Sanofi SA

PAR:SAN

Earnings Call Analysis

Sanofi Sees Strong Growth and Pipeline Potential

Sanofi's transformation into a tech-powered biopharma company in 2023 has been marked by robust growth drivers, led by Dupixent's impressive performance which contributed EUR 2.8 billion at a constant exchange rate. Specialty Care and Vaccines showcased double-digit growth, particularly from Dupixent and vaccine sales rising over 20%. The company's Vaccine business hit a milestone with the launch of Beyfortus. Despite challenges in General Medicine, Sanofi has been active in reducing carbon emissions in healthcare. Looking ahead, Sanofi anticipates continual growth with new launches predicted to exceed EUR 10 billion in sales by 2030 and low double-digit sales growth for Dupixent. The quarter's sales increased by 9.3%, driven by Specialty Care and Vaccines, and the company delivered a 5.4% annual EPS growth, aligning with their full-year 2023 guidance.

Strong Foundation with Blockbuster Prospects

Sanofi's past year has been marked by substantial positive developments, creating a wealth of opportunities to capitalize on. Increased R&D investment is targeted towards potential blockbuster projects with a focus on addressing unmet medical needs in immunology, neurology, and vaccines. The company has set ambitious goals including a significant enhancement of its Phase III project pipeline by 50% over the next two years and is already progressing towards having over 35 projects in this phase by 2025. A disciplined investment in these areas is anticipated to yield long-term benefits to both patients and shareholders.

Regulatory Victories and Clinical Progress

Exciting near-term regulatory milestones include the potential approvals for Dupixent in COPD, and other crucial findings from multiple drug trials, such as tolebrutinib, rilzabrutinib, and amlitelimab. Notably, Sarclisa’s positive Phase III results in myeloma patients hold promise for submission for FDA approval, which could enhance Sanofi's presence in the sizable market.

Strategic Acquisitions and Innovations

An example of external growth through strategic acquisitions is the recent addition of Inhibrx, enhancing the rare diseases portfolio. The key product from this acquisition, INBRX-101, has shown promising data and may offer a much-needed treatment alternative for alpha-1 antitrypsin deficiency (AATD). The projected launch is anticipated for 2027, with an expected sizable impact on the market.

Financial Metrics and Market Performance

Sanofi has experienced double-digit growth in its Specialty Care division amidst the backdrop of generic competition, especially noted for the drug Aubagio. Dupixent continues its impressive sales trajectory, aiming for nearly EUR 13 billion in 2024. The company's newest hemophilia treatment, Altuviiio, has captured significant market switches, indicating progress and continued growth expectation into 2024. Lastly, vaccine sales have hit EUR 2 billion, with Sanofi maintaining a strong position in this segment.

Challenges and Outlooks

Despite a slight 4% reduction in flu vaccine sales and decreasing General Medicine sales, the company is navigating market dynamics with a portfolio of core assets that continue to show growth. Initiatives to increase awareness for treatments such as Tzield for Type 1 diabetes are underway. A total sales increase of 9.3% in the quarter has been reported, alongside a promising outlook for gross margin expansion and a proposed annual dividend of EUR 3.76 to shareholders.

Gearing Up for a Transformative 2024

Sanofi has provided guidance for both Q1 and the full year of 2024. Dupixent sales are expected to soar, vaccines franchise expected to grow mid-single digits on the strength of Beyfortus launch, and Aubagio's impact is set to decrease. Although there is a slight anticipation for gross margin reduction due to disappearing COVID-19 sales, the company forecasts OpEx growth fueled by a EUR 700 million ramp-up in R&D. Sanofi predicts a business EPS decline in the low single digits at CER for the full year 2024 but remains on track for a strong recovery and expansion in 2025.

Unlocking Long-Term Value with Beyfortus and Pipeline Strength

Sanofi is implementing a strategy for Beyfortus that could reach blockbuster status by 2024, with improved supply chain and manufacturing. The company, alongside AstraZeneca, is working to meet demands for both the current and upcoming seasons, with positive indications of the vaccine's efficacy from high-coverage areas such as Spain. Alongside this, advice from outgoing executives underscores the company's focus on capitalizing and developing the promising pipeline further without sacrificing financial discipline.

Earnings Call Transcript 2023-Q4

[Eva Schaefer-Jansen, executive]

Thank you for joining in Sanofi's fourth quarter and full year 2023 results, followed by a Q&A session. As usual, you can find the slides to this call on the Investors page of our website at sanofi.com.

Moving to Slide 3. I would like to remind you that information presented in this call contains 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 [Foreign language] for a description of these risk factors.

With that, please advance to Slide 4. Our speakers on the call today are Paul Hudson, Chief Executive Officer; Houman Ashrafian, Global Head of R&D; Jean-Baptiste de Chatillon, Chief Financial Officer; and the Global Business Unit Heads, Brian Foard, Thomas Triomphe, Olivier Charmeil and Julie Van Ongevalle. [Operator Instructions].

And with that, I'd like to turn the call over to Paul.

[Paul Hudson, executive]

Well, thank you, Eva. And thanks, everyone, for joining our call today. Before we discuss the Q4 highlights, I will start by updating you on another announcement we made this morning. François-Xavier Roger will join Sanofi, taking over the role of CFO effective April 1, 2024. I'm very pleased to welcome him at Sanofi. He's an accomplished and widely recognized finance executive with a proven track record in accelerated value creation. In fact, some of you may have met him already before, either in his role at Nestlé or in the past at Takeda.

He'll take over a finance organization that has been significantly modernized into JB's leadership over the past 5 years. JB has been instrumental for the successful execution of the first chapter of our play-to-win strategy and creating the growth opportunities ahead of us. With JB at the helm of our finance team, we have consistently delivered healthy top line growth over the last years, a significant BOI margin improvement and EUR 2.7 billion of cost efficiencies that were all reinvested behind our growth drivers and pipeline.

He also worked closely with Olivier and Julie on the simplification of Gen Med and the stand-alone of our Consumer Health business, 2 critical projects that deliver significant value to the company and shareholders. Many of you may not be aware about JB's long-standing personal commitment to charity work. He's decided to devote the next stage of his career by leading a renowned French-based foundation, and I'm 100% certain of the positive impact JB will continue to have on people's lives. I would like to take the opportunity here to warmly thank him for his dedication and leadership. He's been a great partner to me, and dare I say it, a friend, and to the rest of the Executive Committee. Thank you, JB.

2023 marked a pivotal year for Sanofi as we became a development-driven tech-powered biopharma company. Our core growth drivers in Specialty Care and Vaccines continue to deliver. The main driver remains Dupixent, which continued to deliver stellar performance in all approved indications and across geographies. Dupixent added EUR 2.4 billion to the top line or EUR 2.8 billion at constant exchange rate. 2023 also marks a very successful year for our Vaccine business, with the launch of Beyfortus a real moment for our strategy and execution.

