Q3 2019 Earnings Call
Ladies and gentlemen, thank you misconduct by welcome to Sanofi said quota 2019th annual conference call I would like to turn the call over to George close <unk>, Vice President head of Investor Relations at Sanofi. Please go ahead Jeff.
Good morning, and good afternoon to everyone on the call.
Thank you for joining us to review fantasies third quarter results as usual you can find the slides this call on the investors page of our website <unk> Dot com.
Moving to slide two I'd like to remind you the information presented in a tall contain forward looking statements that involve known and unknown.
Certainties and other factors that may cause actual results to differ materially I refer you to a 20 424 documents on file with the FCC I'll start I tried to response for a description of these risk factors.
With that please advance to slide three let me introduce our speakers today.
We are Paul Hudson, Chief Executive Officer, and jump up chooses to shop.
Second Vice President and Chief Financial Officer.
Paul will discuss highlights after which is on but she's will review the financials.
After the concluding remarks, we will close with the Couponites session during which will be joined by members of the Executive Committee.
With that I'd like to turn the call over to Paul.
Well, thank you George and good morning, and good afternoon, everyone. So real pleasure and indeed, a privilege to be hit on my first earnings call. The CEO it so nicely.
No I know many of you are eager to hear about my priorities to say something to the wrong on this in mind I will share some of the insights gained to my for 60 days and the company, but people that lets dive into the straight into Q3 results.
So on slide five Sanofi delivered a stable performance in Q3, despite facing a flu vaccine sales. This was in line with our expectations.
Positions us well to meet our full year guidance.
Highlights in the quarter include the continued strong uptake of on now Annualizing mango blockbuster Dupixent.
On the downside, we continued to face pricing pressures and probably cat as well as facing.
Additionally, our consumer health care will CHC business was impacted by the sometime equal.
These sales impacts whether were offset by an increasing level of responsibility in managing our opex.
To that end, we managed to hold as flat.
And finally, we achieved important regulatory milestones, notably dupixent in the EU with nasal polyps, that's one of adolescents with atopic dermatitis.
So going deeper into sales performance on slide six.
Little bit solid growth, but just for the roughly 3% negative impact to facing which I'll remind you will balance out in Q4.
As in prior quarters, you can see clearly that all key growth drivers are more than offsetting the declining losses.
To somebody.
[noise] advancing to slide seven I'm looking at the performance by GPU and by geography, we achieved excellent growth in specialty care, beating 20% in both mature and emerging markets and greater than 20%.
Thanks, Tony or the end was heavily impacted by the flu phasing in North America, well CHC growth was constrained by the Sun's I'll be cool.
Prime expense, sorry, you probably can't remained under pressure in mature markets.
Slide eight shows how our strong brands.
Together on driving double digit growth in specialty.
The primary driver continues to be the outstanding launch and continued excellent execution of Dupixent.
Sales of this kiosks at more than doubled in Q3.
I think it over 2 billion euros.
We will continue to expand the penetration and I don't it's helping dermatitis and continue the launch sequence enough spot and additional markets.
Our second we just try to about you sustain good growth. Despite the rival of new competitors and gained nearly half of share point in the past year.
Meanwhile, already disease business continues to drive growth by identifying new patients and as a pioneers of enzyme replacement therapy. We continue to build this category, notably this quarter with new patient growth in go Chase.
Our rep, all red blood disorder franchise with the only real disappointment.
Tight underperformed.
Brand of course completed this transition to us.
Knowledge this opportunities both in.
In execution, but we also recognize the challenges to new entrance in the market.
Slide nine highlights the strong unit brand momentum on Dupixent across key customer groups in the us.
Importantly, though was a 15% increase and then be Rx versus the previous quarter.
Timeline from on sweat outpacing other biologic on logs in both asthma and dermatology.
You will also note that we launched the nasal polyps syndication over the summer.
On the graph you can see the uptake of dupixent with with entities.
Initial positive anecdotes from the field point to the fact that the message around capabilities, such as asthma resonates well with physicians treating patients suffering from nasal polyps.
We want to build on all momentum with our new DTC TV campaign in a topic dermatitis as well.
And after an estimate TV campaign, which launched as recently as this week.
An important point tremendous a sustained efficacy and safety of Dupixent as demonstrated in the 76 week data, which was recently published in the channel.
Second Academy of Dermatology and as we all know safety will be a critical consideration in the dermatologists office going forward.
And other vaccines on slide 10.
Clearly illustrates the impact of U.S. flu facing on April performance.
As previously mentioned the delay in the Whr strain selection push the U.S. food delivery is backed by roughly a month.
To remind you around two thirds of all U.S. flu doses sold when the third quarter last year, which compares to less than half in this year's third quarter.
Equally to sales fell 20 nanometer some.
So this is simply a phasing issue and we expect to more the make up the shortfall in Q4 and in fact as high a full year sales than we did in 2018.
Our leading position in fleet continues to be based around our differentiated portfolio.
Typically pleased with the flu performance.
That concludes the rest of all vaccines grew well, notably in Texas in China.
On slide 11, and primary care. Despite good work by the team on volume sales were down due to pricing pressures in diabetes and to a lesser degree from Biosimilar competition to Lovenox.
I would highlight however that we performed better in diabetes in Europe , where the strength of to jail, which is the pace of sales declined to 3%.
Performance in the U.S. diabetes business on the other hand, with additionally impacted by the 44% reduction.
Looking to 2020 us payer coverage for diabetes portfolio is largely maintained.
Elsewhere Praluent remains a mystery Judah contrasting legal outcomes between the U.S. in Germany, and due to the previously signals us pricing pressure.
And of course, when we look to 2020 us payer coverage for Praluent is low.
