SNY - Sanofi's Immunology Business Is Doing A Lot Of Heavy Lifting

2024-06-16 07:19:35 ET

Summary

• Sanofi's shares have not fully recovered since announcing a business strategy change in October 2023, focusing on R&D investments and on separating its consumer healthcare business unit.
• The company's immunology business, led by Dupixent and other smaller products like Sarclisa, Beyfortus, and Altuviiio, is performing well.
• The immunology commercial portfolio and pipeline need to do a lot of the heavy lifting to maintain and improve Sanofi's growth profile.
• The healthy balance sheet leaves room for business development activity to expand the commercial portfolio and pipeline.
• The valuation is near historical lows, and the stock can re-rate higher if the increased investments show a desirable effect on top and bottom-line growth.

Shares of Sanofi ( SNY ) have yet to fully recover from the business strategy change the company dropped on investors in October 2023. At the time, Sanofi announced plans to increase R&D investments to “drive long-term growth and enhance shareholder value” and to separate its consumer healthcare business to enable greater focus and resources to the biopharma business. This was a shocking turn of events for a slow-growing, dividend-paying company, and I understand the reluctance of the shareholder base, which likely experienced increased turnover since the announcement.

As hard as the decision may have been for the company to make, as a growth investor, I genuinely liked it and felt it was one of the best decisions the company made in years, and I believe increased pipeline investments will lead to higher long-term shareholder returns and that the short-term pain is worth it....

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