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# Sanofi (SNY): Business, Risks and Management Discussion Sanofi reports in euros under IFRS. Euro amounts below are converted to US dollars, using the average exchange rate for the period for flows and the closing rate on the date for balances. Amounts the company states in US dollars are shown as stated. Growth "at constant exchange rates" (CER) is the company's own measure, which removes currency movements. Other percentage changes that come with an amount are US dollar changes; where the company gives only a percentage, it is labelled as the change in euros. Each American Depositary Share (ADS) represents one half of an ordinary share, so per-ADS amounts are half the per-share amounts. ## Business *Source: Annual Report on Form 20-F for the year ended December 31, 2025, accession 0001628280-26-008403.* Sanofi is a Paris-based biopharmaceutical company that discovers, makes and sells prescription medicines and vaccines worldwide. Its customers are mainly wholesalers, distributors, pharmacies, hospitals, clinics and government agencies. In 2025 it had net sales of $49.32 billion. The United States provided 50.8% of net sales, Europe 21.0% and the Rest of the World 28.2%, including China at 6.0% and Japan at 3.2%. US distribution is concentrated: the three largest customers accounted for 18%, 12% and 6% of consolidated net sales. Sanofi reports a single operating segment, Biopharma. It is managed through three global business units, Specialty Care, General Medicines and Vaccines, and its products fall into six categories: - **Immunology.** Dupixent (dupilumab), an antibody that blocks the IL-4 and IL-13 pathways behind type 2 inflammation, is by far the largest product. It had 2025 sales of $17.77 billion, 36.0% of net sales, across atopic dermatitis, asthma, chronic rhinosinusitis with nasal polyps, eosinophilic esophagitis, prurigo nodularis, chronic spontaneous urticaria, COPD and bullous pemphigoid. Kevzara is also in this category. - **Rare diseases.** These include the hemophilia medicines ALTUVIIIO ($1.31 billion in 2025), Alprolix, Eloctate and Qfitlia; enzyme replacement therapies for Pompe, Fabry and Gaucher disease (Nexviazyme, Myozyme, Fabrazyme, Cerezyme, Cerdelga); Cablivi; Xenpozyme; Wayrilz; and Ayvakit for systemic mastocytosis, which came with the 2025 Blueprint acquisition. - **Neurology.** Aubagio, now facing generics, is the main neurology product. - **Oncology.** The category centers on Sarclisa for multiple myeloma, plus Jevtana and Fasturtec. - **Other medicines.** This is the established portfolio: the insulins Lantus ($1.96 billion) and Toujeo, Plavix, Lovenox, Praluent, Rezurock, Thymoglobulin, Aprovel, Multaq and Tzield. - **Vaccines.** Sales were $8.97 billion in 2025, in four franchises: polio/pertussis/Hib primary vaccines and boosters; influenza and COVID-19; meningitis, travel and endemic vaccines; and the RSV antibody Beyfortus. Influenza and COVID-19 together were 29.2% of vaccine sales and Beyfortus 22.4%. The economics of Dupixent depend on the alliance with Regeneron. Sanofi books all Dupixent sales and pays Regeneron its share of the alliance's profits. That share is recorded in other operating expenses, where Regeneron-related costs totalled $5.73 billion in 2025. "Other revenues" sit outside net sales. They mainly come from VaxServe, a US distributor of third-party vaccines; Opella products sold in markets Sanofi kept; royalties; manufacturing services; and products supplied to Opella. In April 2025 Sanofi sold a 50% controlling stake in Opella, its consumer healthcare business, to Clayton, Dubilier & Rice (CD&R). It kept a 48.2% interest in the holding company OPAL JV Co, accounted for as an associate. Sanofi received net cash proceeds of $11.80 billion and booked a net gain of $2.95 billion within discontinued operations. Without consumer healthcare, Sanofi is smaller and more concentrated in prescription drugs and vaccines. Its stated strategy is to be an R&D-driven, AI-powered biopharma company. R&D is focused on immunology and inflammation, rare diseases, neurology, oncology and vaccines, and the company is building efficiency programs and AI tools across research, manufacturing and commercial operations. Capital allocation priorities, in order, are organic growth, bolt-on business development, a growing annual dividend, and anti-dilutive share buybacks. Disposals of "tail" brands are a further source of capital. Acquisitions in 2025 extended the portfolio: - **Blueprint Medicines.