In General Medicines, our core assets kept growing, GBU sales were low overall due to net price erosion, and we continue to actively manage our portfolio and divest nonstrategic products. Moving to Consumer Healthcare. The business delivered more than 6% growth driven by priority brands and the recently acquired Qunol, which is an excellent strategic fit for our business.

As you know, last quarter, we announced our intention to separate our CHC business following our earlier decision to create a stand-alone unit to fully unlock its value. This will also allow us to better focus time and resources as a pure-play biopharma company. We're in the process of reviewing potential separation scenarios and still believe that the path most likely to maximize shareholder value would be through a capital markets transaction to create a public listed company headquartered here in Paris. Subject to market conditions, of course, the separation can be achieved at the earliest, Q4 2024.

In a nutshell, the strong performance of Dupixent and our key launches more than offset the anticipated impact of the loss of exclusivity of Aubagio, our last major LoE for the remainder of the decade. Excluding Aubagio, the underlying sales growth of our business was 8.1% in 2023, a fabulous underlying growth trajectory.

Moving now to Slide 7, which perfectly demonstrates our ability to be laser-focused when it comes to launch excellence as we turn Sanofi into a launch engine. Beyfortus, Altuviiio and Tzield generated sales of more than EUR 700 million in 2023, far exceeding our expectations. Beyfortus faced an unprecedented demand, while we've already been able to protect almost 2 million babies, this first season clearly confirmed the importance of our all-infant protection strategy. Altuviiio is capturing more than 50% of all switches in the United States hemophilia A market. And Tzield created great excitement amongst traditions as the first and only therapy to delay the onset of Type 1 diabetes. These 3 transformational medicines join a great number of Sanofi's new product launches since 2019.

New products generated over EUR 2.2 billion in 2023 across different fast-growing therapeutic areas. These launches will add to our top line next to Dupixent for many years. And again, keeping in mind that we will not face major LoE for the rest of the decade.

As I remember from our R&D day on December 7, we believe that we have everything it takes to become the leading immunology company. In addition to the recent pharma launches, we have a record number of medicines in our pipeline with potential blockbuster status, including 3 with the potential for over EUR 5 billion in peak sales. We expect these launches to exceed EUR 10 billion of sales by 2030. At the same time, Dupixent will keep being a once in a career and a life-changing medicine, continuing to deliver a low double-digit sales growth CAGR until 2030. And finally, our growth driver vaccines will continue to power us forward with its leading positions in RSV, flu, pediatric combination vaccines and other franchises, bringing more than EUR 10 billion in sales by 2030.

Moving to Slide 9. We're very excited about Dupixent's potential to become the first biologic to treat COPD. And with our partner, Regeneron, we are making rapid progress in submitting applications for approval in Europe, in the U.S. and also China. And let's certainly not forget itepekimab, our anti-IL33 monoclonal antibody, which holds additional potential for COPD. Recent Phase II results of this asset were highly encouraging, and the 2 large Phase III trials are now nearing completion of enrollment. Pivotal results are expected in 2025. Together, Dupixent and itepekimab have the potential to address a large COPD population with a limited overlap. We believe that these 2 medicines combined to have a peak sales potential of greater than EUR 5 billion in COPD.

Let me now share with you some of our key priorities for the year. Number 1 is to keep being laser-focused on the best-in-class launches. We're working closely with our partner, AstraZeneca, and regulatory authorities to increase the supply of Beyfortus for 2024 and 2025 to meet this tremendous demand. For Altuviiio, we continue to capture patient share in the U.S. hemophilia A market and drive geographic expansion after a very promising start in Japan. And for Tzield, we will increase our efforts around the patient screening and enrollment in our support programs. And of course, the launch preparations for Dupixent and COPD are well underway.

Number two, we'll keep moving swiftly on our pipeline priorities. We expect tolebrutinib Phase III data for both relapsing, remitting and secondary progressive MS around midyear. We will initiate the planned trials for many of our promising immunology, neurology and vaccine assets. Finally, on cost reallocation, we announced a few months ago a new set of efficiency initiatives across the biopharma business that will free up operational resources to support the accelerated R&D investments and unlock value creation opportunities. We continue to target savings of up to EUR 2 billion from '24 to the end of '25 to fund innovation and growth.

To sum it up, 2024 is a year of investment in science, and lockup pipeline and position us for a strong EPS rebound in 2025. Let me conclude by highlighting some of our commitments to the fight against climate change. We're making clear progress on our trajectory to reach carbon neutrality by 2030, exemplified by our leveraging renewable electricity and expanding our eco-car fleets. As a reminder, our ambitions in 2030 and 2045 are vetted by the SBTi, the Science-Based Target initiatives. We attended COP28 in Dubai last December in a push to elevate the need for stronger collaboration across health care systems. We are active contributors to the sustainable market initiative and have the privilege to lead the patient care pathways, working with -- where we focus our efforts on how to reduce carbon emissions from health systems while improving health outcomes for patients.

Well, I now hand it over to Houman, Head of R&D, who will share more insights into our R&D priorities and milestones for this year. Houman?

[Houman Ashrafian, executive]

Thank you, Paul. As we discussed with you in December at our R&D Day, Sanofi delivered an unprecedented cadence of positive news and important data readouts last year across major projects with blockbuster potential. By increasing our investments in R&D, we intend to fully capitalize on the growth opportunities ahead of us by prioritizing pipeline assets with meaningful growth potential and extending the opportunity to successfully launch medicines.

This year, we look forward to several important regulatory milestones and readouts from our pipe. As already mentioned by Paul, we expect regulatory milestones to Dupixent and COPD and pivotal readouts for tolebrutinib and relapsing MS and secondary progressive MS as well as rilzabrutinib in ITP. For amlitelimab and rilzabrutinib, we're excited to learn the outcome of important Phase II results in asthma later this year.

Separately, we're preparing to submit the recent positive Phase III results of Sarclisa in first-line transplant ineligible myeloma patients for FDA approval and expect the pivotal data for subcutaneous administration before year-end, which would bring additional upside for Sanofi in this large market seeking convenient treatment options.

As you will recall from our R&D Day, we highlighted our ambition to increase the number of Phase III projects by 50% across immunology, neurology and vaccines over the next 2 years. A significant number of these pivotal trials have already started to dose their first patients, including the first amlitelimab Phase III trial in AD and Phase III trials of frexalimab in both relapsing MS and secondary progressive MS. We are progressing well and are evolving at the right pace as we expect to have more than 35 projects in Phase III by 2025.

