redesign but also the potential COPD indication by then?

And then does the September approval versus the prior June expectation, have any implications for inclusion and formularies for next year? And then secondly, if I may, we've obviously seen a qualitative readout for a competitor to Beyfortus in the recent days. What gives you retained confidence in the differentiation of the asset and its commercial opportunity beyond perhaps the -- just the compelling real-world data that we've already seen?

[Paul Hudson, executive]

Okay. Great. Thanks, Ben. Dupi, Brian?

[Brian Foard, executive]

Thank you so much for the question. So yes, obviously, we don't comment too much on how the negotiations are going with the Bayer but we always kind of remind everybody that we've been in this position for quite some time. We've worked very closely with the external stakeholders to share our ambition is to take this into a whole host of diseases driven by underlying type 2 inflammation. And you can see, obviously, from the results we've generated a very strong track record of the year. So we find ourselves in a very good position, I think, as we continue the negotiations for next year, and we do it each year.

The second part to your question is, I think the best answer to that is, again, we reconfirmed our strong commitment to around EUR 13 billion for the year. So again, we are committed to have a strong COPD launch whenever it does come. But agnostic of that, we are committed to $13 billion for this year.

[Paul Hudson, executive]

And it does -- choose an answer but the pay negotiations around CPD for '25 based on a PDUFA in September rather than June?

[Brian Foard, executive]

Yes, it doesn't really necessarily affect it. As long as it's approved within this year, you're already negotiating for these indications within the next year.

[Paul Hudson, executive]

Thank you. Thomas, RSV.

[Thomas Triomphe, executive]

Yes, Ben, indeed, there has been some recent communication from competitive monoclonal antibody against RSV. A couple of points I'd like to say about this. First of all, as you noted out, there was absolutely no data to, neither safety nor efficacy. So there's not much to say in details. What I can tell you though is I can talk about our product and what it's doing well. You've seen that we have a very strong [indiscernible] safety profile. And you've seen that we've demonstrated efficacy, not in 1 trial, not in 2 trials, but trials after trials in clinical studies and in evidence studies. And I invite you to go back to the last ACIP publication in June, where they were showing that actually the 2 effectiveness point against hospitalization were 91% and 98% as measured by the ACIP network.

So I think that the overall data set that we will have is very significant. Now of course, moving forward with if and when we're going to see some data coming down the road from competitors, I think it's going to be interesting to look at what is the exact safety profile because we're talking about the most fragile population of the universe, maybe also very interesting to see what is the exact efficacy data, especially when it comes to specialization.

And of course, we want to look at the duration of protection. On these terms, duration of protection, we are very confident about the Beyfortus profile. Why? Because we have seen from the previous studies from our competitors that the half-life of Beyfortus is significantly higher and longer than the half-life of the coming competitor.

So delighted to have some competition if it helps to bring more and more awareness about the importance of infant protection. However, I think that there will be some difference between the products. And I do believe that the fact that we have done the formulation and the design of a product that gives the exact amount of quantity or the exact kit to get the best protection is paramount to the success of Beyfortus.

[Paul Hudson, executive]

Next question. Maybe the last question. Two more? Okay.

[Operator]

The next question comes from Eric Le Berrigaud with Stifel.

[Eric Le Berrigaud, analyst]

Yes. Two short questions. First, on the other revenue line into the P&L. We've seen less dynamic this quarter but I don't want to read too much into a quarter. Is there any chance you can guide us towards how we should see other revenues moving towards the end of the year and maybe for the following years?

And then second question on Sarclisa. As you're moving closer to the launch of a very significant indication. So far, the drug is only EUR 0.5 billion in sales if we analyze where it is, but the IMROZ indication is probably at least a couple of billion in potential. Could you maybe share the kind of cost and resources you're putting behind that of the upcoming launch and how you see competition versus data that you have CFIUS data coming later, subcu may be ready, but you having 1 year launch ahead of competition. And so how big could be that opportunity for the drug?

[Paul Hudson, executive]

Thank you for 2 little questions. We'll start with François?

[François-Xavier Roger, executive]

Yes. Eric, thanks for asking the question on other revenues, indeed, you're absolutely right, difficult to read it by the quarter. And we had a weak revenue amount in the second quarter, but it doesn't mean much at the end. I can confirm that we expect for the full year 2024 to be around the same level as what we have experienced. At least as far as disposal is concerned than we had in the previous years, which is about EUR 0.5 billion of profit in -- as a consequence of disposal. So some expectation this year in '24 than what we have seen in the past.