On slide 12, consumer health delivered stable sales. Despite the continued negative impact of divestments and additional regulatory requirements.
Additionally, we carried out to precautionary involuntary zones have equal following initial FDA safety concerns.
For the brand fell nearly 60% in Q3 impacting performance.
I just have cut it.
In other parts of the business, we made good progress emerging markets with again, the highlights and all three other three categories each registered growth.
Hi, This slide 13 is the 10% growth in emerging markets, which remain a core strength of Sanofi.
Four months has led by double digit growth in China in Latin America, and I am, particularly impressed by our capabilities.
Our people and are planning.
Jim markets. Thank you could be the best in the industry.
On slide 14, however, I do want to take a moment to remind you on how the landscape is changing in China for mature products.
So while we delivered 14% growth in Q3, we do expect to seal CSL declined in Q4, following the national rollout volume based procurement.
The chart shows that our BBP effective products Plavix in the approval family held up last quarter looking forward, though we expect to significant sales decrease in Q4.
Part through inventory adjustments to pricing.
We expect sales of these products to decline by about 50% in 2020 . Also appreciate this is new ground for every company in this in this position so well update as we go forward.
It's VBP products accounted for around 40% of country sales. This will have an inevitable impact on our overall, China performance and 2020 .
However, going forward, we need to work hard on growing volume to return to growth in 2021.
As you think through the broader portfolio you should also note that we have a meaningful percentage of our sales in China and injectable products.
Indicated in the dock to be shading on the chart, which may be less exposed ultimately to the VBP program.
Additionally, we expect more than 10 products submissions through the end of 2020 , including Dupixent, which will be important for future growth in China.
Turning to pipeline on slide 15, we are anticipating a number of important milestones in the coming year, including.
First approvals for is it took some mob in multiple myeloma.
Our next generation men in Chicago vaccine men quotes.
We're also expecting multiple pivotal trial readouts, notably for all read these assets so Tim the map lipper days and glucose todays as well as for submit them up in basal cell carcinoma.
Finally, we should receive proof of concept readouts for us in breast cancer, BTK inhibitor, NMS, and Ohio, 33 in CBD and 80.
I am excited by a number of assets on this list. So it's going to be quite important year ahead from R&D organization and I look forward to gain much deeper on several of these projects at our capital markets day in December .
On Slide 16, Ellen mentioned the progress we made on sustainability in the quarter and in particular, we opened our digital factory of the future in Framingham, Massachusetts.
Now while the.
To society, and energy and water reuse so ization of significance at the same time.
What I love about this site is it makes a significant contributions and lowering our overall cost of goods. So between the environmental impacts on the cost of peloton production. This is a major step forward.
Furthermore, we're delighted to be recognized as the third most sustainable pharma company by the Dow Jones sustainability index.
So with that I'd like to know handover to John taste to discuss the financials.
So if you're falls on the good morning, good afternoon to euro.
On slide 18, we managed to compensate the vaccine spacing for just mentioned by our efficiency initiatives as a consequence be wide declined only slightly on we achieved modest margin leverage of 70 basis points.
The extent of our new mindset is clear in both DNA on R&D lines, which declined by around 1.5% on 8%, respectively. While our investments in our late stage pipeline on new launches is happening.
So we are learning to manage our opex more efficiently onto reallocate resources 12 priority.
So it's aligned.
Sure.
Attention is other approaching income and expense. This includes our share of the profit on loss of the original monoclonal antibody Alliance.
Reimbursement of commercialization expenses incurred by region.
On reimbursement of development cost two centers.
The combined outflow inter quarter increase.
On $7 million versus 160 million in Q2 2019.
As a collaboration is more and more profitable.
Looking at OCO slide on slide 19 to gross margin of 71.4% decrease slightly on a reported basis by 40 basis points at consulting sends rate.
In addition reflected.
Impact already discussed.
For the nine months, we deliver the gross margin of 71.8% of TR.
Turning to Opex combined R&D.
<unk> expenses declined by 4.1 into quarter, if we adjust for the received so for Mike Stone from Sobi on D. and realization of the new generates divestment.
Thanks would have declined on a comparable basis by 1.9 person.
As I mentioned before Opex performance underscores the new mindset, we are implementing across the organization.
For the full year, we maintained our guidance for the gross margin to be between 70, 71% CR.
Keep in mind, so gross margin in Q4 will reflect the dynamics in China on our usual seasonality from through vaccines in Q4.
We expect.
Opex growth for the full year to be no somewhat below one person.
For Q4, Opex will reflect increased investments in Dupixent DTC campaign for flu, we switched from Q3 Q4.
Our continuous investments in our pipeline.
On slide 20, I reaffirm our full year guidance for business appears to grow upper mix at approximately 5%.
Exchange rates.
The impact of Forex is expected to be around three person positive based on October average exchange rates.
We thought that we'd like to talk to go back to Paul.
Thank you Giambattista so to summarize Sanofi posted on track third quarter performance led by two persons and more broadly by strong growth in specialty care and emerging markets.
Stable business Cps with the help of good progress.
Smart spending.
As well on track to deliver off would your EPS guidance of around 5%.
So now before going into Q in a one to say a little about my initial impressions and Sanofi.
The first thing to say that have been inspired and humbled by the depth of talent in this organization.
Single minded dedication to improving the lives of patients.
I am just over half way through 100 days tour of the company.
But already I've had the opportunity to learn from an exchange ideas with hundreds of colleagues in the us, France, Germany, Spain, Italy, and the UK next week I'll be in China, and deep for the entire week.
Also met with important external stakeholders to add further insight to my learning experience.
These franken open interactions are taught me a great deal about the challenges Sanofi faces.
But more importantly about the opportunities that lie ahead.
