The U.S. Food and Drug Administration (FDA) recently announced that it had accepted Sanofi (SNY -0.94%) and Regeneron's (REGN 0.45%) supplemental Biologics License Application for priority review of Dupixent to treat patients with a rare skin disease called prurigo nodularis. 

With a decision from the FDA expected by the end of September, it's worth asking the following question: What would the annual sales potential be for Sanofi if Dupixent became the first drug in the U.S. to be specifically indicated to treat prurigo nodularis? To find out, let's take a look at the results from Dupixent's clinical trials for the potential indication and the condition's market size potential in the U.S. 

Strong treatment for an unmet medical need

Prurigo nodularis is an inflammatory skin condition that is characterized by an intense, persistent itch. The disease can also come with thick patches of skin called nodules that can cover the majority of the body. 

It's estimated that the condition impacts nearly 250,000 Americans. While most patients find relief on high-potency topical steroids, roughly 30% of patients don't notice improvement in their condition. And even for the patients that do get better on topical steroids, long-term use often poses safety risks. Until recently, this meant there wasn't any hope of an impactful treatment that was also viable for the long term.

That all changed when Dupixent reported the results of its phase 3 clinical trials for patients with the condition last October. Patients were randomized to receive either Dupixent or placebo every two weeks for 24 weeks. The treatment group fared considerably better than the placebo group, achieving a clinically meaningful 58% reduction in itch at week 24 from their pre-treatment baseline compared to the placebo group's 20% rate.

And patients were able to tolerate the side effects of Dupixent better than placebo. This is supported by the fact that 30% of patients in the placebo group discontinued treatment by week 24 -- far more than the 3% in the treatment group who discontinued treatment by week 24. 

A doctor and patient talk with each other at an appointment.

Image source: Getty Images.

Decent add-on revenue potential

Dupixent is showing to be a much-needed, safe and effective treatment for patients with prurigo nodularis who aren't responding to topical steroids or are concerned about the safety profile of such a treatment over the long run. But how much revenue would it haul in for the pharma stock Sanofi in the United States?

The addressable market for Dupixent is the approximately 75,000 prurigo nodularis patients who didn't improve on topical steroids. For the sake of conservatism, I won't even include the countless other patients whose providers may switch them to Dupixent from other treatments. 

Dupixent is on track to become the first and only treatment indicated for prurigo nodularis. This should give the drug a significant first-mover advantage. Along with the stellar reputation of Sanofi and Regeneron among healthcare providers, this is why I expect Dupixent to seize 60% of the patient share -- or 45,000 patients. 

The annual list price of Dupixent in the U.S. is $41,000. Adjusting for patient assistance programs and the bargaining power of health insurers, I will use an annual net price per patient of $30,000. This comes out to nearly $1.4 billion to be split between Sanofi and Regeneron. 

Sanofi's almost $700 million cut of the annual revenue would provide a 1.5% lift to the $43.8 billion in revenue that analysts are already expecting in 2022. For a single indication in a single market, this would be a solid boost for a large-cap company like Sanofi. 

The stock is a compelling buy

Sanofi's mega-blockbuster Dupixent has been on a roll lately, with an FDA approval for prurigo nodularis likely months away and a recent approval for the drug to treat patients with eosinophilic esophagitis. And with 91 projects in different stages of development, Sanofi has an exceptionally healthy pipeline of drugs and vaccines besides just Dupixent. 

This is why analysts believe the company's earnings will grow at 10.3% annually over the next five years. And at a forward price-to-earnings (P/E) ratio of 11.9, the French drugmaker is dirt cheap for its quality and growth prospects.