Ladies and gentlemen, thank you for standing by. Welcome to the Sanofi's First Quarter 2020 Earnings Conference Call. I would now like to turn the call over to Felix Lauscher, from Sanofi Investor Relations. Please go ahead, sir..

Thank you. Good morning and good afternoon to everyone on the call. Thank you for joining us to review Sanofi's first quarter results. I hope everyone is safe and remaining healthy during this unprecedented times. As usual, you can find the slides for this call on the Investors page of our website at sanofi.com.

Moving to Slide 2, I would like to remind you that information presented in this call contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially.

I refer you to our Form 20-F document on file with the SEC and also our Document de Reference for a description of these risk factors. With that, please advance to Slide 3.

Our speakers on the call today are Paul Hudson, Chief Executive Officer; Bill Sibold, Executive Vice President Specialty Care Sanofi Genzyme and Jean-Baptiste de Chatillon, Executive Vice President and Chief Financial Officer. Paul will review the first quarter business performance.

Bill will provide an update on Dupixent in the quarter and Jean-Baptiste will then review the financials. After concluding remarks, we will close with a Q&A session, during which we will be joined by the members of the Executive Committee. With that, I would like to turn the call over to Paul..

Well, good morning, and good afternoon to everybody. Let's take a moment to look at how we're dealing with COVID-19 as an organization first. One of the most overused words is unprecedented. And it is certainly overused. But these are very complicated times. And I think we are responding incredibly as an organization.

I couldn't be more proud actually of the response of each and every one of Sanofi's more than 100,000 employees, everybody's stepped up to the plate. Everybody's putting the patient at the heart of everything we do, despite the challenges. We have clearly like most companies reinvented how we work during this Q1.

And strangely, that's almost perfectly aligned with what we outlined at the Play to Win strategy meeting back in December at Capital Markets Day. We're fully remote, but continue to function, recruiting patients for studies. We're delivering on our objectives.

We've let go of some of the old behaviors, which, as a new CEO in a wonderful organization that I've described as a hidden gem it's been a privilege to see how we've blown away the politics and are just focusing on trying to do our very best across the business and in COVID-19.

As to manufacturing and supply, we've mobilized our unique strengths and kept 100% of our sites operational and [indiscernible] our global sourcing in order to avoid any product shortage.

We've had careful and meticulous business continuity planning, which has allowed us to continue with our studies and enabled our field force to be fully digitally engaged with physicians and with healthcare professionals in general.

In fact, just to add, our own organizations completed over half a million hours of digital training, which has been a good use of their time during this crisis and will stand us in good stead as we modernize the company going forward.

We've done this whilst offering our gratitude and our support for the safety and effectiveness of over 20,000 employees who work every day on our industrial sites across the world. We've added to that a premium to thank them for their work in providing these essential medicines through difficult times.

So COVID-19 has allowed everybody in the organization to focus on the behaviors that are essential for our strategy.

And it's clearly not the setting we would like to have chosen to accelerate the culture change in the company, but we must take advantage of that to do the best for those patients who need our medicines now and those that we think will need our medicines in the future.

So what about our fight right now? We take on this responsibility to fight COVID-19 by investigating therapies for patients right now. Now, clearly, both Kevzara and hydroxychloroquine were medicines that weren't specifically intended to fight COVID-19.

And whilst they don't form a large part of our future in terms of any benefit from doing this, the critical thing was mobilizing the organization to make sure that if they did have some application that they were - inventories were built, and we were ready to do our part. We will do our best to protect the public in the future with two vaccines.

I'll come to those in a moment. But right up front, we're looking for Kevzara to work in patients hospitalized with severe respiratory complications. And we'll get the data on that imminently. Whilst it's a long shot it's the very least we can do to try and follow the biology and other experiences across the world from Investigators.

Also supporting the WHO with the Solidarity trial, in addition to the two Sanofi sponsored trials evaluating the antiviral effect of hydroxychloroquine. And we've offered already 100 million doses to around 50 countries pending a demonstrating that we have an effect.

And last week, we announced that we would partner with Luminostics on a home diagnostic for COVID-19. And we hope that could even be available as soon as quarter four this year. Why do that? Well, there's a lot of companies and academics working on COVID-19 testing, very few are working on at home.

We think that the new normal in 2021 will require people to be able to test at home. If they get symptoms, they're unsure, what they just want to overcome any type of anxiety. We hope a test that takes somewhere between five and 30 minutes will enable that. So developing two complimentary vaccine approaches is a huge opportunity for our organization.

I want to try and outline where we are and what it could mean for helping the globe get back to a new normal later next year.

Earlier, I think it was probably the 18, we announced a collaboration with BARDA to develop a protein antigen vaccine candidate and in late March, we added a second program to develop an mRNA vaccine candidate with our collaboration with Translate Bio.