** Closed July 18, 2025, at $129.00 per share in cash, an equity value of about $9.1 billion. A contingent value right tied to SAR449028 (formerly BLU-808) could take the total to about $9.5 billion. The deal added Ayvakit and the follow-on mastocytosis drug elenestinib. - **Vicebio.** Closed December 4, 2025, for $1.15 billion upfront plus up to $450 million in milestones. It added an RSV/hMPV combination vaccine candidate and a "molecular clamp" vaccine technology. - **Vigil Neuroscience.** Closed August 5, 2025, at $8.00 per share, about $470 million fully diluted. It added the oral TREM2 agonist VG-3927 for Alzheimer's disease. - **Dren-0201, Inc.** Closed May 27, 2025, for $610.47 million upfront plus up to $1.36 billion in milestones. It owns the bispecific antibody DR-0201 (SAR448501). - **Dynavax Technologies.** Agreed December 24, 2025, at $15.50 per share, a total equity value of about $2.2 billion. Dynavax brought the HEPLISAV-B adult hepatitis B vaccine and the shingles candidate Z-1018. The deal closed in February 2026 (see Current period). On December 19, 2025, Sanofi made a voluntary three-year "most favored nation" (MFN) pricing agreement with the US government. Sanofi aligns Medicaid prices of certain medicines with those of other high-income countries and offers direct-to-patient access through TrumpRx.gov. In return it receives a three-year exemption from Section 232 tariffs, and it reaffirmed a $20 billion investment in US manufacturing. Sanofi said the agreement was expected to have no material impact on its growth strategy or financial outlook over that period. ## Risk factors *Source: Form 20-F for 2025, Item 3.D, accession 0001628280-26-008403. The Half-Year Financial Report 2026 (accession 0001628280-26-050803) refers back to these risk factors without amending them.* The risks below are the ones most specific to Sanofi, condensed from the annual report. - **Dependence on Dupixent and a few other products.** Dupixent generated 36.0% of 2025 net sales. Any safety issue, adverse ruling, supply problem, pricing action or competing therapy affecting it would hit results hard. Influenza vaccines face new mRNA and combined COVID-flu competitors, price pressure, falling vaccination rates and US anti-vaccine policy. Beyfortus faces a competing monoclonal antibody. - **Reliance on the Regeneron alliance.** Dupixent, Kevzara and itepekimab are developed and sold with Regeneron, which also handles some manufacturing and supply. Sanofi shares the profits, so alliance products contribute less to earnings than wholly owned ones. Disputes or differing priorities with partners could disrupt development or sales. - **US and European pricing pressure.** The MFN agreement may constrain launch pricing and sequencing, and could force Sanofi to delay or skip launches in some countries. The mandatory GLOBE and GUARD Medicare pricing models announced in December 2025 run for five years, while Sanofi's MFN agreement lasts three. Under the Inflation Reduction Act, Medicare price negotiation expands each year. Sanofi does not expect Dupixent to be affected until 2031. In commercial channels, the three largest PBM purchasing groups now cover about 85% of prescription claims, which adds to rebate demands and gross-to-net erosion. In Europe, pharmaceutical legislation reform could cut data protection, and joint health technology assessments add access hurdles. - **Pipeline and regulatory risk.** R&D spending was $8.87 billion in 2025, 18.0% of net sales, and failures are costly. In December 2025 the FDA issued a complete response letter for tolebrutinib in non-relapsing secondary progressive multiple sclerosis, and 2025 results included a $1.88 billion impairment of that asset. The itepekimab COPD studies gave mixed results in May 2025. Regulators may also revisit earlier approvals. - **Generic, biosimilar and China procurement erosion.