[Paul Hudson, executive]

And Houman, maybe you could pick on Sarclisa and Brian will finish.

[Houman Ashrafian, executive]

Yes. Thank you for the question. We're bullish on Sarclisa. Obviously, it's proven case and transplant ineligible patients. But we are looking forward to seeing in the very short term, the outcome and transplant eligible patients, which will give Sarclisa the broadest possible indication profile. The second point I'd like to talk about is the fact that the subcutaneous formulation study will come next year, which will provide much more opportunity and potential sales to Sarclisa in multiple combination indications going forward.

[Paul Hudson, executive]

Thank you. Brian, do you want to add to the resourcing?

[Brian Foard, executive]

Yes, I think well, first, I'll start with the performance. As you saw in the quarter, we saw a really strong performance again. And again, this is really important that sets ourselves up nicely as we expand our indication it sets ourselves up nicely because you talked about dara there, but actually, the class of CD38 is really the strongest class there. And that class continues to grow, and that's great. We talk about the pie growing bigger. But then what we've seen is our strong growth is because we continue to do very well and continue to take share in the areas where we've been approved.

So as we look to this next expansion to first-line therapy very soon, we're really excited about that, and we're resourcing it appropriately to be able to take share and to be able to continue to grow this great asset for these patients in multiple myeloma. So we're excited.

[Operator]

The last question comes from the line of Pete Verdult with Citi.

[Peter Verdult, analyst]

Sorry, jumping from 1 conference call to the other. Can you hear me?

[Paul Hudson, executive]

Yes.

[Peter Verdult, analyst]

Good stuff. One for Houman and 1 for Paul, please, just to end the call. Just a follow-up on tolebrutinib, just given the absence of randomized Phase II data in SPMS, can you remind us why you are optimistic in this setting? Or is it just that it crosses the blood brain barrier very well and is again the placebo?

And then, Paul, for you, maybe I can tell you to at least swing the bat a little. Consensus had about EUR 865 million of earnings in for next year, points to a very nice double-digit rebounding growth for stock trading on just 11x. Now I realize this is not affordable or guidance call for '25, but hopefully, I can tell you what you can't resist saying something or giving us a sense level of comfort where consensus is? I know there are big swing back to COPD, Beyfortus, Gen Med but just wanted to keep a tie view on where expectations sit for next year and the journey of growth for the remainder of the decade?

[Paul Hudson, executive]

Okay. Well, I don't want to disappoint you as you jump between calls, thinking you could get them to reveal something about '25. So Francois, do you want to start there?

[François-Xavier Roger, executive]

Yes, I can, Pete. As we said, it's not the time to talk about '20 to '25, let's land 2024 to start with. But as you can see, we are very positive about it. But now I'm in a position to fully confirm the fact that we have a very positive -- the same positive outlook for '25 that we had before. And even -- I mean, it gives us the good performance that we had in H1 gives us further comfort on our expectation for 2025. What you can see as well is 2024 is actually the evident that the rebound is happening earlier than we thought.

So -- and just to help you a bit as well in terms of building blocks for 2025, we do expect to have a solid top line growth again. We will have some positive development in terms of gross margin as a consequence of a positive mix. We do expect to be around flat in terms of R&D spend and with the tight control of SG&A. So all of it is really giving us comfort on the outlook that we had provided before for 2025.

[Paul Hudson, executive]

Thank you, François. Houman, we'll leave it to you to bring us home on tolebrutinib.

[Houman Ashrafian, executive]

Yes. Pete, thanks for the question. The answer is pretty straightforward. I'd be a little bit more nuanced in so far as the pathophysiology of secondary progressive disease is clearly immunological origin, existing therapies, albeit not well used, are very focused on the immune response. And remember, we believe tolebrutinib differentiated not only through blood-brain barrier permeability but its effect on the profile of kinase as it hits and importantly, the potency on the kinase. So bottom line is, we believe it's a great drug working on target in an appropriate indication.

[Paul Hudson, executive]

Okay. Well, we'll get the data soon enough, and we'll find out. Okay. Well, thanks for that last question, Pete.

Our strong business momentum continued in the second quarter. We delivered double-digit sales growth at CR. We continue to execute on our pharma launches. We kept advancing our pipeline of new medicines. We upgraded our 2024 EPS guidance. Thank you for connecting. We know it's a busy day for you. We've tried to keep it short out of respect. We look forward to connect with many of you on Monday and Tuesday of next week. Okay. Thank you.