Now, there is a lot of activity in the vaccine sector and I think the WHO last count was 76 active COVID-19 vaccine projects. Let's be really honest, very few of the sponsors of those 76 programs have the expertise or the capacity to produce a vaccine at required scale.

Sanofi Pasteur, as one of the world leaders in vaccine is probably one of the very few companies with significant expertise and scale. Well, unprecedented challenges also require us to think even bigger and therefore we entered into a collaboration with our partner GSK, an unprecedented alliance of two vaccine giants.

And it's interesting to partner with what have been many times a competitor, but we need to do this together. Our protein antigen approach is based on Sanofi's licensed Baculovirus expression platform that's the basis for Flublok. So it's proven.

In addition to our proven technology and experience we’ll also leverage prior development work on a SARS vaccine that has demonstrated encouraging immunogenicity in animals. GSK for that part will contribute the approved pandemic AS03 adjuvant, which they will be able to manufacture at a large scale. That in itself is incredibly important.

Existing manufacturing capacity in place today is up to 600 million doses and looking to double this and to have over a billion doses available by mid 2021. We're planning to initiate clinical studies in Q4 2020 and aiming for approval in mid to second half of 2021.

Our mRNA vaccine approach provides a second shot on goal based on innovative technology with the potential for accelerated development.

Now others have moved into the clinic with mRNA vaccines faster, but even with significant funding from BARDA it's unclear how soon other mRNA vaccines can be produced at an industrial scale required to protect the public.

Our collaboration partner Translate Bio has significant investment in mRNA capacity in place today already that can be applied towards the vaccine. And we're scaling up from a current capacity up to 360 million doses by H1 2021. And we target initial clinical studies in Q4 '20, aiming for approval in late '21. I can't stress enough from that point.

The debate has been about vaccines. We're confident that we will get there. There hasn't been enough debate about ability to make billions of doses. And for the record, we have 10,000 people producing over a billion doses right now of our own vaccine portfolio. This is not easy to do. But we do it to an incredible standard.

And I think we're going to play a major part in one of these two approaches, if not both, to get us back to the new normal next year. Let's move to Dupixent. I've said it many times, it's an absolute privilege to be involved with this medicine, even in challenging times. We've seen incredible performance right across the board in Q1.

We're 130% up, 776 million and that is almost entirely demand driven. Bill Sibold will go on later to talk about TRX and MBRX development to give you some confidence in that number. But that number is in great position on a stable business offering absolutely fantastic benefits to patients. And it's again a real privilege to see continue to grow.

On a constant exchange rate basis our sales and business EPS grew by 6.6% and 15.6%, respectively. About half of our first quarter sales and profit growth was driven by COVID impacts, patient [stocked up] [ph] chronic meds and our trusted consumer health plans. We do expect however, most of that to unwind during quarter two.

Our focus on efficiency also delivered strongly with OpEx down 2.9% versus Q1 2019. So overall, in terms of the fundamentals to take us to where we need to go on our commitments post Capital Markets Day, we are in good shape. Our new GBU Structure delivered in Q1, we're settling into the new rhythm.

Of course, we've done a lot of it remotely and virtually which again, a great learning for us going forward. Specialty care performed particularly strongly led by Dupixent, but we also saw good growth across other key franchises.

In general medicines we saw moderation and sales decline, notably in diabetes and vaccines delivered solid growth despite a tough comparator from prior year. We can comment on that later. Consumer health unit saw consumer stocking more than offset the anticipated headwinds.

So let's go a little bit into specialty care, up 31% with growth across the franchises. We expect roughly a three percentage point contribution from COVID overall, give you some more detail on that now.

Dupixent, again, was a solid performer, continue to grow well in excess of 100% year-on-year and Bill will describe in a second, Dupixent growth was almost entirely due to demand and not related to COVID buying. Maybe a word on Sarclisa, we launched in the US just before the lockdown occurred, full launch is expected after the crisis.

So we're being appropriately conservative for deployment between now and then. Aubagio was disproportionately affected by COVID buying, especially pharmacies relaxed restrictions a little. And we're allowing MS patients to stock up or refill early. We would expect this effect to unwind in quarter two.

Rare disease tends to see order phasing impacting individual quarters and this quarter was no exception also, with some contribution from COVID buying in Europe.

Maybe now I'll hand to Bill because it's important I think to get a deeper understanding of why we're confident in where Dupixent is through Q1 and why we're confident in where we go from here. Bill over to you..

Great, thanks, Paul. As you said Dupixent performance was strong in Q1 adding again nearly EUR100 million in sales versus the prior quarter. And this was despite the impact from Copay assistance programs in the US that typically affect Q1 sales each year.

As you can imagine, we have analyzed our 776 Q1 sales performance very carefully for any COVID related stocking impact, including longer scripts. In our assessment, is that for Dupixent the impact is negligible. So I'm pleased to say that global growth of 130% versus Q1 2019 reflects under demand.

