Recently, Sanofi (SNY -0.58%) and Regeneron (REGN -0.48%) received positive news from the U.S. Food and Drug Administration (FDA). The agency accepted Dupixent's supplemental Biologics License Application for review to treat adult patients with chronic spontaneous urticaria (CSU), a skin disorder.
With a decision expected from the FDA by October of this year, patients with CSU could have a much-needed treatment available by the end of the year. But how much of a sales lift could such an approval provide for Sanofi? Let's assess the phase 3 clinical trial results and the U.S. CSU market to lay this question to rest.
A demonstrably strong treatment
CSU is an inflammatory skin condition, which results in sudden and severe hives and skin swelling. Patients typically experience swelling (also known as angioedema) on the face, hands, and feet, but the throat and upper airways can also be affected by the condition.
The first-line treatment for CSU is a drug class called histamine-1 (H-1) antihistamines. These drugs target H-1 receptors, which are thought to cause the condition. Unfortunately, approximately 50% of patients don't achieve meaningful improvement in their condition with this therapy. The itching and/or burning sensations felt by patients can have a detrimental effect on quality of life.
The good news is that other treatments are currently being developed for the disease. One of the most promising is arguably Sanofi and Regeneron's Dupixent. The two companies enrolled patients with CSU who still had symptoms despite antihistamine use in a phase 3 clinical trial. Patients were then randomized to receive either Dupixent or placebo.
The patients who received Dupixent attained a 63% reduction in itch severity as measured by the itch severity scale at week 24. For context, this was a statistically superior response compared to the 35% improvement patients in the placebo group achieved at week 24.
The results from the clinical trial also showed Dupixent to be safer than placebo in terms of overall adverse event rates: Just 50% of patients in the Dupixent group reported an adverse event versus 59% of patients receiving placebo.
The sales potential is decent
Dupixent could be a tremendous treatment option for CSU patients and their healthcare providers. What could this mean for Sanofi?
It's estimated that over 300,000 patients in the U.S. have CSU that isn't being appropriately controlled by antihistamines alone. With Novartis and Roche's Xolair on the market and other drugs likely set to be approved in the years to come, the CSU space will see plenty of competition in the future. Using a conservative assumption that Dupixent can seize 10% of this patient share, that would be around 30,000 patients.
The annual list price of Dupixent is $43,000 in the U.S. But this isn't the price paid by most patients, due to financial assistance programs and health insurers negotiating the net price lower. Using a conservative annual net price of $20,000 per patient, Dupixent could generate $300 million in annual sales for Sanofi after splitting revenue with Regeneron.
Stacked up against the $48.6 billion in annual sales that analysts expect from Sanofi in 2023, this is a 0.6% increase in its sales base. But with over 80 projects currently in clinical development, the pharmaceutical should have no problem propelling its top line higher moving forward.
Sanofi is an undervalued growth stock
Analysts expect that Sanofi's earnings will grow by 12.3% annually over the next five years. This is well above the 7% annual earnings growth outlook of the drug manufacturers industry. Yet, shares of the stock look discounted.
Sanofi's forward price-to-earnings (P/E) ratio of 9.8 is far less than the drug manufacturers average forward P/E ratio of 12.8. This makes the stock a compelling blend of growth and value for investors to scoop up.