Turning to Phase II. We are fortunate to have and initiate a significant number of projects presented at the R&D Day. One example is frexalimab in Type 1 diabetes, where we started with the study assessing different doses on routes of administration. We're sticking to our strategy of combining strong innovative science with opportunity to address patients' major unmet needs. You can also see the proof points of our progress in R&D productivity by moving our major assets, such as the Oral TNFR1 signaling inhibitor and lunsekimig into mid-stage. They're both with our portfolio by providing promising solutions for multiple indications. We believe the increased R&D investment in pivotal Phase III programs and key Phase II trials will offer long-term returns that benefit of patients and shareholders. This is the essence of the play-to-win strategy.

Moving on Slide 16, we provided a granular and concrete sense of areas that we are changing in Sanofi R&D recent investor event in New York. First, we talked about peak investment. Through dispassionate data-driven evaluation of our pipeline, we're investing in only our winning late-stage assets to underwrite the long-term growth of Sanofi. Accordingly, we'll drive our late-stage opportunities by launching multiple Phase III trials in parallel. We need to increase investment in these long-term opportunities for us to drive real growth and value for our shareholders. And we will do that in a disciplined way.

The second theme was that we must earn the right to do that. We're going to deliver portfolio focus across our breadth of platform sites and TAs. We continue to have the right to win in oncology, but in a focused way. And we're uniquely positioned to win in immunology and information. We have deep provenance in immunology, and it's a self-fulfilling prophecy at least leads to developing better immunology, drugs and also doing research in immunology.

Finally, pipeline sustainability. Although we've made good progress to improve our R&D productivity with a focus on greater quality, we now have to step it up by leveraging both in-house research and external innovation.

Slide 17 is as a great example of external innovation. Let me take just 1 minute to talk about our recently announced acquisition of Inhibrx. It fits perfectly with our rare diseases portfolio overlapping with our immune-mediated respiratory franchise. As underlying the R&D Day, we continue to drive our successful rare franchise and keep our eyes open for immune-mediated disease in the periphery of what we do.

When it closes, this deal will add INBRX-101 to our portfolio, a recombinant human alpha-1 antitrypsin FC fusion protein for the treatment of alpha-1 antitrypsin deficiency, an inherited rare disease of the lungs and liver causing progressive tissue deterioration. The Phase I trial showed strong data with a best-in-class profile, thanks to sustaining normal AAT levels and aiming for a better compliance to a potential monthly dosing regimen.

The current standard of care is a plasma-derived AAT, leaving patients without sufficiently effective well-validated treatment. As across our other rare disease therapies, we're committed to patients with AATD. The next readout is expected in 2025 for a potential launch in 2027, with a potentially rapid approval following U.S. Fast Track designation granted last May. The blockbuster potential behind this asset is predicated on use by both existing patients and by the anticipated use by increased number of de novo patients that could benefit from the treatment.

With great pleasure, I now hand over to the GBU heads to go through the respective business performance. Over to you, Brian.

[Brian Foard, executive]

Thank you so much, Houman. Now taking a closer look at Specialty Care, where we once again delivered double-digit growth in the quarter, supported by outstanding performance of Dupixent. As Paul mentioned earlier, strong demand for this exceptional medicine across all approved indications and geographies continues to be a core driver of Specialty Care. Our Rare Disease business was another important contributor in the quarter. Strong growth across Pompe, Gaucher and Fabry products highlights our unique expertise in identifying patients and our ability to drive demand through new patient accruals. The rollout of Nexviazyme as the new standard of care in Pompe and Xenpozyme in ASMD continue to be successful in global markets.

In rare blood disease, we're very pleased with the continued strong uptake in Altuviiio, another exciting launch in Specialty Care. And I'm going to update you a little bit on the insights of the brand's recent performance in just a minute. Now we believe the continued double-digit growth in Specialty Care is particularly impressive against the backdrop of generic competition for Aubagio, Sanofi's last meaningful LoE for the rest of the decade. Generic versions of Aubagio have now entered all key markets, including Europe in September. With almost EUR 1 billion in sales in 2023, we continue to navigate the impact of generic erosion into 2024, including a particularly high base comparison for Aubagio in the first quarter.

Now moving to my next slide. Dupixent sales reached almost EUR 3 billion in the fourth quarter alone. As highlighted on the slide, full year sales were up 34%, driven by continuous robust growth in both the U.S. and ex-U.S. geographies. Almost 7 years into the initial U.S. launch in atopic dermatitis, we have achieved and maintained leadership positions in INBRXs across all 5 approved indications, and we are confident to deliver around EUR 13 billion in sales in 2024 as previously guided. We remain very excited about the outlook for the brand's outstanding commercial success and expect COPD to become another important growth pillar over time. And as Paul discussed earlier, significant regulatory progress has been achieved with COPD across key markets, and we plan for a launch in the U.S. later this year.

Now as a quick reminder on the left-hand side of the chart, you will notice similar to what we have seen in previous years, and as is common for Specialty Biologics, Q1 growth usually reflects the impact of higher seasonal patient co-pay assistance program utilization associated with the annual resetting of insurance deductibles at the beginning of the year. We expect a similar effect to weigh on the reported sales in the first quarter of 2024.

Now turning to my next slide, we saw strong momentum for Altuviiio in the fourth quarter. Altuviiio has become a top choice for switches in the hemophilia A market, now capturing more than 50% of all switches. And this is really driven by the brand's differentiated efficacy profile. Importantly, 2 of every 3 switches comes from competitive products, including an estimated 10% from nonfactor Hemlibra.

In addition to the gains in a number of U.S. patients, we also saw a geographic expansion with our promising launch in Japan late last year. And launch to date, we have seen a broad uptake in the U.S., and many HCPs have even stated that their intent is to increase their depth of prescribing, which provides us with another encouraging indicator for the launch progress into 2024.

And with that, I'll pass over to Thomas.

[Thomas Triomphe, executive]

Thank you, Brian. Growing 21% year-on-year, our Q4 vaccine sales reached EUR 2 billion, driven by the strong uptake of Beyfortus, an impressive launch I will further elaborate on in my next slide. In flu, Sanofi continues to be the market leader, driven by our differentiated product portfolio, which represents the majority of our total flu sales. In line with Q3 earnings call comments, approximately 30% of our H2 '23 flu sales were reported in the fourth quarter, generating 4% sales reduction year-on-year as we saw lower flu immunization rate this season and an increased level of competition in the U.S. market.

Finally, we are very pleased by the Q4 performance of our pediatric franchise, which benefited from the favorable public order patterns in the U.S. despite VAXELIS sales not being recorded in our net sales. In Q4 2023, VAXELIS has become the U.S. pediatric primary series leader and continues to gain share over the pentavalent vaccines.