This strong global demand was seen across all three main indications of AD, asthma, nasal polyps, and we're also pleased with our ex US performance, now contributing greater than 20% of worldwide Dupixent sales.

Obtaining approvals of new indications and widening the addressable age group is implicit in our EUR10 billion sales goal, and we're pleased to report that all key regulatory milestones are on track. The most near term milestone is the FDA action date at the end of May for six to 11 year olds with moderate to severe AD.

In a moment, I will share the data we recently presented from the supporting study. Looking a little further ahead, we expect the Part A readout from the pivotal Phase III study in Eosinophilic Esophagitis in the second or third quarter, followed by the pivotal asthma readout six to 11 year olds in the fourth quarter.

And lastly, for our line extensions we discussed last quarter Eosinophilic Esophagitis are underway. Next slide, this slide shows the supporting pediatric data I mentioned on the previous slide, which we believe supports Dupixent best in class profile.

On April 5 at the Revolutionizing Atopic Dermatitis Virtual Conference or RAD, we presented data from our pediatric study in the six to 11 year olds group. This data further reinforces Dupixent's safety profile which is already established in adults and adolescents.

The children studied in the trial had suffered with AD for most of their life, with the majority of their body covered by lesions. After 16 weeks, about three times as many children on Dupixent and topical corticosteroids, achieved skin clearance and reduction in pruritus or itch compared with topical corticosteroid alone.

We believe this data really matters to prescribers, and we look forward to the FDA regulatory decision in this age group with a PDUFA date of May 26. Next slide please. I know you all will want to hear about how the COVID crisis is impacting Dupixent and I'll try to address it for you on the next couple slides here.

Let me remind you that the type two pathway is not involved in viral defense mechanism and the selective blockade of IL-4 and IL-13, which drive the efficacy and safety profile of Dupixent does not suppress the immune system.

Importantly, this is increasingly recognized by HCPs and recent market research indicates that Dupixent's MOA is a preferred systemic option by prescribers in the challenging current environment. The data shown here supports that HCPs are comfortable not only to maintain, but also to initiate patients on Dupixent during the COVID crisis.

This data refers specifically to AD therapies.

When you look more broadly across dermatology, other surveys such as the Spherix Global Insights Wave 3 dermatology report from April 6, 2020, shows that dermatologists assess the risk benefit profile of Dupixent favorably when compared to Type 1 agents or JAK inhibitors, especially during the COVID crisis.

We believe this is due to Dupixent's differentiated safety profile. Next slide, so what does this mean for Dupixent in the coming months? This is an unprecedented situation for all of us.

So forecasting is challenging, but I'll share our thinking on the dynamics for Dupixent it in the coming months based on our market research, and the data and trends that we've been observing in recent weeks and days.

Dupixent total prescriptions have been resilient, and there are several factors that give us confidence that this will continue to be the case. At home administration and no requirement for lab monitoring are clearly an advantage in the current situation.

Around 80% of dermatologists are extremely comfortable continuing patients on Dupixent therapy via telemedicine and we are seeing no change to length of prescriptions. So the TRX dynamics are unchanged and not inflated by patients stocking. Inevitably COVID-19 has resulted in slower new patient additions in recent weeks.

Overall, we see about a 60% reduction for in-person doctor visits, and this is only partly compensated by increased telemedicine. This is expected to result in a slower rate of new patient starts.

Importantly, we are still gaining new patients and MBRXs are currently running at 86% of what they were between February 14 and March 6, reflecting pre-confinement levels. So in other words, MBRXs are down 14% versus pre-confinement levels.

Looking forward, we're confident that patient additions will normalize once patients are being seen more regularly by CTs. So to conclude patients are continuing to receive Dupixent during this unprecedented time and as the situation eventually eases we expect new patients starts to normalize.

Paul?.

Thanks, Bill. Thank you very much. It's incredible. I mean, it is a super medicine of course. But to see MBRX just down what was it 14% versus pre-confinement. The guide Cuba just released some data that it was minus 42%, if I remember correctly, on average across therapeutic areas.

So Dupixent continues to defy the normal thinking, testimony to its efficacy and safety profile. So thanks, Bill for giving us the details. Let's, let's move now to general medicine. The self-decline moderated to below 4% and I think this speaks to the resilience of our portfolio incidence of course, connect therapies globally.

I would assume – we would assume that Gen Med saw about a two percentage point contribution from COVID related buying, many established meds and so a little bit extra stocking. Diabetes saw a year-on-year decline moderate to 1.2%, the lowest level in more than three years. And whilst I accept that there may have been some additional buying.

It's great to see that we are starting to see what we outlined at the end of last year with the beginning of the trough of our business and we can start to think about bottoming out and coming back. Established product showed modest growth outside of China. China, of course, was impacted by the VBP. I'll come to this in a moment.

And looking ahead, we expect inventory build to reverse in Q2, as Jean-Baptiste will discuss later. We also made good progress on our Play to Win strategy, streamlining and simplifying our portfolio through divestment of Separafilm and the restructuring the Praluent agreement which was executed. A little more detail on China.