** Generics and biosimilars cost $399.11 million of net sales on the products and markets the company tracks for this in 2025 (selected markets for Aprovel, Lantus, Lovenox, Plavix, Aubagio and Mozobil). Sanofi expects that erosion to continue in 2026. China's volume-based procurement auctions keep cutting prices for insulins, Plavix, Aprovel and Lovenox. Biosimilars are also a growing long-term threat to biologics. - **Product liability and legal exposure.** Sanofi is defending product liability claims over Taxotere, Zantac, talc products and Depakine, as well as pricing and marketing suits, including whistleblower and 340B drug-pricing litigation. Product liability insurance is increasingly hard to obtain, especially in the US, and self-insurance may become the only option. In January 2025 the FDA issued a warning letter over manufacturing practices at the Framingham facility. - **Manufacturing complexity.** Biologics, vaccines and insulins need specialized, often dedicated plants and cold-chain distribution, and backup capacity is limited. Contamination, inspection findings or disasters could cause shortages, recalls or delayed launches. Third parties, including EUROAPI, supply part of the active ingredients. - **Acquisitions and divestments.** Recent deals such as Blueprint may not deliver expected benefits; Blueprint's early-stage immunology pipeline is still uncertain. The retained Opella stake could lose value. Divestments may face claims or price adjustments after closing. - **Currency.** About half of net sales are made in the United States, but Sanofi reports in euros, and its costs do not fully offset its currency exposure. Exchange rates also move the dollar value of ADSs and of euro dividends. - **Geopolitics, trade and data rules.** Risks include tariffs and trade restrictions, US-China tensions, the proposed US BIOSECURE Act, the Russia-Ukraine and Middle East conflicts, and data-sovereignty rules that limit cross-border data flows needed for research, M&A and AI. - **Customer credit.** US wholesaler concentration and slow-paying public health systems in some countries create credit and working-capital risk. - **Cybersecurity and AI.** Research, production and sales depend on IT systems and third-party providers. Breaches, outages or flawed AI use could cause financial, legal or reputational harm, and insurance may not cover the losses. - **Largest shareholder.** At December 31, 2025, L'Oréal held 7.27% of the share capital and 13.10% of effective voting rights, giving it influence over board appointments and shareholder votes. L'Oréal does not regard the stake as strategic and is not bound by any lock-up, so large sales could weigh on the share price. ADS holders vote only through the depositary. In a rights issue, the depositary may sell their subscription rights instead of passing them on, which could dilute them. ## Management's discussion: full year 2025 *Source: Form 20-F for 2025, Item 5, accession 0001628280-26-008403.* **Sales.** Net sales were $49.32 billion, up 11.0% in US dollar terms (6.2% in euros) and 9.9% at CER. Currency took 3.7 percentage points off euro-reported growth. Dupixent was the main driver, up 25.2% at CER to $17.77 billion. ALTUVIIIO grew 77.6% at CER to $1.31 billion as patients switched from older factor products, including Sanofi's own Eloctate. Ayvakit added $344.84 million after Blueprint was consolidated in mid-July. Vaccines fell 1.2% at CER, mostly because of influenza: price cuts in Germany and soft US vaccination rates. US Beyfortus sales fell 27.9% at CER against a high base, while Europe and the Rest of the World grew strongly as all-infant protection rolled out. By region, the US grew 16.3% at CER, Europe 1.6% and the Rest of the World 5.6%. **Margins and costs.