The next slide is focused on our RSV franchise. Starting with the left. You can see that the launch of Beyfortus in the U.S. set a new record in terms of routine pediatric immunization uptake when compared to similar pediatric vaccines launches such as rotavirus and pneumococcal conjugate vaccines. With an average adoption rate of 38% in only 6 months after launch, Beyfortus' performance illustrates the successful implementation of its first broad in fund recommendations in the U.S., in France and in Spain. We are very encouraged by the strong real-world clinical data generated in Spain, and we now look forward to rolling out Beyfortus more broadly in 2024.

But beyond the infant segment, the respiratory syncytial virus is also a significant burden for toddlers and older adults. We are developing vaccines specifically targeted to these 2 groups. And I'm glad to report that our vaccine candidates are making good progress. For toddlers, our live-attenuated intranasal RSV vaccine candidate received EU Prime designation in December following U.S. Fast Track designation in 2020. These designations do recognize the potential of our vaccine candidate to address a significant unmet medical need.

As communicated at our Vaccines Day, Phase III will start this quarter. For other adults, we initiated last November the Phase I/II clinical trial of our mRNA RSV-hMPV vaccine. As highlighted then, we believe that our combo vaccine has a real potential to be first in class and that its medical value compared to RSV stand-alone vaccines will provide a more compelling case to recommending bodies. The value of this combo is already recognized by the U.S. FDA, which granted it the Fast Track Designation in October 2023. If Phase I/II results are positive, the Phase III trial is planned to start by the end of this year. Overall, I'm thrilled by the phenomenal progress our RSV team has made in the last 6 months, building foundations for Sanofi to become the leader in the RSV franchise.

Let me now hand over the call to Olivier.

[Olivier Charmeil, executive]

Thank you, Thomas. General Medicine sales in the fourth quarter showed a slight decrease of 2.4% to EUR 3 billion. Our core assets grew by 6.3%, driven by Plavix, Toujeo, Rezurock and Praluent, which was partially offset by lower sales of Mozobil due to generic competition, which started in the U.S. in July 2023. Sales of Rezurock in the U.S. continued to grow strongly, driven by increasing patient numbers as well as improved adherence rates. Rezurock Q4 sales delivered double-digit growth, driven by China. This largely offset lower sales in the U.S. due to a lower average net price.

Sales of noncore assets decreased, mainly driven by lower Lantus sales in the U.S., which continued to be affected by a negative channel mix as well as lower inventory and trade in anticipation of the 2024 list price decrease. For the full year 2023, Gen Med sales decreased by 7.1% due to the exceptional impact from the U.S. Lantus decline along with the VBP impact on Lantus sales in China.

As mentioned, Tzield continued its gradual uptake in Type 1 diabetes. In November, we launched a well-received national screening campaign in the U.S. to increase awareness and encourage screening for at-risk individuals. As a result, screening grew 31%, driven by endocrinologists in 2023. And 168 patients were infused by the end of the year. The number of patients infused grew by 25% in Q4 versus Q3 despite the year-end holiday season. The full results of the product studies with newly diagnosed Stage 3 Type 1 diabetes patient were shared at the ISPAD Congress, and interaction with FDA and EMA are ongoing.

With this, I'm handing over to Julie.

[Julie Van Ongevalle, executive]

Thank you, Olivier. Firstly, I'd like to start with an update on the separation of the CHC business, which as previously announced, could happen in Q4 this year at the earliest. We're making solid progress on our journey to full business autonomy and continue to enhance our own internal talent pool with selective hires in key areas. The service agreements are being put in place, and we are establishing our digital infrastructure so that we can hit the ground running on day 1.

Regarding performance, Q4 marks our 11th consecutive quarter of growth, with sales up 8.5%, driven primarily by price. Excluding divestments and acquisitions, Q4 growth was around 5%. The Qunol acquisition, closed at the end of September, drove growth over 50% in our physical and mental wellness category. As you may recall, Qunol products focus on healthy aging in the U.S. I'm very glad that the Qunol is now part of our CHC business, giving us a fast-growing platform with which to compete in the important U.S. VMS market.

Last quarter, I introduced you to the 15 priority brands, which represent over 60% of our total net sales and over 85% of our growth in the past 3 years. In Q4 and in full year 2023, these brands were once again our major growth drivers, which resulted in a 6.3% growth for the full year with good growth across all categories. Our largest category, digestive wellness, continues to perform strongly with double-digit growth and market share gains. And I would like to give you some more background on 1 of these brands in this category, Dulcolax.

Dulcolax is the world's #1 nonprescriptive laxative. Important to note is that 1/3 of the world's population suffer from constipation, yet nearly half still don't seek treatment with laxatives. This makes an attractive and substantial market opportunity. Dulcolax has been growing faster than the market for the past 3 years, executing on its repeatable model of growth, of which 3 main drivers are: one, the change in the focus of marketing to consumers, moving from our positioning from purely medical and functional solution to a more emotional communication, breaking down the taboo of constipation whilst educating on how Dulcolax works naturally with your body.

Second, launching innovative, more consumer-friendly and gentle formats such as chewables that have driven category penetration. Last but not least, working with health care professionals, resulting in strong endorsement. With its simple, repeatable mode of growth, I'm confident Dulcolax will continue to help consumers and gain market share.

With this, I'm handing it over to Jean-Baptiste, our CFO.

[Jean-Baptiste de Chatillon, executive]

Thank you. Thank you, Julie. As you just heard, sales were up 9.3% in the quarter, driven by double-digit growth in Specialty Care and Vaccines. Dupixent and Rare Diseases were key drivers in the Specialty Care while vaccine sales grew more than 20%. General Medicine sales declined -- decelerated on CHC reported another quarter of growth of 8.5%.

Looking at the Q4 P&L on Slide 31. Gross margin expansion was driven by our improved product mix on the strong contribution from COVID-19 vaccines revenues in the last quarter. R&D expenses grew 6.6% as we are mainly reflecting the continued progress of our vaccines pipeline mainly driven by the mRNA development programs. This quarter, we also start recording a share of the Phase III development costs related to the recently announced collaboration with J&J on our potential first-in-class ExPEC vaccine. The BOI margin decreased 1.7 percentage points to 23.7%, mainly due to a decrease in capital gains related to product disposals when compared to the same quarter last year. EPS was up 8.2% in Q4.

Turning now to the full year group P&L on Slide 32. We recorded an improvement in gross margin of which almost 1 percentage point was due to COVID-19 vaccine-related sales and revenues. The product mix also contributed to gross margin expansion, partially offset by lower Aubagio sales due to generic competition and lower net prices of launches in the U.S.