Overall sales decline 14% impacted by VBP. So let's start with the VBP impact. As we guided you, Plavix in Aprovel family sales declined as a consequence of VBP by 54% and 33% in the quarter at constant exchange rate. The good news, this is really important. I think the good news is the volume up lift we predicted is materializing.

Plavix and capital shipments were up 69% despite the very tough pace in what was a high Q1 in 2019. Encouraging especially as we look into next year and price impacts will wash out. The COVID impacts in China has been mix.

Chronic Disease treatments up strongly on longer prescriptions and patients stop bill whereas hospital drugs have been a little bit more negatively affected. The non VBP part of our China business including vaccines grew at 15%. This speaks again to the resilience of the current portfolio.

And the future of our business in China is building a specialty franchise and it's on track. Praluent launched in March, Dupixent an under review for AD and additional launches planned this year, including Fabrazyme and Aldurazyme in rare disease. Switching gears to vaccines, which delivered solid growth despite a tough year-on-year comparison.

In Q1, we saw growth of 3.7% against exceptionally strong Q1 last year, where sales were up 20%. And let's not forget that included a 450 basis point contribution from phasing in Japan. So the 3.7% is just the beginning and we're excited about the rest of the year for vaccine.

Margin impact of COVID, almost neutral to be honest as uptick in fly demand was offset predictably by a reduction in travel vaccines as restrictions came into effect. Overall very pleased with the performance, which puts vaccines on track to deliver.

Pentaxim up 33% since China as inventory build up ahead of the reopening appointed vaccination centers the end of February and seeing rapid recovery post lockdown and include already for expected high demand in second half based on greater public awareness of vaccination benefits.

So there is also a little bit we think maybe an opportunity as early or accelerating availability and present high days for the elderly following an expected Q2 approval. We're getting some very positive signals there.

On to consumer health, so sales up 4.2% and this includes approximately a six percentage point contribution from COVID related pantry loading as customers trust our over the counter medicines when dealing with the crisis situation.

Now, the main benefit from our customer stocking is seen in the cough and cold and pain categories driven by especially a strong demand in Europe. Of course we don't have the scale of that business in the US, its European driven, notably, the household name brand Doliprane in France.

Our Q1 performance reflects the anticipated headwinds, including the effect from the Zantac voluntary recall in the fall of last year, and the portfolio cleanup.

You won't see on the light for like to unwind until we get closer to Q3, the Zantac piece To provide the promise update on our switch opportunities, we held meetings with the FDA on Cialis and Tamiflu and whilst we can't divulge the details, of course, these areas remained somewhat competitive.

Our development plan is on track and there are no changes to the timelines that we've previously communicated. Meanwhile, we continue to transition to a standalone business and we're on track here too.

Remember going back to Capital Markets Day, we said our real focus for consumer health was to unencumbered, to put the agility back into it and to be accelerating our growth through the remainder of 2020 with the expectation of being close to on market growth before the end of the year is possible.

With that recap, I will hand over to Jean-Baptiste to give the financial update.

Jean-Baptiste?.

Thank you. Thank you, Paul. Good morning. Good afternoon to you all. Well, on Slide 22, as Paul said that we delivered 6.6% growth in the first quarter, around half of it being related to the COVID impacts with inventory building in channels. If we strip this out, sales growth would have been in line with our expectations, driven mainly by Dupixent.

We expect the incremental COVID impact to reverse mainly in the second quarter. When we move further down the P&L, we again delivered P&L leverage, helped by the incremental revenue impact and by our efficiency initiatives. As a consequence, BOI grew by around 16% in the quarter and our BOI margin increased by 220 basis points.

Similar to sales, you should consider that broadly, half of the increase in BOI margin resulted from the volume impact due to the COVID crisis. Importantly, we delivered on our savings in the quarter as we continued to work towards our targets of 2 billion savings by 2022.

As a result, our G&A and R&D lines reflect efficiencies of 2.1% on 4.3% respectively in the quarter. Among the other lines, I would draw to your attention the operating income and expense and the associate line, both of which increased significantly versus prior year period. OI reflects our accounting for the Regeneron monoclonal antibody Alliance.

Here the outflow in the quarter increased to 243 million versus 75 million in Q1 2019 as the collaboration further improved profitability.

I remind you, so net figure includes three components of shared profit of on loss to Regeneron, reimbursement of commercialization expenses incurred by Regeneron and the reimbursement by Regeneron of our development costs.

Regarding the associates line, the increase reflects our equity accounting share of Regeneron's profit, including a true up in Q1 2019 for actual reported results. Slide 23 takes a closer look at our cost line.

Beginning with gross margin, we saw a decline of 80 basis points at constant exchange rate despite productivity gains, also strong growth of specialty care. The decline was mainly due to price reduction in China on Plavix and Aprovel as a result of VBP. These impacts will continue through 2020.

