Sanofi SA (ADR): SNY Pipeline Is Overflowing With Potential
April 14, 2016 – by Richard Band
France-based Sanofi SA (ADR) (SNY) is one of the world’s largest pharmaceutical companies. I mentioned where it’s headquartered because the company actually pre-dates much of America. Its roots actually go back to 1718.
Over the next nearly 300 years, Sanofi has continued to grow as well as maintain its influence as a leading European pharmaceutical player. It wasn’t until the early 21st century that SNY made a conscious effort to globalize its brand and make inroads into the American market.
In 1999, it purchased India-based Aventis and in 2011, it acquired US-based Genzyme, which was the third largest pharmaceutical company in the world at the time.
Since then, Sanofi stock continues to grow by acquisition and joint venture, which is the current trend for big pharma. It’s cheaper to buy a specialized biotech than build it out from the ground in your own research and development department.
Sanofi Pipeline Is Bound for a Hit
But that’s not to say it doesn’t spend mightily on R&D. Nearly 7% of its revenue in fiscal year 2015 (the most recent full year) was focused on R&D. That’s a solid amount and makes it more understandable why SNY has a growing pipeline.
Most big pharmaceuticals now have a significant challenge. Many of their big blockbuster drugs are coming off patent in coming months and years. Getting a blockbuster is like coming to bat in baseball. You don’t hit homers every time you step to the plate.
That means you have to have plenty of swings so you can connect once in a while.
That is the primary reason big pharma is shopping for hot new drugs and biotechs to bring into the fold while they’re still making money from the blockbusters.
Sanofi has 18 drug and vaccine launches scheduled by 2020. The new drugs range from an orally delivered flea and tick medication for dogs and cats to treatments for dengue fever, diabetes, high cholesterol, rheumatoid arthritis, multiple sclerosis and cancer.
That’s a healthy mix of opportunities. And SNY has acquired 18 other biotechs since 2008 to add to its swings.
Furthermore, its new joint venture with privately held Dice Molecules is not a blockbuster drug, but a blockbuster idea. Dice’s proprietary directed chemical evolution technology essentially allows the company to figure out ways to make injectable medicines available orally, with a pill.
This could revolutionize the availability of drugs and mean significant licensing opportunities with other pharmaceutical firms.
Sanofi is treading water for the year, but its 3.8% dividend certainly takes the sting out of its current slow growth. There’s a tsunami coming down this pipeline.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation. As of this writing, he did not hold a position in any of the aforementioned securities.