Having the right people in culture is vital to seizing these opportunities.
We are in my view, a uniquely diverse culture in our industry. As an example, there are 35 different nationalities working in our global innovation Center in Barcelona.
We should be writing proud of our diversity, which gives sanofi a real advantage.
Recently Intellinx Society.
As part of my strategic review, the Executive Committee and I have reviewed disease areas strategies with an eye toward a deeper.
Much more precise look into our pipeline.
Into competition on into disruptive science in order to define our long term ambitions and indeed, the revenue drivers that go with them.
Fundamental to this will be bolstering R&D engine.
We will have to execute on the new priorities of our refocused R&D organization under John Reid with the ambition to bring first and best in class treatments to patients.
To achieve this objective I believe Sanofi can increasingly leverage is leading edge research platforms supported by our rapidly emerging digital and AI capability.
It is also clear to me that there are many opportunities to maintain the best of Sanofi, while improving its productivity.
Performance.
Even at this formative stage of thinking I believe we can be more efficient by continuing and amplifying the culture change in mindset on cost and cash flow management, which our CFO jumbo piece has begun to implement.
You saw clearly in today's results.
So where does this end up ultimately my goal is to Sanofi to be an innovation leader at commercial leader culturally to one of the most attractive investment opportunities in the biopharm industry.
The task.
The impression on completing energized to deliver on this.
Now I understand that many of you on the call today are waiting for the opportunity to ask questions about our future strategic priorities.
I've been with the company for a little over eight weeks. So I believe this has not yet the time on deep venue to have this conversation.
Tony working as a team with the Executive Committee on the board on the completion of a strategic plan.
There was still a lot of work to do not everything will be finalized by our capital markets day, but we do look forward to sharing with you all strategic direction at that time.
We will be delighted to welcome you in person or offices in Cambridge, Massachusetts.
On December 10th.
With that I hand over to George talked acuity.
Thank you Paul I will now open up the call to your questions joining us for today will be Olivia Sherman Executive Vice President General medicines and emerging market.
Karen Linehan Executive Vice President Legal Affairs, and General Counsel, David Lowe Executive Vice President Nancy pastor.
Alan main executive Vice President consumer healthcare, John Reid Executive Vice President Global head of R&D, Bill Civil Executive Vice President since you Genzyme and Dieter Wynand Executive Vice President primary care.
As a reminder, we ask you to limit your questions to each and we would ask that you reserve your questions on the strategic review until the capital markets. Thanks.
Thank you.
Your first question comes from the line of Pizza.
Please go ahead your line is open.
Thank you Pete Verdult city.
Just two questions vaccines.
Hello.
Just interested in your thoughts regarding trumps recent executive order to modernize influenza vaccine production.
Just wanted to know where you see the opportunities and threats to your current dominant.
New business and confidence.
The vaccines business overall can continue to drive mid to high single digit growth rates and then second the pool following.
Access getting worse cited by you in the Q3 release the landscape is getting tougher.
While numbers.
For us loss, making.
Turnaround brands in the past the prior companies do you feel you can do the same hair all options being considered thank you.
Okay. Thank you. Thank you for your questions. So Paul.
I'll come to either shortly.
Maybe just a quick comments, we'll try to David on vaccines I've been up to pleasure to get trend the vaccines business.
So I joined the company and.
Well, if I understand its alone development cycle, the opportunities and how we're approaching it I think is tend to be very interesting for what happens next.
Maybe I'll, let David.
Thank you take a shot.
Trunk.
Yes.
Sure. Thank you Peter.
We welcome of course, the executive order because.
Help prepare the us even better.
It is one of the best prepared nations in the World in terms of pandemic preparedness and we have been long time working with BARDA.
To help.
Be really geared up for a pandemic out right now the executive order flips and accident on new technologies and here, we are well place you'll remember that we have acquired protein signs, which has a recombinant technology. So we are working as we speak with ours to discuss how we.
We're going to expand the footprint in the United States.
We can also prepare adjuvant and versions of this and we can engage together into the next generation more broadly protective.
Flu vaccines, so we really welcome that executive order.
Thanks, David.
As for working on other band brands previously.
Enjoyed getting to know the opportunities.
Around praluent.
The access is always a double edged sword, you do get opportunities.
Even when.
Having slightly lower access the previous year, maybe you want to make.
Comment.
Yes, Peter.
Access.
The balance.
Why we strive to continue to improve access we are focused on utilization.
Management criteria with trip instant progress on as expected in the substantial volume growth we've seen in the west.
39% volume growth and it's not offset completely completely offsetting obviously the price reductions weakness you got to full impact.
During the year.
The.
Focus on profitable access improvements.
And we had hinted towards that already as we said we expect into pricing decline.
To stabilize as you go forward offering reflecting.
When we reflected in our sales growth going forward.
Thanks data I think quite a mature response to be honest on.
Hospitable approach to access.
Operator next question.
Thank you. So next question comes from the line of Lauren.
Speedy Society's annual please go ahead your line is open.
Good afternoon Jensen unsecure much for taking my questions.
Two quick ones.
First on the pipeline following the discontinuation of the.
The New York City switch combo.
Are you has the confidence and the continued the development with.
What is your map.
And the sector.
On the pipeline.
With us.
For the most important milestones on the pipeline you mentioned that you will be.
It will be re importance.
Type studies readout by.
If you could elaborate on this would be great and my second question for you.
Recount.
Fine now and it could we have more color on the summer sector.
This review.
In this country many thanks.
Okay. So we'll come alleviate to use sounded more like three questions.
But livia will come to shortly John .
Yes.
Question on some at the moment and is it took some up.
Maybe just pick one or two milestones.
On your mind that would be great.