On OpEx, combined G&A and R&D declined by 2.9, so reduction in expense was driven by sitting from our prioritization on smart spending initiatives. COVID impact was broadly neutral as some expense reduction was balanced by extra cost associated with COVID.

On Slide 24, we delivered a strong increase in free cash flow in the quarter with the help of some phasing benefits, but also one off divestments. In total, free cash flow more than doubled against the same period in 2018.

Excluding onetime factors we continue to make progress against the midterm drivers of free cash flow we have previously highlighted. That is we increased sales margin, we improved our working capital and we prioritize investments.

Based on our underlying progress on the change in mindset across the organization, I'm increasingly confident we will meet our target to improve free cash flow by 50% by 2022. On Slide 25, I want to give you a sense of the likely business dynamics in the second quarter.

Company sales, I expect it to decline at the low single digit rate versus Q2 2019 as the first quarter impacts of COVID reverse. When we look at this as the first – at the level of our different businesses where in pharmaceuticals, we expect to see a reduction of in-channel inventory build.

In vaccines, so recovering China on global demand for flu vaccines should continue. But we will see a significant adverse impact from reduced travel vaccination on the postponement of pediatric vaccinations and boosters.

In CHC, we expect to see significant negative impacts from the unwinding of consumer stock piling and the reduce consumer traffic in pharmacy. We also expect to deliver further OpEx efficiencies in Q2.

The net impact, if we take the first and second quarters together is that we expect our first half performance to be on track to achieve our full year guidance. And my last slide, I confirm our full year guidance for 2020 business EPS to grow by around 5% at CER.

The impact of Forex is expected to be negative by minus 1% to minus 2% based on April average exchange rate. Finally, I would like to say that we remain confident on delivering the financial targets that we set out at our Capital Markets Day. With that I'll return the call back to Paul..

Thank you, Jean-Baptiste. I think, I think we are ahead in Q1, we do expect some of it unwinding Q2. We will be on track to deliver our guidance. So don't want anybody to not fully appreciate that.

So in moments like this we have to stand back and take a look at our entire portfolio and see how we're positioned because this is not clearly a short-term event, and it will move through 2021. And we'll play our part there, as you know.

So just taking a quick look, I mean, we have a portfolio that's diverse and also resilient with opportunity to deal with this. This isn't just about us keeping moving in challenging times. This is about making sure we have the right balance. At the same time, like I said earlier, it's not the way I would have liked to have learned it.

But it's clear that we have the capabilities, the skills and the people to execute on our strategy.

I would also add the speed element, which is we're going to keep after things return to some type of normal, I think will be an advantage because of the – we have a backbone of entrepreneurial DNA that I think is unique and hard to replicate in other places.

Dupixent of course in specialty is going to be the pillar, delivering major benefit across a range of inflammatory mediated diseases. And I think Bill mentioned without suppressing the immune system. Whilst that was always the case, it's going to become an increasingly more competitive advantage, given new entrants that can't make that claim.

We've also Kevzara and we would love to see some benefits. Again, to remind everybody, we've increased the manufacturing so that we're there if the studies read out positively. We haven't built it into our financial modeling, but we certainly would love to play a part in helping patients if we can.

As for Gen Meds, we have this broad range of chronic disease treatments and a global portfolio of essential medicines, which will help lift the standard of care in emerging countries and we think will be essential.

And vaccines, what can I say, a world leader with a differentiated fleet portfolio and we're leveraging our know how and manufacturing capacity. I can't repeat it enough our ability to manufacture at scale will ultimately be the winning criteria to who can help the most people when we actually come to delivering vaccines.

Consumer, while we supply the medicines needed by patients to cope with the milder symptoms, Paracetamol, for example, Doliprane. And when this pandemic eventually subsides, we think we have a compelling strategy right across each of our GBUs, which is why we set them up this way. Dupixent is really a great example.

It shows it's critical to understand the driver pathways in disease and our unique understanding of T2 biology allows a precise intervention where you do not trade off efficacy and safety. So I just want to move a little bit to the BTK. We hosted a call yesterday first time for us to do something on that scale.

We put it out there to present some balanced scientific reflection on our Phase II data in MS for the BTK 168, where over 1000 people connect, it just shows us when we move towards these new tools courageously, we can move incredibly quickly.

We also know that we think we have this unique, unique tool mechanism of action, not only just on the periphery, but inside the CNS. And I think we went a long way to demonstrating that yesterday. Of course, we have these Phase III programs, and we'll have somewhere in the region of 4000 patients involved in those.

And that's going to be significant itself. Yeah, there was an expression used for those that were on the call yesterday that this may end up being best in disease, not just best in class. And we can see that being a real possibility after even a short period of time and 90% reduction in lesions in Phase II. The Phase III data looks good.