Operating expenses grew roughly in line with sales, and our business operating margin remained stable at constant exchange rate. EPS for the year grew 5.4% in line with our full year 2023 guidance. On Slide 33, our Board is proposing an annual dividend of EUR 3.76, which represents a 5.6% increase over last year. Our progressive dividend policy remains an important part of our capital allocation policy. We have launched the different efficiency initiatives presented in Q3, with the objective to reallocate up to EUR 2 billion savings. We will focus on the programs with first or best-in-class potential, reallocating resources on growth drivers and strategic therapeutic areas. We will also leverage procurement to generate additional savings. Lastly, we will modernize the commercial delivery by optimizing our country setup, expanding the hub strategy to increase centralization while refocusing R&D on most critical sites and technology platform.

On Slide 36, we are providing an outlook for both the full year 2024 and the Q1 2024. Full year 2024 sales, we expect Dupixent to reach EUR 13 billion and the vaccines franchise to grow mid-single digit, driven by the ongoing launch of Beyfortus. The Aubagio LoE will continue to impact mainly in H1. The planned Gen Med divestments will lower the top line by around EUR 300 million. On full year 2024 P&L, we expect the gross margin to decrease slightly due to the absence of COVID-19 sales on revenues. OpEx is expected to grow due to roughly EUR 700 million step-up in R&D, while SG&A expenses are expected to remain stable.

Finally, as announced in Q3, the ETR will increase to 21% due to the implementation of Pillar Two. The dynamics in Q1 will differ from the overall year, mainly due to high base FX in vaccines on Gen Med, Aubagio, on top of the Dupixent sales annual step-up in U.S. co-pay, as already mentioned by Brian. Similarly, on the P&L side, I remind you of a high level of capital gains generated in Q1 2023.

So advancing to my final slide, Slide 37, we expect full year 2024 business EPS to decline in the low single digits at CER, excluding the impact of the tax rate change, so full year 2024 business EPS would be roughly stable. On foreign exchange, we see a negative currency impact of minus 3.5% to minus 4.5% based on January 2024 average exchange rate. 2024 is a year where we are resetting the company for long-term value creation, and we expect a strong EPS rebound in 2025.

Let's open the call now for Q&A.

[Eva Schaefer-Jansen, executive]

[Operator Instructions] Can we have the first question, please. The first question comes from Luisa Hector, Berenberg. Luisa?

[Luisa Hector, analyst]

Can you hear me?

[Eva Schaefer-Jansen, executive]

Luisa? Can you hear us?

[Luisa Hector, analyst]

Yes. Can you hear me?

[Eva Schaefer-Jansen, executive]

Yes.

[Luisa Hector, analyst]

Great. So maybe my question would be on Beyfortus. Just to get a bit more color on where you are with manufacturing and the ability to meet demand this year and whether you would anticipate perhaps some demand for second season vaccination. And is -- are you able to now show, given your sort of high vaccination rates in some countries, and you show that the emergency room -- entry for RSV has gone down? Like do you have that sort of data to support the use of the vaccine? And so that will be the first question.

And then obviously, I would like to extend thanks from everyone to JB for all the conversations over the years. Thank you, JB. Congratulations on the move. And I guess a question for you would be what words of advice you would pass on?

[Paul Hudson, executive]

Well, thank you, Luisa. I think it's very gracious of you to say that to JB. We'll give him a moment or 2 to think about words of advice. Before that, Thomas will come to you on Beyfortus. And perhaps if you're open, you could share some of the data from Galicia as a guide to what it might look like. I know they've been publishing some of that, but on the supply for Beyfortus in 2024.

[Thomas Triomphe, executive]

Great point, indeed. So as you've seen from the Q4 results, we are very happy with the strong Beyfortus launch in Q3 and Q4 with more than EUR 400 million sales in Q4. I start by that because I think that's showing that the implementation of all infant protection programs is highly feasible and goes very well with the record uptake in 6 months.

Now back to your question, first on the supply elements. As we discussed previously, clearly, Sanofi and AstraZeneca are working very hard to extend the manufacturing network, packaging side, filling sites. And as always -- and that's why we're not going to be very precise today. As always, first, you need to qualify the lines and then make them registered by the different regulatory authorities. That's the work that is ongoing right now in order to be able to completely, I would say, debottleneck the supply and have a full supply for the season 2025.

For the season 2024, we'll see an increase in supply. And I think we can share here together that our expectations is to reach blockbuster status for Beyfortus in 2024. To be more precise, it's a bit cloudy. Again, as we ramp up the supply progress. And as we get further with regulatory authorities, we'll come back to you.

Your second point is extremely important with that. I really thank you for asking that. Because at the end of the day, the reason why we are in this industry is to really make sure that we have an impact in terms of clinical efficacy. But actually, babies don't go to hospitalization or don't go to the ER. I really ask everyone if you guide at a moment to look at the Galicia data, which is referenced on our slides there. Have a look there. I know very well, it's not the end of the season. But the Spain data is very important because unlike the U.S. offerings, which have a partial vaccination coverage rate this year, the actual Spain data is in a country where there is about 90% coverage rate. And you will see that they show extremely impressive data, where they see that -- well, you can see that the hospitalization rate this year in babies is less than 8 months of age, i.e., eligible to Beyfortus.

The hospitalization rate is extremely low. While for babies that are above 1 year of age, i.e., susceptible to normal RSV infection because they were not protected, actually, it's a high RSV season for them. RSV disease is there. When you receive Beyfortus, it's not there, you don't go to hospitalization. We'll provide you more data at the end of the season, obviously.

[Paul Hudson, executive]

Second season.

[Thomas Triomphe, executive]

Second season, the product is indicated for your first RSV season, except for a very small population of infants that have either specific heart conditions or specific lung conditions. It's usually depending on the population, about 1% of the newborn population. But for which Beyfortus is engaging for the second season. So it's really targeting for the first season. But interestingly, as you have seen, we have an RSV toddler intranasal vaccine that we are targeting to bring just after Beyfortus for our kids, for the second and third seasons, be available and protected.

[Paul Hudson, executive]

Thank you, Thomas, and congrats again on an amazing launch. JB? So you've had some time to reflect on what advice you would giving. You've certainly give me plenty of advice when we were together, so I'm sure you're not short of something.

[Jean-Baptiste de Chatillon, executive]

No, I'm not short, but first, thank you very much, Luisa. I'm a bit -- it's a lot of emotion for me today. And of course, the financials of the company are better, but what counts is that the pipeline on the science and innovation we have now in our hands, where if I add the arrogance of an advice, it will be really to make the most of it. Really make the most of it and bring them to fruition, develop them all in. That's what we have decided. That's what we should do. And of course, Paul, G&A, as you know -- that could be kept under...