Thank you for the questions with respect to combining our Cdthirty cdthirty eight antibodies for tomorrow with.
PD, one or PDL one.
The hypothesis, we're testing there is that Cdthirty eight plays an important role in the tumor microenvironment contributing to an immuno suppressive state and therefore could be a.
Essentially in immuno oncology opportunity beyond the role of Cdthirty eight is indirect target in myeloma now the tumor micro environment.
Very kind of cancer is different.
Really quite unique depending on the type of malignancy and Thats why we.
Laid out a broad based program around eight different types of malignancies to test that hypothesis in a number of context.
The first couple of indications prostate and long and have not confirm the hypothesis, but we still feel there's merit to continue that work in the other indications.
Several of them are hematologic malignancies for example, where the tumor microenvironments very different than solid tumors and so we'll we'll see those studies to their end their small signal seeking studies.
Test the hypothesis, we accept them beginning its.
It's a low probability of success.
We feel that the.
The data the preclinical data from our own labs and from the medical community merits that we test the hypothesis and.
Lean way that will help to determine whether as a broader opportunity for cdthirty eight antibodies like Unituxin lab.
Have unique properties due to the epitope, we target relative to other competitors.
Couple of milestones the looking out for in the.
In the assets.
Just to reiterate what was said during their during Paul's remarks is that our estrogen receptor to greater or serve molecule will be completing it yes.
His analysis in the monotherapy as a monotherapy in late line. These are patients who've already fail typically three or more therapies.
We're encouraged by the early days.
We'll have a more complete dataset by end of year and then be poised.
To move forward, we have already based on the data we've seen the got our first randomized study as monotherapy in late line.
Cancer. So we're encouraged by the early results for will have a more complete.
Packages that will allow us to efficiently declare proof of concept by end of year. So thats, a very important readout for us.
Also mentioned was the anti IL 33, and see LPD as we know CRPD is an indication with.
With great unmet need.
No biologics really have been able to crack that problem so far.
We'll have.
In middle of November .
First of RP overseas.
Ladies phase two studies will read out and we'll see how were bearing at that point, maybe I've just mentioned those in a couple of examples and importantly, though thank you.
And then Olivier China so of flow on so this ministry of finance or this is a sector Oded center.
These galanti being formed.
Interest.
Just to.
Our work on but we have not yet this year the port.
They are more than 70 78 companies to meet the size on that being in all the in decided.
The spending is that the ministry of finance, one to understand how come in Europe right.
And the objective of this.
Hey, much policy shaping at the moment of time well there are many things that are going on in China. You saw yen turned on better understanding our company upgrade I was in manufactured products.
How is it almost product so.
It's a deep.
Deep audit.
In that sector oriented.
And we will be waiting the outcome in terms of policy shaping.
The.
Future months, you want to that something.
Some updates.
Okay.
Hello.
I might have some FX impact for the sector in China.
So far waiting for the report.
Thank you okay. Thank you very much.
Your next question comes from the line of Graham Parry.
Erica. Please go ahead your line is open.
Okay. Thanks for taking my questions say first again in the normal on China's obviously, you talking plastics and have a prelude likely to declined 50% in 2020 GVP just wonder if you could help us understand that volume and price makes that a seems and then how do you expect that to plants in subsequent years. So you talked about winning volume to go back to grow.
Sounds too is that what essentially prevent space being a multi year decline for each of these products and which products do you think might also getting to expand the program as we roll forward through the years and then second question.
Paul I think there's always been an external fee that executive management sanofis being somewhat hamstrung by the board.
To 80 feet to discuss you'll specific strategic objectives at this time, but perhaps if you could help us understand your view, if youre independents and freedom to execute change in the business and maybe what Youre mandate in the evening given from the board is key.
Graham.
As always thank you feel a person in question.
We should will come to the price volume piece in China, I mean, I think just by way of a setup.
This is new for everybody right Festival secondly.
One of the absolute will cost trends in this company is helping manage emerging markets and in particular in China.
I think our opportunities to get outside of the Big City and try volume is probably one of the leased in the top two companies to be able to do that.
We've suggested that approximately 50% of revenues will be impacted.
But there is some there was some room and depending on.
When the province is rollout that.
Our individual programs because it's not all alone one day.
I think not to have the opportunity to ask Olivier wed as the volume growth come from.
So we are seeing and of course, you can imagine that we have taken a sound decision and thats.
Paul This season, two Bucks fate.
Based on the ability to go significantly volume are we seeing that within 12 to 18 months. So we should be able to grow volume by 16, 17, 18, 19% and we have a couple of data points that quite interesting here based on the experiencing the seven plus for Cts.
We have been observing.
Thats, a big belonging to a different ta we have been absorbing a significant increase in terms of consumption. The second that mindset is very specifically China is that the consent to invest capital for example on products like Labick CJS.
Significantly below Enzo as of the world and significantly below the.
Phase unlike other emerging countries by a factor of.
One to two or three or four and Allfast Solomon.
For Q3, and a little bit higher than we we don't see baking just due to the fact that we are tracking very nicely in that counties, where we continue to see a lot the potential for volume growth in the in the future the implementation plan and as Paul mentioned it earlier this is new to everybody as we implement.
In addition, Lana Province by Province is not known also we are starting to CEO .
Getting organized to being a situation to executed media during the first quarter, but you would end to stand that of course.
Moving on when it's going to impact into 20.
Yes, we've been different.
It's what you should keep in mind is that assumption is that we wouldn't be able to get back to gross.
Turning to add to 18 months and of course, we are getting off in Iceland ethane in the last few months gross on the manufacturing standpoint than we had anticipated.
To be in his vision to cope with those volume and second of course, the go to market strategy things can change significantly.