** Gross margin rose to 77.2% from 75.7%, thanks to lower cost of sales. R&D expense was $8.87 billion, up 10.8% in US dollar terms (6.1% in euros) and steady at 18.0% of net sales. It included wind-down costs for the discontinued E. coli sepsis vaccine and costs of newly acquired and licensed programs, while oncology spending was cut. Selling and general expenses were $10.79 billion, and fell to 21.9% of net sales from 22.4%. Net other operating expense rose to $5.00 billion, up 40.4% in US dollar terms, mainly because Regeneron's profit share grew with Dupixent sales. Impairments of intangible assets were $2.53 billion, mainly the $1.88 billion tolebrutinib write-down after the negative PERSEUS phase 3 results and exchanges with the FDA and EMA. **Earnings.** Operating income fell 8.6% in US dollar terms to $7.17 billion, mainly because of the impairments. Net income attributable to shareholders rose 46.8% to $8.83 billion, including the Opella divestment gain in discontinued operations. Basic EPS was $7.24 per share ($3.62 per ADS). Sanofi's preferred non-IFRS measure, business net income, excludes amortization and impairment of acquired intangibles, restructuring, discontinued operations and other items. It was $10.80 billion, up 7.2% in euros, and business EPS was $8.85 per share ($4.43 per ADS), up 10.0% in euros. Business operating income was $13.71 billion, 27.8% of net sales. **Cash flow and balance sheet.** Operating cash flow was $12.15 billion and free cash flow (a non-IFRS measure) $9.15 billion, up 41.9% in US dollar terms. Acquisitions used $10.62 billion, of which Blueprint was $8.53 billion. Sanofi also spent $5.69 billion on its own shares, including a block bought back from L'Oréal in February 2025, and paid $5.40 billion in dividends. The annual report attributes the year's rise in net debt mainly to acquisitions and the dividend, net of free cash flow and the Opella proceeds. At December 31, 2025, net debt was $12.92 billion, cash was $8.99 billion and the gearing ratio (net debt to equity) was 15.4%, up from 11.3%. Undrawn committed credit facilities were $9.39 billion. Parent-company financing carries no financial-ratio covenants. ## Current period: first half of 2026 (six months ended June 30, 2026) *Source: Half-Year Financial Report 2026 (Exhibit 99.2, management report, and the condensed consolidated financial statements) on Form 6-K, accession 0001628280-26-050803, filed July 30, 2026. Quarterly detail is from the Q2 2026 results release on Form 6-K, accession 0001121404-26-000008.* **The second quarter.** Net sales for the three months ended June 30, 2026 were $13.49 billion, up 19.0% in US dollar terms and 17.8% at CER. Dupixent sales were $5.99 billion. Net income attributable to shareholders was $398.91 million, down 91.1% in US dollar terms, mainly because the quarter carried the full impairment writing off the drug candidate amlitelimab, while the year-earlier quarter included the Opella divestment gain. Business EPS was $1.22 per ADS, up 34.8% in US dollar terms. The rest of this section covers the first half. **Leadership change.** The board relieved Paul Hudson of his duties as Chief Executive Officer effective at the end of the day on February 17, 2026. Olivier Charmeil served as interim CEO until Belén Garijo took over on May 1, 2026. In the Q2 release she describes her early priorities as an accelerated transformation roadmap focused on R&D and pipeline improvements, beginning with pipeline prioritization decisions. **Sales.** First-half net sales were $25.79 billion, up 18.5% in US dollar terms and 15.7% at CER. Currency took 4.6 percentage points off euro-reported growth. Growth came overwhelmingly from the US, where sales were $13.57 billion, up 29.9% at CER. Europe grew 3.6% at CER, the Rest of the World 1.9%, and China fell 3.5%. - Dupixent sales were $10.88 billion, up 34.4% at CER. In the US they were $8.08 billion, up 39.5%, helped by strong demand, operational improvements and a favorable change in estimated gross-to-net deductions. - ALTUVIIIO grew 32.3% at CER. Ayvakit contributed $428.15 million. US government rebates rose after Blueprint became part of Sanofi; without them, Ayvakit growth would have been about nine percentage points higher. - Sarclisa grew 33.0% at CER and Rezurock 18.3%. - Lantus fell 3.8% at CER, with US sales down 6.6%. The Q2 release says the earlier benefit of windfall US sales, when competing medicines were unavailable, partly subsided as expected. Lovenox fell 19.2% at CER under biosimilar pressure. - Vaccines fell 1.1% at CER to $2.85 billion, mainly on influenza and meningitis/travel vaccines. Heplisav-B, newly acquired with Dynavax, lifted US primary and booster vaccine sales. Falling births in China cut sales in the Rest of the World. Dynavax contributed $167.62 million of net sales from February 10. **Costs and margins.