[Paul Hudson, executive]

No. All right. All right. So I touched on in the opening comments, but I think we've all worked well as a management team, but JB and I particularly well. And we pushed each other pretty hard, to be honest over the time, and it's been necessary to try and have as much discipline as possible whilst making sure we take advantage of opportunities. I think you commented about pipeline. It's extraordinarily well made. We've made sacrifices to be in a position where we have it. Don't squander it, I think, is what you're saying. And you're right.

I think for those that should be interested, of course, we'd announced a cost-saving program. I think you need to know that aligned with JB's wishes and comments, we go full ahead for the reallocation of that. That doesn't blink. One of the reasons why I'm excited to work with François-Xavier is because he picks up this well-run machine, but with the same intensity. And I think that's very important for people to understand. We won't squander it, JB. Okay. Next question?

[Eva Schaefer-Jansen, executive]

Your next question is from Jo Walton, UBS. Jo, can you hear us? UBS team? Okay, let's move on, and we'll come back to...

[Jo Walton, analyst]

Can you hear me?

[Eva Schaefer-Jansen, executive]

Yes.

[Jo Walton, analyst]

I'm sorry. I have a question on the consumer side, please. Just looking at any progress on the Rx OTC switch trials that you're doing for Tamiflu and Cialis, just thinking as to whether they will -- how visible they will be at the point of separation going forward.

And secondly, just on the timing of your COPD launch. I know that you've filed and you don't yet know the time frame of that review. Do you have a priority review voucher? Could we assume that you would use that for such an important launch?

[Paul Hudson, executive]

Okay. Thanks, Jo. Great to have you connected. So Julie, updates on the switches?

[Julie Van Ongevalle, executive]

Sure. So as you know, we have already launched Cialis together in the U.K. And since our last call, we have now also received approval for Nowhere in Ireland. What's -- for the U.S., we have been conducting certain studies to support our strategy to lift the clinical hold. Those studies are now complete, and we're looking forward to discussing the results with the FDA over the coming quarter and hope to gain alignment with them on the next steps. And on Tamiflu, there is no update at this time.

[Paul Hudson, executive]

Yes. I think -- and I'll tell, Julie, I mean, it is very much a conversation with the FDA. But I think it's fair to say what was expected of us to be done, we've done. So now we find out whether it will be enough, and that's -- we've gone further than others, but we'll find out. So certainly progress on Cialis. I don't know whether we want to go to Brian then next on COPD? There was a question about the voucher and assumptions around launch.

[Brian Foard, executive]

Well, first and foremost, thank you so much for the question. We're really, really excited about this next potential opportunity. As you may recall, back in August, the FDA went -- in quite a unique move, granted us breakthrough designation at that time. And that was off of the first trial. Since then, as you know, we read out the second trial. Both trials positive in exacerbations. We filed. We announced that we filed as of December 27. And so we are awaiting regulatory feedback or feedback from the agency as we speak. We are anticipating, as we said earlier in the pre -- setup that we did that we will be launching in 2024. Still to be determined whether or not it will be a priority review or not, but we will see.

[Paul Hudson, executive]

Okay. Thank you, anything to add, Houman? No?

[Houman Ashrafian, executive]

Yes.

[Paul Hudson, executive]

Okay. Good. Thanks, Jo. Next question.

[Eva Schaefer-Jansen, executive]

The next question is from Tim Anderson, Wolfe.

[Timothy Anderson, analyst]

I have a couple of questions on Beyfortus, if I could. Can you describe the longer-term opportunity and how it parses out by geography, meaning U.S. versus ex-U.S.? Is this 1 of those products where it will be most likely more sales coming from the U.S. as it often is with different products? .

And then second question is your views of potential competition from Merck, they have this product, clesrovimab, in Phase III data and the back part of the year implies a launch in 2025, also monoclonal. Any first impressions of that product based on what you know today?

[Paul Hudson, executive]

Thomas? Breadth of launch and some thoughts on that.

[Thomas Triomphe, executive]

So to the risk of disappointing you, Tim, I may not give you a straight hit with a detailed forecast by geography over the coming years. But of course, we are very encouraged by the Q4 launch of this year. As I said before, we are doing everything and we're confident supply will not be an issue. And we're doing -- we're looking broadly in terms of geography. You have noticed that we just got the registration, Beyfortus in China. And we expect to have the registration of Beyfortus in Japan in the coming few months.

And we will progressively start launch in China and in Japan at the end of 2024. So -- but we're really going as per -- as we named it for all infant protection, it will be a progressive rollout. Geographies such as China, as you've seen it with multiple vaccines, do take time. So it will be a progressive rollout. But the opportunity, if I look at the mid to long term, could be significant.

This year, in 2023, the sales are about 2/3 U.S., 1/3 EU, and that might be the right representation for the short term. But again, RSV is everywhere, and we want to go for all geographies progressively 1 step at a time. For the competition aspect, there are 2 players, as you know very well, 1 which is already licensed. This is about maternal immunization. But I think it's very clear. The fundamental difference between Beyfortus and maternal vaccines is that Beyfortus is designed to protect all infants, the maternal vaccines cannot, by design.

And back to the previous question from Luisa, please have a look at the Galicia results. When there is more than 90% coverage rate in all infants, the impact against hospitalization is impressive from year one. And for the other products, the Merck product is in Phase III. We cannot comment on it. We don't have data about the Phase III. The only thing I can say is that I do believe that the bar has been set in terms of standard of care.

And if you look at the profile of Beyfortus not only in the efficacy, which is impressive as per the Galicia data, but also in terms of safety. And we are talking about the most fragile part of our population here with the newborns. The safety profile of frexalimab is just pristine. So I think it's a high bar. Now let's look at the Phase III results from the med product.

[Paul Hudson, executive]

Okay. Thank you. Thanks, Thomas. Thanks, Tim. Next question.

[Eva Schaefer-Jansen, executive]

The next question is from Peter Welford from Jefferies.

[Peter Welford, analyst]

I'm going to stick -- first of all, with just Beyfortus again, if I can. Just wondered if you could comment at all about the phasing. You made a comment in the first quarter, you don't have supply, but I think at the same time, you are delivering some doses still to the U.S., if I'm not wrong, that was sort of carryover. But should we then anticipate Beyfortus sales to dip and then rise again before the Winter season? Or I guess, do you have any plans at all for the Southern Hemisphere and the launch we should be considering during the -- during those middle 3 quarters? And just curiously, the statistic near 2 million that was given, was that the U.S. alone? Or is that across all the regions so far where Beyfortus has been launched?