Sense that they can be very much about being presence into bidding offices. Both ends of audiences in the upbeat us be tool to get the impact in terms of volume through the foods.
Longer and of course.
Our growth in China, Thanks, very much driven by our new products with 10 products that are being submitted.
The next.
14 months until the end of July 20.
30 products.
Indication.
Being.
Being submitted by 2005 and of course, it being seeing here is a decent do respond tightly to your question on crude.
The BBB expended to us.
And.
Our analysis is that.
So what is going to drive all grossing is a future falls in lung DVB product is very much injectables and we think thats, we have seen a lump of runway.
Last weeks on.
Of course launches.
Zero when the existing to meet within the market and of course on clicks and since the beginning of the yet we have valeo casing significantly sources and we see clearly an acceleration.
Those brands, so even the specific basis of those.
That being in Texas in being Injectables, we feel that VBP like.
It is impossible.
Action to be in specialty oncology.
But the developments for the died being.
And any color.
And so Libya.
Just.
We should underestimate the 10 submissions for sure and again, you know I don't know company better place to pull through on volume questions, how fast and we think more outside of 2020.
So.
Set will update you.
As for your other question Graham I think was about.
Freedom to operate I think was.
So the context of it might have relationship with the board on have you.
The conversations that idle along from before joining and ride through up until.
As recently as yesterday have been constructive positive and forward looking.
I think.
As I get to know the board.
Struck by how well informed they are on what we're doing and not only that.
How to bring their experiences to bear.
I found it incredibly open and only about trying to build.
Full organization for the long term and Thats the boards and the chairman.
Of course.
We will know more as we go alone and as we make choices.
But I think so far have been really pleased with the level of interest and governance, and it's very well balanced and in the interest of the company.
Thank you thanks.
Thank you Sir your next question comes from the line of Matthew Weston. This credit Suisse. Please go ahead. Your line is open.
Hello, It's Joe Wilson here I've got two quick questions. Please.
I Wonder if you could tell us a little bit more about to the penetration of dupixent in the key areas, where you see all you've achieved as much penetration just give us a little background and particularly how it's rolling out in Europe , and whether you see any price pressure is developing.
Add incremental indications to the product.
My second question is feel CFO .
Historically, you've told US that you think you can see operating expenses.
To about 1%, you've obviously done a lot better than that because you're actually managing to get them down 1% I Wonder if you can tell us a little bit about some of the things that you, perhaps found easier to do and give us some sense as to whether this is a growth rate. This is now a reasonable ambition to seek to use as well.
Keith.
Thanks, Joe Sorry, I think you run the introduces Matthew Weston.
Thank you Nonetheless hope to get to Matthew too.
For Dupilumab, I think bill I'm, probably going to come your way I'm not sure how much detail, we normally share on penetrations, maybe a headline for me the biologic penetration of eligible patient populations.
As a chronically too low and this huge opportunity right across all indications and as for us.
Created a paradigm in atopic dermatitis will go on to do that in other indications to the scale and scope of the market is significant.
We hope to look at Dimensionalizing. These things as we go through December the 10.
Bill maybe comment on that and may be on pricing. Following indications, yes, let me just johari, let me start with the pricing.
To date the.
Innovation of Dupixent has been recognized everywhere in the world. This is.
Again as as we.
Transform.
To a best in class first in class.
Product organization.
I think that depicts since a perfect example of that because it's still as on a worldwide basis, securing the reimbursement that we had hoped for and said even exceeded that.
So.
Good news there.
Regarding the penetration of doing all the key areas.
We don't have specific.
Numbers ticket, but let me just try to contextualize that a little bit.
Yes, yes, the way I would I wouldnt describe dupixent across all indications at this point is that we're at the very beginning.
And as Paul mentioned, we are with this quarter on a.
Greater than 2 billion euro annualized run rate.
With aspirations and being in a blockbuster and we're at the start on really all different.
Atopic dermatitis is a indication that didnt have advanced therapy in the past and Dupixent is off to extremely strong start and continues to have a strong has strong performance.
Against other biologic.
Launches in other.
Dermatology indications.
And we see that around the world in each of the markets.
We've seen.
We chosen.
Centex, often as a comparator and were anywhere from three to seven times.
The launch pace.
That biologic in dermatology, which as you know it was very strong launch.
The.
The other piece I would mention in asthma and Paul commented on this as well as biologics penetration has been historically very low a lot of this is Ben because.
Pulmonologists Haven.
Had been means to do and office, where the interest to do and office injections.
The at home profile of.
Excellent and just the clinical profile depicts and has really led to an acceleration with pulmonologists as well and when you go to zero basing the launch curve, so comparing us against all the other biologic launches today.
We are the number one launch in biologics launched in dermatology, where the number one launch.
And from NBR ex again in asthma, and if you look at the specific audience of allergists.
We are the number one and the Rx biologic across all of allergy. So I think it's early we're off to a great start well spend some more time on it in December that were.
Penetrations low at this point with lot of room to grow.
Thanks, Thanks, Bill as you can imagine barilla enjoys making comparisons to cosentyx.
Okay.
We remind him.
Great.
Building well.
So John .
Lessons on.
Cost saving the program overall on the sort of silence I hope you can share with people and.
To sort of underlying commitment to lowering our cost to do business, but how we balanced that with not missing opportunities.
Yes. Thanks.
Actively on its a good example in Q4 of this year, we are looking at data at pushing harder on on DTC campaigns for flu vaccines in the us for instance.
We also increasing our.
Our cost on the on device launches of GP. So.
What's important for us.
Where we under false leadership, we want to take one step further is a good understanding within as the teams.
We are doing it.
Better understanding our priorities so I'd be very happy on the of the 10th of December to give you more color on those delivers we pool.
