Last month, Sanofi (SNY -1.44%) and Regeneron's (REGN -1.70%) immunology mega-blockbuster, known as Dupixent, received some good news. The European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion, recommending approval of the drug to treat patients with a rare skin condition called prurigo nodularis.

With approval potentially only months away, it's worth assessing the sales potential of this new indication for Dupixent. For that purpose, let's dive into the drug's efficacy from clinical trials and the size of the prurigo nodularis market in the European Union. 

A breakthrough for a challenging disease

Prurigo nodularis is a chronic, inflammatory skin disease that causes extreme itch among patients. The disease often includes thick patches of skin called nodules that result in burning, stinging, and tingling sensations. 

These symptoms typically interfere with a patient's activities of daily living and social interaction, which can also negatively impact mental health. High-potency topical steroids are generally prescribed as a first-line treatment. But since there are long-term safety risks and 30% of patients end up having to discontinue treatment, the prognosis can be discouraging for a large minority of patients. 

Fortunately, pharmaceutical companies like Sanofi and Regeneron are working on improving the prognosis for patients that don't see sustained benefits from topical steroids. Dupixent could be an impactful treatment for countless patients. What's the data to support my argument? Let's take a look.

Sanofi and Regeneron enrolled 160 adult patients with inadequately controlled prurigo nodularis in phase 3 clinical trials for a 24-week period to either receive Dupixent or a placebo every two weeks. And patients receiving treatment had considerably better health outcomes compared to those patients that had received a placebo.

By week 24, 45% of the Dupixent group achieved clear or almost-clear skin, which was nearly triple the 16% rate of the placebo group. Because patients experienced improvements in their physical health, their accompanying symptoms of anxiety and depression also improved.

And not only was Dupixent more effective than the placebo, but it was also tolerated at a far superior rate. Just 3% of patients taking Dupixent had to discontinue prior to week 24 against the 30% of patients receiving the placebo.

A patient attends a doctor appointment during the COVID-19 pandemic.

Image source: Getty Images.

Massive sales potential

Dupixent's admirable mix of efficacy and safety bodes well for its future prospects in the event that it is approved. But how much in sales could this translate into for Sanofi?

England has a 3.27-in-10,000 prevalence of prurigo nodularis. Extrapolating this to the European Union's population of 447.7 million people, that would mean an estimated prurigo nodularis population of 146,000 patients. 

Given that long-term topical steroid use isn't viable for many patients, I will assume that the addressable market is roughly 100,000 patients. And with Dupixent poised to win a first-mover advantage with its treatment, I believe a 70% patient share is realistic. This equates to a patient pool of 70,000 patients.

Dupixent's annual list price is almost $41,000 in the U.S. But since drugs are approximately half the cost in the European Union, I will use an annual list price of $20,000. And adjusting for patient financial assistance programs and negotiations with health insurers, I'll factor in a $15,000 annual net price per patient. 

This would be a bit more than $1 billion in annual sales potential to be split between Sanofi and Regeneron. Against Sanofi's $45.4 billion in revenue that analysts expect in 2022, an extra $500 million would be a 1.1% lift to its revenue base. 

An appealing mix of growth and value

As nice of a boost to Sanofi's top line as Dupixent will provide, that's not all that the company has going for it. Sanofi's pipeline has over 80 projects under clinical development, which is why analysts are predicting the company will deliver 12.3% annual earnings growth over the next five years. For context, this is much better than the drug manufacturer industry average of 7%. 

Despite Sanofi's impressive growth prospects, the stock trades at a forward price-to-earnings (P/E) ratio of 10.8. This is less than the drug manufacturer industry average forward P/E ratio of 12.6, which makes Sanofi a great buy for investors seeking a blend of growth and value.