And then the second question, just 1 for JB, just on the P&L. The increase in other operating income during the quarter, you referenced in the release you need to do with litigation-related payments. Wonder how much of that is to do with it? Or could you just quantify a bit what it was that led to the significant increase in the OOI in the quarter, perhaps relative to expectations?

[Paul Hudson, executive]

Right, Thomas, so maybe some thoughts on Q1, what you can share on phasing. And had the distribution of the almost 2 million doses that we've put out there already and then JB.

[Thomas Triomphe, executive]

So first on the first question, the RSV disease is, of course, a very seasonal disease. And therefore, you will see that it will be a cadence, if you reach NH countries will have their sales in Q3, Q4. South Hemisphere countries will have their sales in Q1, Q2. Due to the supply limitation and the fact that we are in the progress -- in the process, sorry, of ramping up supply, I would expect in 2024, but Q3 and Q4 are the key quarters for Beyfortus. There, you will see, as it was communicated, by the way some small sales with the delivery of products in January.

And we are looking for a couple of countries maybe for Southern Hemisphere entries. But again, from a significant sales perspective, it's really about Q4 and -- Q3 and Q4 for 2024. And back to the point you mentioned, to be very precise on the approximately 2 million doses of 2023, 2024. So it includes the season, so i.e., it includes January, February. It's really total, i.e., U.S. plus Europe.

[Paul Hudson, executive]

Okay. JB, the other income?

[Jean-Baptiste de Chatillon, executive]

Yes. Thank you. Well, you realize that -- so ForEx is very readable on the impact on our P&L. But effectively, more specifically, we had a few -- here and there, tens of millions of provisions that we had to pass in Q4. Scattered topics, nothing in particular.

[Paul Hudson, executive]

Okay. Good. Thank you. Next question.

[Eva Schaefer-Jansen, executive]

So the next question is from Richard Vosser, JPMorgan.

[Richard Vosser, analyst]

Question on INBRX-101 or the Inhibrx product. I think Inhibrx was highlighting the first readout at the end of '24. So could you talk through the difference in timing with your second half '25 timing and whether we will still see some initial data ahead of maybe the final data on the '25? And then a question on flu, please. Obviously, flu vaccine hesitancy, and we've been hearing about increased competition. I think you've referenced it, too. So are we back to a situation of sort of overcapacity for the flu market outside of high dose and outside of very old adults? So should we expect price pressure going forward? How should we think of the flu seasons going forward?

[Paul Hudson, executive]

Okay. Good. Maybe Houman, do you want to comment?

[Houman Ashrafian, executive]

Yes. So Richard, thank you for the question. The short answer is in terms of operational outcome, we expect the results in '25. I don't have any further comment on that. And we look forward to seeing those results. There are elements to this as we bring the molecule in once the deal closes.

[Paul Hudson, executive]

Okay. Good. Thomas, getting plenty of airtime today. Flu, maybe comments on high dose. And the differentiation piece and the thoughts on what it could mean for pricing and standard dose.

[Thomas Triomphe, executive]

No. It's an important question, Richard. And I would say it's the continuation of what we have observed over the past 2 years. The situation in the flu market overall is that there is definitely ample supply versus the demand. And that's -- that's been accelerated by the decrease in flu VCR, over the past couple of years, especially in North America for various reasons.

I think 1 point to have in mind though, is that it's very linked to the fact that there has been a very moderate flu seasons in terms of disease. And as you know very well, this year gets softer after 3 or 4 seasons that are lower. And suddenly, VCR comes back after the first big hit. I'm seeing that because right now, we're in Western Europe with an increase of flu disease, and the U.S. will not be immune to that.

But -- so that's for the overall situation. Of course, we had anticipated that. That's why we came earlier with differentiated flu vaccines. We have the 2 differentiated flu vaccines in our portfolio that have significant data, significant data that are showing impact in terms of improved protection versus infection compared to standard dose, which none of the competitors have. That's what we call protection beyond flu. And that has brought the success of these differentiated vaccines but represent still in H2 2023, more than 60% of our flu. So to summarize, I would say overall for standard dose, price pressure is my expectation. You're correct. But we are seeing still ample room for trajectory of differentiated flu vaccines such as high-dose, Infuenza, Flublok.

[Paul Hudson, executive]

Okay. Thank you. The next question please.

[Eva Schaefer-Jansen, executive]

The next question is from Graham Parry, Bank of America.

[Graham Parry, analyst]

So first question is just on Altuviiio. I think you had quite a lot of patients on free drug in, second and third quarter. Just if you could give us an update on how many patients are actually on free drug or bridging programs in Q4? And then how you'd expect that to progress into 2024? And then separately on the Inhibrx asset. I recall Inhibrx had indicated that the FDA wanted some data linking functional AAT levels going to normal levels with some sort of clinical outcome as a sort of precursor to filing on the basis of functional AAT level for accelerated review.

And then they still have to agree a clinical endpoint for the confirmatory trial. So can you just give us an update on where you think that process is? Is that data generated? And what do you think the clinical endpoint that will be needed for approval will be?

[Paul Hudson, executive]

Thank you, Graham. Brian, Altuviiio.

[Brian Foard, executive]

Yes. So first and foremost, as you all know, we have this 30-day program, which has been quite helpful for us. We've seen that about 90% of the patients that go into that program get converted to commercial, which is really fantastic. And as you have said, it is going to go down. It was at 20% previously. The patients that have gone through the program. It's at 14% now. We anticipate it to go down to between 8% and 5%, and probably, it will stabilize somewhere around the 5% range in the coming years.

[Paul Hudson, executive]

Thank you, Brian. Houman?

[Houman Ashrafian, executive]

Thanks for the question. Excellent question, just to call out on the asset yet. So we're beginning to dig into that question. As you will fully appreciate, there are ongoing discussions with the FDA, both in terms of, as you said, bioavailability and bioequivalence with native Alpha-1 anti-trypsin and the right endpoint, but we're deep in those discussions. And in fact, even last week, we were in conversations with the Alpha-1 Foundation Asian group to consider exactly how we move this forward. Thank you for the question, and watch this space.

[Eva Schaefer-Jansen, executive]

So the next question is from Simon Baker from Redburn. Simon? Okay. So maybe I'll move to the next question from David...

[Simon Baker, analyst]

Can you hear me, sorry?

[Eva Schaefer-Jansen, executive]

Yes.

[Simon Baker, analyst]

Can you please provide more color on your view of the potential of CEACAM5 as a target given the recent tusamitamab ravtansine failure? And second one, again, on Beyfortus. We've seen this strong uptake in U.S., but is there any group or payer channels or regions more strongly represented than others that do you see?