To reach that but I can tell you already.
Right.
Traveling through our different subsidiaries of rest of World I can see said, it's happening within the teams.
Smelter superficial thing happening headquarters for the as something that people start to understand as a smart spending activities.
It is quite to is quite good to see I come back with more details on color on buttons.
And some of them too so I think thats the echo that last point I think.
I've been around.
Plus I'd like to and I think people people.
Getting a deeper level of understanding.
We will do as we go through our strategy and our parties about what reallocation like.
Saving in some areas to invest for growth and other areas for the looks like.
So it sort of done the hard part I think upfront and that will too.
Clever work to make sure we can accelerate growth.
I think.
Thank you Joe and the question.
Your next question. Please thank you.
A question comes from the line of consistent with JP Morgan. Please go ahead. Your line is open.
Hi, Thanks for taking my questions to place as such they just cleaning we had good growth from takes and there are some oral products on the horizon, maybe hesitate printing asner and the oral JAK CNH will be dematteis has to maybe you could just give us your perspective on that at a competitive positioning and threat.
Page by Nice and then second question just going on to the pipeline and Nike stem early fourth another Cdseventy 18.
Development.
Thats quite a long way behind basis, and KMOV and Dallas or next day, just if you could give us your rationale and and thought process that as opposed to investing in in other areas. Thanks very much.
Thanks, Richard I'll come to join in a moment.
The question.
And.
The question about Tupi about global challenges between FES pet.
Jacks.
Thank you know, we wait and see what happens with the data readout.
But.
Let's just also remind ourselves that.
Thats very high up on efficacy and.
Safety profile is frankly extraordinary.
Given the nature of the science, So I think there is a.
I think there's just a very high bar.
I'll, let let bill comment plus on the jacks.
I think there is.
Some.
Deepest thinking that needs to go on around.
Safety profile sits very intricate balance to launch.
Oral and where safety and efficacy have already been set and where you are.
Yes.
You know the side effect profiles are less convenient Phil maybe you have done yet.
It's set up I think that.
Just put in perspective, there is now over 125000 patients globally that have been treated with picks and.
So it's got a very big head start and Paul also mentioned the 70 676 week long term safety data, which again showed.
Nothing.
New from what had been seen in the clinical trials and this whole notion of.
But still a pill great. Its appeal is.
Really effective and really safe and as we think about the dermatology audience. We know that safety is a really important aspect of it.
Our product selection.
As well as efficacy and Dupixent has time and time again in different age groups.
Graphically sell on very strong efficacy not only in clinical trials, but in the post marketing.
Setting as well and clearly has done the same with safety. So I think that we have to see how they how those profiles of the Jackson Andy emerge I think that our expectation is that theres going to be.
Class labeling that will.
Be part of those new.
Labels, which we all know us some of the challenges that have been seeing there. So we feel very bullish on depicts since ability to continue to compete we think that were the best stress. We've got a big lead and we're only going to generate more and more data along the way I think it's going to be really tough for somebody come in and we're not going to let somebody come in and taken away from us.
Thanks, Bill said.
Jumps.
Yes, thanks to the question.
We did put a next generation cdthirty eight into the clinic.
The rationale behind these next wave of Cdthirty antibodies is to ask the question of whether they can rescue patients who have failed.
The frontline Cdthirty eight standard of care antibody.
We've engineered into these molecules enhanced properties that.
Enable them to recruit immune cells to attack the malignancy more amplified way diverse those has recently gone in the clinic, we have another one.
Going along behind that that uses yet another immune mechanism.
What we know so far about.
Mechanisms of resistance to the standard of care Cdthirty antibodies is that the levels of Cdthirty eight on myeloma sale are reduced but cdthirty still remains on the myeloma itself over at lower levels. So the target is still relevant and we feel there is sufficient retained expression for most.
Actions that we can still grow at that target with these enhanced antibodies. So they won't really be an attempt to rescue patients who failed frontline standard of care agent.
Thanks, Tom and next question.
Thank you. My next question comes from the line of Steve Scala.
That's Cohen. Please go ahead your line is open.
Thank you well it is on slide 37, Fitusiran is not shown on slide 40 in the R&D milestones phase three data in filing was expected in 2020. So is this still on track or incentive fee less committed to Fitusiran now and secondly.
Regarding the flu vaccine facing curious why send a fee was delayed while a competitor.
Did very well in the third quarter assistant execution issue is there. Some other reason to explain it. Thank you.
Thanks, Steve.
Let.
David in a moment explain why it absolutely wasnt an execution issue just shift position of being the biggest player in the market.
John just forget to too so I will add that is.
So really interesting.
Asset we have in this space there is.
This clearly as we as I guess today this area there is.
A large group of patients that were previously thought to be stable in the fact of space that got moved to have LIBOR and other things for combination of reasons non factor or convenience.
Which shows how dynamic this patient population actually is given the disease and administration button. So.
As it as I as I get deeper I get more excited about what it could be on off with the to surround but.
I'll, let John talked about.
The.
The Mt regulatory milestones.
So they were thanks for the question.
The company so hoping we remain entirely committed to produce Graham we do feel it's highly differentiated product. It offers a subcutaneous convenient delivery route.
For those patients who choose to go where the non factors solution.
As you know it gives relevant for both team believe a and b with or without inhibitors. So really has quite abroad.
Indication possibility and with that can we use a monthly subcutaneous dosing with a low volume one cc and.
Less demand around cold chain, because of being a synthetic or in a serenade growth. So.
For that reason, we remain very committed to this molecule.
The recruitment of a studies has gone slower than planned you may recall that this was studies were transferred from Alnylam to us and as perhaps inevitably happens during a transfer number things were delayed.