I think we will be more than competitive for the injectable or infused anti-CD 20s. We know, almost without exception, that when efficacy is as good as patients will always choose oral. How BTKi, I want to say, potentially impacts the line of mechanism. I touched on this a little bit.

But I think we have a chance to go after being the first real treatment truly effective in progressive forms of the disease and more to follow on that. So I think perhaps, I'll move to just a little bit of pipeline momentum to finish my last slide.

There is excellent momentum building in R&D, I can feel it, I feel it in the conversations, I can see where we're accelerating. We've touched on it already, but we delivered on our promise with the pop data for the BTK. We have delivered the virtual presentation of our pediatric Dupixent data and of course the Sarclisa US approval.

And in the upcoming quarter you can expect multiple approvals across specialty care and vaccines. Look out, in particular the Dupixent and pediatric AD, of course, an expansion of our differentiated flu portfolio in Europe and the EU approval of Sarclisa.

Also expect several important pivotal trial readouts, including the IKEMA study for Sarclisa and the Avalglucosidase alfa also in pomp and Cemiplimab in basal cell carcinoma. By way of a final word, I'm looking forward to our R&D Day events on June the 23, where the headline should be nice and clear for everybody.

We aim to tell you what makes Sanofi R&D unique. It'll be a virtual event, of course, because of what we face.

But I think once again, an opportunity to show you some of our bench strength of some of our science to get connected to more people from R&D because of the virtue of being virtual and we're already becoming increasingly more proud of what they working on. So to close the message you've heard today is I think a clear one.

We are absolutely executing on our Play to in strategy. We're taking a leadership position in managing in combating the COVID pandemic. We are on track to deliver our financial targets for 2020 and beyond. And with that Felix over to you to start the Q&A..

Thank you, Paul. We will now open the call to your questions. As a reminder, we would ask you to limit your questions to two each. Thank you.

Operator?.

We will now begin the question-and-answer session. [Operator Instructions] The first question from the phone is from the line of Graham Parry from Bank of America. Please go ahead..

Great, thanks for taking my questions. So firstly, on vaccines, you alluded to the fact that you're preparing fleet capacity for a second half increase in demand.

Can you help quantify that a little bit and what sort of step up do you think you've got? What kind of level of capacity expansion can you perhaps engage in for this 2020, '21 season? And then secondly, on your COVID vaccine, the SARS-1 vaccines that were originally developed that were targeting spike protein, did see some in vitro animal evidence of antibody induced – or vaccine induced enhancement.

And that's obviously a risk which Sanofi is familiar with from the dengue vaccine. So can you just talk us through in those COVID programs what it is you're actually doing to avoid enhancement issues or animal models that you're going to be having to provide to regulators et cetera? Thank you..

Thank you, Graham, appreciated. I'm going to hand to David. Just maybe on your first question about our capacity to deal with perhaps increase in flu in 2021. I think it's probably easy to say that we're not over sharing because clearly, it's a competitive situation. David may feel comfortable adding a little bit more, but I wouldn't go there.

And then David, if you could reflect a little bit on the SARS learning and what perhaps about the vaccine induced enhancement piece?.

Yeah, thanks. Hey Graham, on the flu capacity, so we have ordered more eggs for the season because we anticipated that the market is going to grow. And that's actually turning eyes to have been a very good decision. So it gives us some leeway even on all egg based vaccines. And then we have also short-term some upside on Flublok.

We are limited only by the filling capacity.

So this means that we think midterm, the flu market is actually also going to increase probably substantially because you really want to prevent that people are having flu while you have COVID still circulating especially in the winter months because once they start to overlap, that becomes very dangerous and it's going to fill up hospitals.

We were kind of escaping the flu season on this COVID now in Europe and in the United States, so we just came out of the flu season and that's why the health care systems have not noticed it, but for the for the next winter, that's going to be a significant issue.

On your second question on COVID and the SARS vaccine, the ADE effect is an effect that you can see potentially with any vaccine. So I think all the companies will have to watch out for that. And there are of course, discussions with the regulators ongoing on this one..

Okay, thank you, David. Next question, Felix..

The next question from the phone is from the line of Richard Vosser from JP Morgan. Please go ahead..

Hi, thanks for taking my question. Maybe a follow up question on the vaccine capacity, just, I think into the US market 169 million doses of vaccine are shipped. Do you have any idea how many actually get into patients? CDC seems to think a third of patients are getting vaccinated.

So is there potential uplift from more people actually taking on what is already in the marketplace from you and others? And second question just on consumer and just thinking about continued demand we see flu season generate – boost to consumer businesses during their ability particularly cough and cold, but other things like vitamins, so just your thought in actually clearly there is a bit of a bonus, but could this be a benefit for most of the rest of this year as well? Thanks very much..

Okay, Richard, thank you so much.

David to you again, on the capacity and the doses that perhaps still in the system and not been used on whether that's still in play?.