[Paul Hudson, executive]

Okay. Thank you. CEACAM5, given the tusamitamab data, maybe some thoughts on the different payload? And is it still a valid target?

[Brian Foard, executive]

Thanks for the question. Excellent question. We continue to believe based on both our precision meds and computational biology approach and classical immune chemistry that CEACAM5 is a highly specific and highly expressed target. Its density profile is well suited to an ADC approach. As you call out correctly, the previous molecule with the DM4 payload sadly did not provide the high efficacy bar that we put in order to serve patient value. We believe, for a number of basic biological reasons, the topo-1 payload on the current molecule, both at preclinical level, but also now in clinic, shows significant promise. The short answer is we remain optimistic about CEACAM5 ADCs.

[Paul Hudson, executive]

Thank you. And Beyfortus, in particular, the...

[Thomas Triomphe, executive]

Great. So I assume Simon, you're talking about the payout coverage in the U.S.? First of all, a significant part of new bonds coverage is through the VFC program. So for the public part, it's really covered very well. And for the private medical side of things, I didn't check there recently, but a few weeks ago, we are already way more and way above 90% payout coverage in the U.S. just a few months after the launch. So I don't see any problem at all in terms of payout coverage. It doesn't prevent, but there might be a few practitioners or a few HCPs that, of course, want to go study because we want to make sure that they will be reimbursed and properly covered. But what we've seen in the U.S. over the past few weeks, I think it's now something from the past, I'm very confident for 2024 in the U.S.

[Paul Hudson, executive]

Yes, just to build on Simon's question. Of course, you referenced the U.S., but maybe to share some of the enthusiasm we're seeing from different countries in Europe.

[Thomas Triomphe, executive]

Well, definitely, I think that you know that it's well known that in Europe, if you look, plenty of previous historical benchmarks, vaccines entries in Europe normally takes a few years in terms of progress because there is recommending body, there is a reimbursement decision and it's early stage. We are seeing a lot of European countries that are trying to accelerate that process in order to make sure that Beyfortus goes earlier for protection.

[Paul Hudson, executive]

Thank you, Thomas. Next question.

[Eva Schaefer-Jansen, executive]

The next question comes from David Risinger from Leerink.

[David Risinger, analyst]

So I wanted to say thank you and best of luck to you, JB. And I have 2 questions for Paul and you, please. First, can you provide color on the outlook for spending growth in 2025? And also, discuss the potential for operating leverage beyond 2025.

[Paul Hudson, executive]

Thank you, David. Okay, JB?

[Jean-Baptiste de Chatillon, executive]

Yes. Thank you very much. Yes, I can try to do that because the equation is pretty simple, and I can lay it out for you. We enjoy a steady growth, and this is with us for many years ahead now with no LoEs in front of us, and you heard both mentioning this underlying growth that we are enjoying when you neutralize the impact of Aubagio. So it's pretty easy to see that we are going to enjoy this growth.

We said that we would increase in '24, and that's why there is a bit of a push in '24 because we increased EUR 700 million R&D while other programs are still running like tolebrutinib, COPD, large phase -- multiple Phase III programs. Those programs will end in '25. And the oncology to I&I reallocation, plus our efforts in terms of the -- of cost reallocation will fully kick-in in '25. So flat OpEx, '25 versus '24, with a clear top line growth, this will trigger leverage.

Now looking beyond this, beyond '25. If we've done -- if we've taken this decision of going all in and developing our pipeline, it's really to break the ceiling of growth rate and profitability that Sanofi as experimented in past years. So we'll see where it goes. But as I said, we are going to enjoy a long run of growth and a clear opportunity to create value and go through the LoE of Dupixent with sort of 3 to 5, 2 to 5 or 3 to 5 assets with EUR 2 billion to EUR 5 billion peak sales potential. And you've seen in the R&D Day that we have more that what it takes already. And you've seen also that we are relentless in adding to our portfolio inorganically as we just did with Inhibrx.

[Paul Hudson, executive]

Thank you, JB. Next question, please.

[Eva Schaefer-Jansen, executive]

The next question is from Gary Steventon from Exane BNP. Gary? Can you hear us?

[Paul Hudson, executive]

May we move to the next one?

[Eva Schaefer-Jansen, executive]

Okay. So we'll come back to Gary. So let's move to Rajesh Kumar from HSBC. Rajesh? Okay. It seems like -- so do we have Gary online? No. So I think I have also a question written in the box. So I'm going to read it out, it's from Florent Cespedes from Societe Generale. So the question is from -- for CHC. So there is 1 question. Could you elaborate on the dynamic in Europe the decline in Q4 and U.S., what is the organic growth? And is it still possible to raise price in the U.S.? And then there is another question on 2025. What are the drivers and challenges for 2025? How confident are you with the consensus EPS growth in 2025?

[Paul Hudson, executive]

Okay. Good. All right. Well, and Julie, Europe dynamics, U.S. and price flexibility, and then JB will come back to the EPS rebound in '25, yes.

[Julie Van Ongevalle, executive]

Okay. So and then there was -- yes, on Q4. So I think maybe on Q4, I think there's 3 factors that is important to notice that have impacted our growth versus definitely consensus is, first, some further divestments of our noncore brands as part of our plan to simplify our portfolio, and we're coming to the end of that program. We'll still have some impact in 2024.

As for the performance in the U.S., it's explained first by a softer market dynamic, but also some underperformance of our brands and actions to improve performance on these brands is happening as we speak, especially in the allergy and pain categories. While the addition, obviously, of Qunol is strengthening our position to deliver future growth in the U.S.

Europe, we have strong positions. I think our strength overall is that we have more than 60% of our business that is driven by leadership -- brands that have leadership positions in their -- in respective markets. With all still a lot of potential to grow, thanks to mainly penetration as well as innovation. That helps. And prices -- or room for pricing -- room for pricing. Obviously, there's less room for pricing than in the past, but there's still -- we see that our category overall is a little bit more resilient, especially the OTC category is more resilient than many other consumer categories.

[Paul Hudson, executive]

Thank you, Julie. JB. Maybe your last comment?

[Jean-Baptiste de Chatillon, executive]

Well, it will be with '25, the strong rebound is coming pretty naturally on -- pretty mechanically. So confidence is high.

[Paul Hudson, executive]

Thank you, JB. Wise words. So thank you to everybody. Thanks for those that connected today and for everybody that played a part. We've positioned ourselves well with the blockbusters that we have ahead of us with our launch performance. We have to keep delivering them now and wait for our readouts and can celebrate our successes from launches. So thank you very much.

[Eva Schaefer-Jansen, executive]

Thank you. You may now disconnect.