A variety of issues that I won't go into here.
To.
Make long story short we have made every effort to try to restore the recruiting timelines recruitment now is has picked up and we feel like we're really now have momentum studies about two thirds recruited right now so we still have weren't to do we will be a bit delay probably.
By a couple of quarters.
But.
I would sort of is what it is due to the transfer and all the logistical issues that occurred in the context of that but will where we're excited about what the potential could man.
Expect that.
And we'll be in probably middle of next year and will be in a position than the second half of next year.
Two.
Share share the results from these.
Very broad clinical program going across.
The with and without inhibitors.
Okay John .
From one of the original team on heavily Bracken.
It's it's great to have experience we have his leadership team around the table on what is.
To surround can do at David.
Maybe you want to make a comment on why just Rcs scale.
It's what took a little bit lung.
Thanks, Steve for the question.
When you look at well you're performing on the Lucy you need to look at different factors, one the time to market.
How many though is are you going to assailant totaled one these are you able to actually sell differentiated though.
We have a higher price level.
So when you look as though.
I'd say is that on the timing.
We have seen kind of GSK come out of the bar and the fastest but we need to remember that they have only standard though.
Okay.
The two other ones in various and ourselves we have been more complex vaccines. We are the only want actually having a high dose vaccine which consumes.
Three to four times more of the antigens. So when you prepare for the flu season. These the more complex manufacturing.
That's a small these advantage.
Big advantage is that you are selling differentiated vaccines. Therefore at the much higher price because they offer more value and we are doing very well again, our internal lets say roadmap and against also the pre orders that we had which typically.
Our.
Finished in March and April Thats, when you know how much gets preorder.
Then you get some additional orders during the season, we're doing very well there as well and then you need to actually look versus.
Are you delivering now according to the shipment plan that you have app and here, we are doing well as well. So overall I think this kind of quick out of the bar in effect.
He is not going to be very relevant to us because everybody.
Was affected by this lingers strain.
And I think we're going to have a very good flu season overall.
Great. Thank you I think it's just repeating again that we expect things to rebalance in Q4, and we expect to into 19, so beyond the 20 team. So.
Thank you David being so.
Please.
Response, and maybe the next question.
Thank you. Your next question comes from the line of Tim Anderson of Wolfe Research. Please go ahead. Your line is open.
Thank you.
Very much.
I am hoping to just get your preliminary view.
Consumer health business I'm sure you'll address this in December in.
Any sort of preliminary view you can give this would be helpful.
Second question goes back to two picks and competition and various fronts as any brand spaces.
So.
So my specific question here is really on.
Adversity, which is pfizer's product because as being run in a head to head trial and that against to fill madness post a report out.
Maybe by the end of the year, it's really hard to see how safety is going to be as good as telematics, but on an efficacy I'm wondering what they may be able to show maybe by business line in their trial.
They seem to be messaging.
I think it at a faster speed of onset and may be better introduction, which they say is important in a topic term. So I'm wondering when you look at that particular trial in that particular program on the efficacy front.
What you think the evolution of their better thank you.
I'll, let bill answer in a moment.
As.
Every single part of our business I've, just been getting up to speed on equal is interested in a deep understanding of outlook on Dupilumab and Sam NCC as I am in vaccines as Ham right across every aspect.
Spending time as a team looking at where opportunities are and you know we will share more of those in detail in December the 10th I can assure you that so.
Bill.
Question and confides as Jack I think it was yes and.
There was.
At recognition I think the safety profile not be Greg.
They are trying to send speed of on said, yes, Tim. Thanks for the question, Yes, you're absolutely right it.
Now looking at speed of onset around the edge add Devon too weak point and.
So we'll see how those read out I think.
Just a couple points to my first of all is atopic dermatitis is not a two week diseases chronic disease and how you perform over the long term is going to be important not only from and safety, but an efficacy perspective as well.
Piece I would report out as Jeff.
What we've been hearing from patients that have been treated.
Thank you pixel is that there's a very rapid onset of action and people have commented that.
After the very first injection they start to have a decrease in edge and certainly we've seen that in the clinical trials to it.
Rapidly on setting so I think thats a.
Certainly a small piece of a much bigger problem, which is in the treatment of atopic dermatitis, and we think overall again as I mentioned.
If I may before about the overall.
Safety and efficacy profile.
These clearly going to be an issue in a atopic dermatitis with with dermatologists and.
We feel we had the best product on from an efficacy and safety perspective.
Thanks Bill.
Very clear I think.
If we if the analysis is correct and if the class ends up with a black box warning.
Then we have to be honest with ourselves particular into in the technology.
If you can get the efficacy with very very good safety profile.
Particularly when you look at these patients are lower than my younger than you.
Really done one too.
You will have to be very thoughtful about that so I think I think we understand that competitive set well enough to know what needs to be dumb.
May pick up.
Time for another couple of questions.
No.
Thank you.
Next question comes from the line of Windmill capacity. Thanks, Steve. Please go ahead. Your line is open.
Great. Thanks, very much for taking my questions remarkable benzene just following up on grams earlier question on China can you talk a little bit about the earnings impact from the drop in sales for products and I provide 2020 are these products above from division margins and Sanofi, taking any measures to reduce the earnings impact for next year once again.
Question is just can you talk a little about the current opex spend trends within the Regeneron collaboration specifically how should we think about the R&D an issue may spend moving forward.
Actually reached peak opex spend within the collaboration on an absolute basis. Thank you very much.
Okay. Thanks Q.
I think.
Well first of all.
Took two giambattista.
A little bit about the to China impact of prevail and Opex on.
Earnings too.
Do you want to make a comment on that.
As weve talked in the past.