** Gross margin rose to 78.7% from 77.7%. Cost of sales absorbed $244.99 million of inventory step-up from the Blueprint and Dynavax acquisitions. That charge was largely offset by the reversal of more than $230 million of earlier pre-launch inventory provisions after subcutaneous Sarclisa was approved. The Q2 release also credits a richer mix of specialty care and rare disease medicines. R&D expense rose 14.2% in US dollar terms to $4.64 billion, including more than $230 million of wind-down costs from decisions made on the pipeline. Selling and general expenses were $5.59 billion. They grew more slowly than sales, falling to 21.7% of net sales, even with Blueprint and Dynavax added. Net other operating expense grew 44.6% in US dollar terms to $3.08 billion, as Regeneron's profit share rose with Dupixent to $4.07 billion. Licensing income from Amvuttra ($464.31 million) partly offset it. **Amlitelimab impairment and reported earnings.** Sanofi decided not to file amlitelimab in atopic dermatitis and wrote off the asset's entire carrying amount, $1.11 billion, part of $1.20 billion of total impairments. Mainly as a result, operating income fell 10.2% in US dollar terms to $3.70 billion. The impairment is not tax-deductible, so the effective tax rate rose to 30.6% from 19.8%. Net income attributable to shareholders was $2.28 billion, down 64.1% in US dollar terms. The prior-year half included the Opella divestment gain. Basic EPS was $1.90 per share ($0.95 per ADS). On the business basis, which excludes the impairment, business operating income rose 24.4% in US dollar terms to $7.30 billion, 28.3% of sales. Business net income rose 22.3% to $5.56 billion, and business EPS rose 24.8% to $4.63 per share ($2.32 per ADS). Sanofi now expects an effective tax rate on business net income of about 21% for 2026. **Cash flow and balance sheet.** Operating cash flow rose 39.2% in US dollar terms to $5.42 billion, and free cash flow rose 61.5% to $4.34 billion. Uses of cash in the half were the Dynavax acquisition ($1.64 billion net cash outflow), the annual dividend ($5.74 billion), and the completed buyback of 12,571,455 shares ($1.17 billion). In April Sanofi priced $2.70 billion of euro medium-term notes. Net debt rose from $12.92 billion at December 31, 2025 to $17.71 billion at June 30, 2026, and cash stood at $7.25 billion. The gearing ratio rose to 22.3% from 15.4%. **Portfolio moves in the half.** - **Dynavax.** Sanofi completed the acquisition on February 10, 2026, at $15.50 per share in cash. The fully diluted equity value was about $2.2 billion, including the subsequent repayment of $0.3 billion of Dynavax short-term debt. - **Medley (Brazil).** On March 6, 2026, Sanofi agreed to sell 100% of Medley, its Brazilian generics business, to EMS Group. The price was not disclosed. Medley is classified as held for sale, and Sanofi expects a net gain. Closing is expected no earlier than the fourth quarter of 2026, subject mainly to clearance by Brazil's antitrust authority, CADE. - **Praluent patent dispute.** On March 6, 2026, Sanofi, Regeneron and Amgen settled their European Praluent patent disputes on confidential terms. - **Rovadicitinib (CTTQ).** In March 2026, Sanofi took an exclusive worldwide license to develop, manufacture and commercialize rovadicitinib from CTTQ, a subsidiary of Sino Biopharmaceutical Limited. Rovadicitinib is a first-in-class oral JAK/ROCK inhibitor that received its first approval in China in February 2026 as a first-line treatment for myelofibrosis. CTTQ received $135 million upfront and is entitled to up to $1.4 billion in development, regulatory and sales milestones, plus tiered royalties of up to double digits on product sales. - **KT501 (Kali Therapeutics).