No. Hey, Richard. You have seen that we have doubled the sales in Q1 and that is clearly an effect of people having vaccinated longer and more people. In fact, we have seen that there were more shots in arm in the script data or in the claims data. So we expect indeed that this is going to continue for the upcoming flu season.

We also see in the southern hemisphere that we are also seeing an uplift of injection..

Alan, beyond pantry loading, do we see any of the momentum continuing?.

So thanks for the question Richard. At this stage, we are not anticipating to see a significant uplift across the various categories. There may be one or two very specialist areas for example, in the vitamins and new space where you might actually have seen a new habit created during this crisis.

But most of the OTC products that have seen pantry loading as we described it are treatment products. So of course, if they're not used for treatment during that period, they will stay in the medicine cabinet. So the current projection is that you will see the uplift kind of ease out over the next quarter or two with no significant uplift.

Just in terms of the seasonality you talked about, we did see a – it was a very good cough and cold season in January, February in the US. It was not a very good cough and cold season for the manufacturers in Europe. And of course, the market sales significantly increased as a result of the COVID epidemic..

Thank you. Felix, next question.

The next question from the phone is from the line of Verdult Peter from Citi. Please go ahead..

Hi, it's Peter Verdult here from Citi. Two questions please, strategy and Dupixent.

So Paul, you called out some key internal projects you were focused on earlier this year benchmarking the most important roles in Sanofi to the industry and defining a go forward strategy for gene therapy and rare diseases, both in terms of the vector technology going back and whether you go organic, inorganic hybrid.

Wondering if you will be willing to provide an update here and comment on the size or ability to pursue BD in the current environment? And then much quicker for Bill, correct me if I'm wrong, but I think Sanofi's split for the US pharma is roughly 40% commercial, 40% Medicare, 20% Medicaid, just given the importance of Dupixent to the Sanofi growth story near term and the risk to the commercial book of business from rising unemployment.

Could you perhaps just spend a little bit of time talking about the rate of exposure for Dupixent to commercial, and just what you're trying to do over and above what you said in your comments to minimize the disruption to future initiations of therapy? Thank you..

Thanks, Peter, I'll turn to bill in a moment on that. As for the gene therapy question, yes, we said that we would look in those buckets. I'll be frank. My contractual agreement with my previous employer did not allow me to be involved in anything to do with gene therapy until the end of – at the very end of February beginning in March.

So we've been accelerating that work. Now, I can play a more active role. We are starting to get to the decision points on how we want to deploy – I can tell you there's a lot of excitement, enthusiasm. There's also some very good in house projects that need augmenting and some capabilities that need adding.

Our plan is to provide a more detailed look, as we get to the half year results, but you'll have to forgive me I was not allowed really to be involved until just a number of weeks ago. Bill, over to you for the commercial book of business, which is higher, I think than Peter was suggesting, certainly.

And then, and what are the implications with unemployment?.

Yeah. Peter thanks for the question. And as Paul said, it is it is a little higher. So the depiction is really a commercial story for the most part. You're looking at over 70% of it is commercial, so higher than across the rest of the portfolio that we have. And I think not knowing where unemployment is going.

Obviously, it's up, we see that that is going to have an impact across the industry. On Dupixent the dynamics that you'll see is a shift in patients perhaps towards Medicaid or health exchange marketplace or any of the uninsured programs. Now, we have in place very strong programs that help patients if they are at any risk of missing doses et cetera.

We have strong patient assistance programs, et cetera. So we feel that from a coverage of ensuring first of all that patients have access to therapy that we're in good shape. I think it's a – at this point too early to tell how many patients are going to end up making that shift. And we know it's not a real efficient shift at this point.

So if somebody is going from commercial to Medicaid, just in general across the industry, because of the unemployment, it's not an instant effect that takes place. So that will – we'll have a little bit better view of in time.

The comment I would make just in general is about Dupixent them weathering the storm so to speak is we've seen real resilient TRXs hearing from the physicians, they are very comfortable in maintaining and even starting patients on Dupixent during this and I think a lot of that has to do with their broad experience with it today and the strong safety profile.

So we think that as far as products go during this COVID crisis, we continue to see the strong interest in Dupixent, the numbers are holding up well.

As I talked about some of the impacts on MBRX, but TRX is there and all the survey work that we're doing are suggesting that physicians are really continuing to turn to this, so maybe I'll leave it at that..

Thank you, Bill and next question..

The next question from the phone is from the line of Laura Sutcliffe from UBS. Please go ahead..

Hello, thank you for taking my questions. I've got one on Dupixent and then one on sort of recovery more generally. Firstly, I think you mentioned in your material today that you see strong uptake for Dupixent in asthma.

So my question is whether you think that's going to be more challenging or less challenging to maintain that momentum than the trajectory you see in atopic dermatitis and given the appropriate unique circumstances that we're in 2020? And then secondly, do you expect any geographic differences in the way that any parts of your business might recover later on? Thanks very much..