Level of gross margin in China is.
It is really accretive.
Globally to.
Incentive fee on.
So if you will have an impact on 2020 that's for sure.
No going for the reasons that.
Just from a.
Just before we need to know exactly what's going to play what we know as of today is that we are placing also for the Jordan player.
Get appear rebound AFFO growth in China from 2020 one.
Which is a good position to be.
So.
Surely to give a precise impacts on on earnings 2020 .
Live is evident.
I would just add that we are shifting I'll go to market strategy and this is positive plus.
Stop.
The last few months and the second element is that since the beginning of the Euro we look at significantly sources VI now gross driver and we are starting to see some of the brands and acceleration present themselves the indication.
Thank you just repeat said a few times already which is.
This is new ground for everybody, we've tried to give a sense of the potential impact but.
I think we have to except that the.
When you go into these tenders you understand what margin you have less expect to the volume of what breaking out of that would look like I think we.
We are betting on ourselves a little bit some I think you know again, we'll adjust as we go with communicating.
Further updates on those numbers for Opex spend trend and R&D with general.
I would say overall with the relationship I think we're adjusting between brands and nothing that is.
Very helpful.
Bill you had a specific comments.
No look just in the context that picks and again thinking where we are.
The broadest launch that we have is adults with a topic dermatitis, where we're launching literally around the world with several more markets to launch event in 2019.
Asthma, we are just getting started we have only to market in.
Europe , where were launch so Europe still has to rollout otherwise, it's really the U.S. and Japan.
And then now with the recent approval nasal polyps in Europe .
We will be.
Launching there as well so.
We are still in process of launching.
Mega blockbuster global scale, and we will continue to invest to make that the mega blockbuster that we expected to be county, and we will support it with clinical trial work so theres.
More to come with some details but.
Overall.
As you know we've got a lot to do with depicts and to make a brand that it can become.
And we will adequately invest.
Yes, and just to maybe to add as well.
Specialty deployments in markets across the world going up.
Pardon me cast field deployments that can be tens and fifteens and even in large markets. So.
At one thing I can assure everybody is that.
Whilst.
We are very considerate about how we deploy.
And we expect to deploy to win.
And we have to set ourselves up to achieve.
Maybe we have time for one last question.
Thank you.
Final question comes from the line of Thibeault strain of Morgan Stanley . Please go ahead. Your line is open.
Thank you for taking my question one question.
So Chris propane, China in particular and could you walk us through is a new credit growth above breakeven, China incomes us significant new filings launches and NRG and reinvestment that but can you keys.
I wish that they could have said to pricing question on plastics and approach.
So we still recent that provisions agenda, genzyme business, including Bedouin Myozyme and things that.
As I am highly aren't in the end type resume must contend that review.
Chinese has constantly.
So.
Can you kind of is that I think you previously talked about investing in did you get in China.
And in combination with.
Significant unmet needs told you Dixons Nagy in ESMA.
What do you think about the risk profile in may get them in China.
Reza Tessa next year.
Okay. So maybe I'll start with that and off elevated it tends to talk about the 10 submissions.
I think we'll provide by the way more color.
In December as to the.
What we what we hope to expect.
On the digital pace I think what sets China apart in many ways is.
Is there wasn't a at traditional infrastructure of.
Primary care physician office and access to health care.
For the entire country. So you know probably as well as I do that.
500 million plus people, who really don't have everyday access to healthcare why is an important component because in many countries. When you introduce digital youre trying to undo or replace.
A sort of terrestrial alternative and that can take a lot of energy and effort.
In China, it's split whipping encouraged and rightly so to leapfrog too.
Doug getting access to medicines looked like in a digital heavily.
Smartphone penetrated fourg.
Fast moving rural World.
And that means that their chances to bring AI and algorithm derived.
Triaging of patients much earlier in the equation. So we have a very strong digital presence in China and collaborations.
Strong tier two collaboration which is what excites us about helping use low marginal cost initiatives to pull in patients on a large scale, which is one of the reasons why we felt comfortable.
Going into 10 that now there's a lot of Lenin's along the way but.
There is a very favorable local environment to trying to make dot work and will pay off part and I think.
If you'd like to talk a little bit about submissions.
So where we see the gross in the upcoming quarters.
For our business in China beyond what I mentioned into two bitch earlier, which is the acceleration of.
The the grow so products that I injectable, Mike I'll choose.
Our next and where we see and run vet up where we see significant potential for growth was very strong double digit growth. So regarding the submission into next 12 months definitely Jill as echo, but as you mentioned off.
These product defense is going to be.
Important play here, we are expecting.
Can you submit in coming months, we as a potential approval at the end up to 20 beginning of 221 Ms.
Rock down to two reimbursement given the strong unmet need.
Discussion.
Reimbursements of full by June we have suite products that are currently being reviewed.
Bye Bye now.
And we are expecting to get reimbursement by Geo.
And.
If we are looking a little bit head of the correct.
Beyond the two at 21 to a 22 well.
We are expecting to get.
Equal.
To 21, two or 22 and of course is a new products.
From oncology coming between torture industry into a 25.
And Columbia, So I think we'll we'll probably set up the end of the questions. Maybe just some closing couple of comments repeat what I said of front I'm very excited.
Average to take this fro Sanofi.
I can tell even up to eight weeks since I get a bit deeper I see.
Plenty of opportunities and we look forward to sharing with dose with you in detail in December the tenant if you can join us.
You know.
There's some incredibly talented people in this company some great opportunities and I think I and the team have a lot of energy for what happens next and the train to create next chapter. So thanks for joining us for the pull today and that wouldn't put singing personally from these some of the time.
Thank you.
This concludes your conference for today. Thanks for participating you may now disconnect.