Almost a year ago, Sanofi made history for the wrong reasons.
Last October, CEO Paul Hudson announced strategic changes including boosting R&D spending and pulling the company’s long-term guidance on profit. The stock erased $21 billion in market value in the biggest single-day decline for a large biopharma.
At the time, Houman Ashrafian was still settling into his new job as Sanofi’s R&D head, having arrived from SV Health Investors, a healthcare VC and fund manager. The stock has recovered, and the pipeline, with a focus on immunoscience, is moving ahead, built around a dozen potential blockbusters. The company is in active deal talks with a potential buyer for its consumer health business.
The French company’s big bet on R&D means that Ashrafian will be key to Sanofi’s future, as well as Hudson’s legacy. Earlier this month in New York, Endpoints News sat down with Ashrafian to look back on his first year and what lies ahead for the $140 billion company.
This conversation has been substantially edited and condensed for clarity and length.
Andrew Dunn: How were you first pitched the job, and why’d you take it?
Houman Ashrafian: I was incredibly happy at SV. I co-ran the biotech franchise. I created 13 companies — many of them are doing well. I was brought in by the Sanofi R&D team to do a portfolio review on Valentine’s Day 2023. We looked at every program. It was super-clear this was a company that’s about to go stratospheric. The raw material was there but would benefit from shaping. It was a very easy decision.
Dunn: The month after you started, Paul Hudson shocked Wall Street by yanking earnings guidance as part of a broader move that also includes boosting R&D spending. What role did you play in that decision?
Ashrafian: The discussion happened on my first day. The question was, do we make our numbers, punch out quarters, and be a value stock, or do we become a growth stock?
In my view, it would have been the wrong thing to adhere to our guidance and destroy value. I think we have an A-plus on strategy and on execution. On narration and communication, we could have done better.
Dunn: That was the largest single-day drop for any large pharmaceutical company. Fast forward to today, Sanofi’s stock has recovered. Did you learn anything about the market or investors by going through that?
Ashrafian: I’ll answer that in two ways. My eyes are on 2040. Obviously, I have a three-year, five-year, 10-year, and 15-year plan, but I’m trying to make sure Sanofi becomes and remains the best pure-play biopharma company in the world. The share price is a byproduct.
Secondly, what did I learn? A year ago, there was skepticism if Sanofi can do R&D. They would say it to my face. Today, when I meet with analysts and folks like you, they’re beginning to believe that with the changes we’ve put in place, Sanofi is destined to head to where we wanted to go.
Dunn: To think out to 2040, I’m curious if you agree the single biggest question for Sanofi’s future is post-Dupixent. I’m fascinated by the pharma story of how to get through patent cliffs in a graceful, productive way instead of a value-destroying one.
Ashrafian: We’re lucky that Dupixent is still in its prime, eight years before presumptive loss of exclusivity in 2032. We have multiple strategies to mitigate LOE, which I won’t go into now. It wouldn’t surprise you if that LOE date was pushed back.
We’ve Monte Carlo’d it to Kingdom Come. Both based on our late-stage portfolio, but also our mid-stage and early portfolio and our external innovation, we have covered every base to ensure that we continue growing beyond Dupixent.
We love Dupixent. It will grow to its final breath. But we have the measures internally to overcome that.
While the sun is shining, make hay. While you’ve got free cash flow, double down. There’s always dark days ahead. The challenge in our industry, historically, has been people waiting until the last moment because they want to convince the Street their P&L discipline is such that it gives you that extra boost in the short term, but harms you in the long term.
Dunn: At this year’s JP Morgan conference, you mentioned Sanofi is looking at the generation 2.0 of obesity drugs. How confident are you that Sanofi will eventually be a player in weight loss?
Ashrafian: There’s no question obesity has been an incredible, generationally interesting pharmaceutical development.
They’re not perfect. Our view is mitigating the potential suboptimal features of the GLPs, which are incredible. Muscle loss, potential impacts on bone density, implications of discontinuations, manufacturing challenges, complexities related to rebate.
A natural starting point for us would be an adjcacency in our immunoscience. We’ve got some early bets internally. They may or may not stand the test of time.
Dunn: In five to 10 years, do you see this as a duopoly of Lilly and Novo?
Ashrafian: It’s really hard to predict. Lilly and Novo have done incredible things. The scope of the disease and its complications are so wide that you will see other entrants come into the space.
Dunn: Do you have any career advice related to AI, extending beyond the idea the technology won’t replace people? But maybe it replaces tasks. I think of medical writing, or some rote work, as probably obsolete soon.
Ashrafian: Obsolete in its current form. The workforce of 2040 will be very different. It will be much more skills-based activity, rather than technical expertise or work. It’ll be passion-based, curiosity-based.
I think we’ll move to a techbio model, where we will be a tech company with deep therapeutic capability. People will move around the organization much more, including beyond R&D.
Dunn: In the next five-year span, what’s the single biggest opportunity for Sanofi?
Ashrafian: Immunoscience, unequivocally. Dupixent gave us the reason to believe and the right to play. I think it’s fair to say now, if not No. 1, we’re certainly in the Premier League of immunoscience.
Dunn: Your biggest challenge?
Ashrafian: Complacency is our enemy. We’ve started on our incredible journey, but it’s the start of the journey. The challenge is to make sure no one believes we’re at the end.
A second challenge is, fundamentally, to remain at the forefront of science. I just finished a book called “Power Failure,” about the history of GE. Societal growth, financial growth, impact growth is entirely based on staying at the cutting edge of science.
There are pharmaceutical companies who have had that kind of mantra and lost it. Now that we’re getting there, we need to not go back to the bleachers. We need to militate against mediocrity.