No action has been taken on the AA/Stable issuer rating of Sanofi S.A. and its debt ratings following a monitoring review.

Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for French pharmaceutical company Sanofi S.A. (rated AA/Stable, short-term debt rating S 1+, senior unsecured debt rating AA) on 05 December 2023.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

After reviewing Sanofi S.A.’s Q3 2023 results, Scope has concluded that the business and financial risk profiles are in line with the agency’s expectations.

Evidenced by Q3 2023 results, Sanofi’s performance continues to be driven by the Speciality Care unit, which was supported by Dupixent and therapeutic treatments against rare diseases. Dupixent continues its strong performance as Sanofi’s top drug and is likely reaching EUR 10bn in sales this year and close to EUR 13bn in 2024. Dupixent has a meaningful lead over competitors’ products and has become the biologic agent of choice in atopic dermatitis and is expanding approval in further indications.

In the Vaccines unit, Sanofi continues to lead the influenza vaccines market with a focus on premium products. A global footprint in other types of vaccines is also a meaningful contributor to the vaccine portfolio. The recently launched respiratory syncytial virus (RSV) vaccine Beyfortus will gradually ramp up in the next years.

The simplification and streamlining of the GenMed portfolio continue at pace. Sanofi reached the target number of around 100 branded product families this year and will continue to reduce the portfolio to around 85 branded product families, thus allowing for further efficiencies.

With further steps taken to focus on the main business, Sanofi announced its intention to separate its Consumer Healthcare unit at the earliest in Q4 2024 and is reviewing potential separation scenarios. The Consumer Healthcare separation is deemed to have a neutral effect on the business risk profile assessment as Scope had not previously taken it into consideration due to the segment’s low EBITDA contribution to the group. The separation will allow Sanofi to concentrate on its core business Biopharma (Pharmaceuticals manufacturing and Vaccines).

Looking at group sales, almost two-thirds of sales are coming from Speciality Care and Vaccines, the crucial drivers for performance and for the business risk profile assessment.

Scope points out that the effect of patent expiration appears to be limited. Multiple sclerosis treatment Aubagio started to be impacted by the entrance of generic competitors this year due to patent cliff and marks Sanofi’s last meaningful loss of exclusivity this decade. Sanofi is relying on its internal pipeline to prepare the ground for a post-Dupixent era, which will lose its exclusivity around 2031. With the absence of large value-added acquisitions, Sanofi decided to focus on increasing R&D to accelerate the progress on internal pipeline candidates. Sanofi has also lined up several drugs with differing mechanisms to either complement Dupixent or eventually succeed it as the drug heads toward patent expiration. The purpose remains to develop an industry-leading immunology pipeline.

While the 2023 guidance was reaffirmed¹, for 2024 Sanofi expects continued sales growth supported by leading franchises and launches in addition to a step up in R&D expenses. While the operating margin may slightly deteriorate in 2024 due to increased R&D spending, Scope foresees an improving margin in 2025 based on Sanofi’s guidance of continued sales growth, stable YoY R&D expenses, the full benefit of the launched efficiency initiatives and Dupixent being the major catalyst.

Scope expects credit metrics to continue at a strong level driven by strong cash generation and the absence of significant M&A deals. Leverage in terms of Scope-adjusted debt/EBITDA is expected to stay at around 1.0x and Scope-adjusted funds from operations/debt is expected to remain at above 70%. Scope-adjusted free operating cash flow/debt is also expected to remain above 60%.

Sanofi’s capital allocation remains unchanged, prioritising organic investment followed by M&A opportunities, progressive dividend and anti-dilutive share buybacks.

1. Press Release: Sanofi Enters Next Chapter of Play to Win Strategy (27 October 2023)

The methodologies applicable for the reviewed ratings and rating Outlook (General Corporate Rating Methodology, 16 October 2023; Pharmaceuticals Rating Methodology, 10 January 2023) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. 
Lead analyst Azza Chammem, Associate Director 

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