** In March 2026, Sanofi also took a worldwide exclusive license from Kali Therapeutics to KT501, a tri-specific T-cell engager for autoimmune diseases. Kali Therapeutics is entitled to up to $1.2 billion including upfront payments (of which $0.1 billion has already been paid) plus development and sales milestones, and to tiered royalties from high-single to double digits on product sales. **Litigation developments** (half-year report, note B.14): - **Zantac.** In the second quarter, the Delaware Superior Court granted summary judgment dismissing all state-court cases against Sanofi. Plaintiffs are appealing, with no decision expected before the fourth quarter of 2027. An Eleventh Circuit ruling on the federal multi-district litigation is expected in the second half of 2026. - **Talc.** Sanofi was a defendant in about 1,430 US cases at June 30, 2026; none has gone to trial. - **Dupixent.** About 30 federal product liability cases alleging that Dupixent causes or worsens T-cell lymphoma were consolidated into a multi-district litigation in New Jersey federal court in June 2026. Eight more cases are pending in New Jersey state court. - **Insulin pricing and Medicaid.** The direct-purchaser insulin antitrust trial in Massachusetts federal court is scheduled for January 2027. On February 13, 2026, the State of Texas intervened in a Texas Medicaid Fraud Prevention Act case. Trial is set for July 19, 2027, subject to continuance. **Outlook.** In the half-year report Sanofi raised its 2026 guidance. It now expects net sales to grow about 10% at CER, with business EPS growing slightly faster than sales. At July 2026 average exchange rates, it estimates currency effects of about -1% on sales and -2% on business EPS. Management expects growth to normalize in the second half after the strong first half. ## Subsequent events *Sources: Half-Year Financial Report 2026, section C and notes, accession 0001628280-26-050803; Forms 6-K, accessions 0001193125-26-316771, 0001193125-26-393653 and 0001193125-26-410232.* The half-year report states that the only significant events between June 30, 2026 and the board's review of the interim accounts were R&D developments. On July 24, 2026, Sanofi decided not to submit amlitelimab for regulatory review in atopic dermatitis; the full write-off of the asset is already in the first-half accounts. In July the FDA approved subcutaneous Sarclisa (Sarclisa Escena) delivered by on-body injector. Outside R&D, the report's litigation note records that in July 2026 certain state-law and unjust-enrichment claims were dismissed in the Mosaic Health 340B case. On July 21, 2026, Sanofi announced a reshaped Executive Committee effective September 1, 2026, including Paulo Fontoura as head of R&D. Two transactions followed after the half-year report was filed: - **Cheplapharm (announced September 14, 2026; not completed).** Sanofi intends to transfer 20 mature medicines, including Lovenox/Clexane, to Cheplapharm in exchange for a 26.4% equity stake in Cheplapharm. Three manufacturing sites would also transfer: Csanyikvölgy in Hungary, Jurong in Singapore and Ploërmel in France. The product transfer is planned to start in the first quarter of 2027, with completion expected by the third quarter of 2027, subject to employee consultation, regulatory approvals and customary conditions. Sanofi expects no effect on its 2026 guidance and has not yet given further financial terms. - **Regeneron alliance expansion (October 1, 2026).** Four long-acting, Regeneron-invented antibodies were added to the alliance: the clinical-stage IL-13 antibody REGN20423, an IL-4xIL-13 bispecific, and IL-4 and IL-4Rα antibodies. Sanofi pays Regeneron $1 billion upfront plus up to $7 billion in development, regulatory and commercial milestones. Costs and future profits on the new programs are split 50:50; the existing Dupixent profit-sharing terms are unchanged. The companies also settled their earlier collaboration-related litigation. The Medley sale to EMS Group was still pending at the date of the half-year report.