Could This Drug Candidate Be a Blockbuster for Sanofi?

The pharma giant recently shared encouraging results from a late-stage clinical trial for its hemophilia drug candidate.

The pharma giant recently shared encouraging results from a late-stage clinical trial for its hemophilia drug candidate.

In March, Sanofi ( SNY 2.21% ) and its Sweden-based partner Sobi ( SWTUY ) announced positive phase 3 clinical trial results for efanesoctocog alfa, their jointly developed drug candidate for severe hemophilia A.

The two companies expect to begin submitting applications for the drug’s approval to regulatory agencies around the world this year. But what kind of potential does this drug have to move the needle for Sanofi? 

An impactful treatment

Hemophilia A is a genetic disorder that results in patients either lacking enough of the blood-clotting protein known as Factor VIII or producing a defective version of it. When they get cuts, patients with hemophilia A will bleed significantly longer than other people. These bleeds can occur internally into joints and muscles or externally from cuts, dental procedures, or injuries. 

Cases range from mild to severe. Mild hemophilia A is diagnosed when a patient has Factor VIII activity in their blood that is between 6% to 49% of what is considered normal. Mild hemophiliacs often exhibit symptoms after serious injuries or during surgeries. Moderate hemophilia A is diagnosed when Factor VIII activity is in the range of 1% to 5% of normal. Such patients tend to have bleeding episodes after minor injuries as well. Severe hemophilia A is indicated by Factor VIII activity that’s less than 1% of normal. Symptoms include extended bleeding after any injury and frequent spontaneous bleeding episodes. Approximately 60% of hemophilia A cases are classified as severe. 

The good news for the several hundred thousand patients worldwide living with severe hemophilia A is that treatment advances are helping to reduce the frequency of bleeding episodes. This, in turn, improves the quality of life for those with the condition.

Sanofi and Sobi enrolled 159 patients with severe hemophilia A who had previously been treated with factor VIII replacement therapy in their phase 3 study. Patients receiving once-weekly treatments with efanesoctocog alfa met the primary efficacy endpoint, which was to significantly reduce the annualized bleeding rate (ABR) from its pre-treatment baseline. 

Patients taking efanesoctocog alfa had a median ABR of 0, which means they experienced no bleeding episodes in the 52 weeks that they received the drug. Sanofi and Sobi haven’t yet shared the pre-treatment ABR baseline for the clinical trial participants. But in a comparable study of factor VIII replacement therapies, the median ABR was 2.0. This suggests that efanesoctocog alfa offers a clinically significant improvement.

A doctor addresses a patient's concerns.

Image source: Getty Images.

A decent boost to revenue

Efanesoctocog alfa appears to be a game-changing treatment for severe hemophilia A patients. But what could that mean for Sanofi’s revenue growth? According to a forecast from market research firm Fortune Business Insights, the global hemophilia market will grow at a 6% annualized rate from $9.9 billion in 2018 to $15.8 billion by 2026. It’s estimated that hemophilia A accounts for 85% of the overall hemophilia market. 

Under Sanofi’s agreement with Sobi, the latter company retains the right to commercialize efanesoctocog alfa in Europe, North Africa, Russia, and most Middle Eastern markets. Sanofi can sell it in North America and any remaining markets that Sobi hasn’t pursued. North America, of course, includes the U.S. market, which accounted for 46% of total global pharmaceutical revenue in 2020.

So a conservative assumption is that Sanofi’s total addressable market for the drug will be about half of the global hemophilia market — or about $8 billion in 2026. Given the impressive efficacy results so far for efanesoctocog alfa, I estimate that the drug could capture 15% of that market. This would translate into $1.2 billion in annual sales for Sanofi.

Analysts project Sanofi will generate $44.9 billion in revenue in 2022, so a $1.2 billion bump would amount to a 2.7% top-line increase. By itself, this would somewhat move the needle for the company. And since Sanofi has 86 pipeline projects in various phases of clinical trials, it should keep adding new drugs to its catalog, driving more revenue and earnings growth. 

This is precisely why analysts forecast that Sanofi will produce 10% annualized earnings growth over the next five years, which is impressive for a large-cap pharma company. 

The stock is an all-around great buy

Sanofi looks to be an underappreciated stock. It’s trading at a forward price-to-earnings ratio of 11.9. This is just below the industry average of 12 for drug manufacturers. 

Yet its 10% annualized earnings growth outlook is also significantly higher than the industry average of 7%. Simply put, Sanofi is an above-average pharma stock trading at a near-average valuation. And the cherry on top of the sundae is that at its current share price, the stock’s dividend also provides a market-beating yield of 3.6%. This makes Sanofi an excellent healthcare stock for investors to buy.

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