Okay, thank you. Thank you, Laura. So maybe Bill, I'll sort of start. I mean, my – an intro to you the Dupixent's resilience is very specific. It is easy to initiate and there's a high degree of confidence, at least from pulmonologists. I think the competitive set is a little bit more complicated to get started.

So there is a high degree of comfort in initiating with Dupixent. I think the additional thing to consider is what is the new norm going to be like, because most of these offices that planned two and three year migrations to a blend of telemedicine and face to face to maximize capacity. They're rushing to that now.

And I wonder whether the new norm for medicines like Dupixent and beyond have an opportunity to access a much greater eligible population than they would have done pre because of the leverage of digital tools.

Bill, do you want to make any additional comment or look at any geographical differences?.

No. Look, regarding with asthma, we've seen that there's been more continued patient visits to pulmonologist office during this time. We think that we've got coming out of this and through this.

The profile of Dupixent's really what is going to continue to make it a product for physicians to turn to? So the competitive dynamics still going to be there, Dupixent we think has the best profile in the space. So I think that it is just going to be business as usual from a competition perspective.

And but pulmonology seems to be a little bit further ahead than dermatology in maintaining offices..

As the drug then just wide sort of look, it is really very much dependent on the type of restrictions that are being imposed and then lifted on what timescale? We're seeing China come back and start to come back quite strongly in general, but it's not 100% back, it's continuing to add opportunity every day and open up more places.

I don't think we're any different in terms of the scale of that opening up. I don't think we've had any medicine that is disproportionately up to geographically versus what we expect them to achieve.

I am optimistic that when we come back the new normal will have more opportunity in it for patients’ eligible patients to get access to the right medicine. I think Dupixent will sit at the leader in that group. Next question..

The next question from the phone is from the line of Florent Cespedes from Societe Generale. Please go ahead..

Good afternoon.

Florent Cespedes from Societe Generale, two quick questions, first of all on the – on your clinical trial program, could you tell us if the trials which are expected to result in H2 are still on track or if you make delay inevitably in your hemophilia portfolio or your cancer portfolio inevitably the sale? And my second question, maybe for Jean-Baptiste, just to double check regarding your full year guidance.

Do we have to understand so after the softer Q2 that you have highlighted in your slides, do you anticipate a kind of a recovery in Q3 and then kind of back to normal in Q4, just to double check. Thank you..

Okay. Thank you, Florent. So John Reed, maybe you could give an update on sort of regulatory milestones and whether they have moved or not and what are – what we're doing to deploy, both in the COVID studies and our and the ongoing studies..

Yeah, thanks, Paul and thanks Florent for that question. Well, I would say this has been sort of certainly a moment of pride for me as the head of R&D to see how our team has stepped up.

Our clinical development team has done a heroic job to both start randomized clinical trials for purposes of exploring drug repurposing opportunities for combating COVID-19 as well as to keep patients on study where pipeline molecules are concerned.

And just to give some examples, first I would mention the speed with which the clinical development and ops team have executed on the COVID-19 studies. They've started three randomized clinical trials, one for kids or two for hydroxychloroquine with record speed from concept to first patient randomized in just three weeks.

Then second with respect to the ongoing pipeline, we've been using a variety of digital tools and adopting new ways of working. And our team have managed to keep more than 90% of patients on study and they've managed to continue recruiting patients to ongoing studies.

The methods used to achieve this progress, of course have included – there've been a diversity of things, but they've included direct to patient shipping of investigational products, organizing in home infusion of IV drugs to avoid visits to medical centers, using telemedicine for patient assessments, conducting site visits virtually using video conferencing, conducting remote site inspections using smart glasses and just shifting with agility to clinical sites located in geographies that are less impacted by the pipeline.

I would also say that supplying the trials with investigational product, we've managed to keep our CMC teams working on site. And thanks to their heroic efforts by the CMC team. No Sanofi studies have suffered an interruption of investigational product supply.

Our drug supply chain staff have also worked overtime to package label and successfully ship the products to the study, so all together we're in pretty good shape. There are some studies where the ability to recruit new patients has been slowed.

But with few exceptions, we're on track to deliver the programs that we featured in the Capital Markets Day. Paul, if we have time, I can hit a few of the milestones of the first quarter in terms of the pipelines progress..

Yeah. I think you might – I think if I remember correctly, the question also include Fitusiran component, maybe you could just mention where we're at on that..

Yeah. So in hematology, Fitusiran, we have four ongoing Phase III studies, two of those are now fully enrolled. The other two are very close to be enrolled. We're down to just a handful of patients. I think it's two for one and eight for the other, something like that. The team have been pushing that forward.

With BIVV001, we have the study as 85% – moving into the Phase III it's 85% recruited. We have not yet started treating patients with the investigational product. We're extending the running period where you establish a baseline annualized bleeding rate before starting to do therapy.

Because of the COVID pandemic, we've decided to postpone that by a couple months. We hope to be dosing patients who've already been randomized and recruited to the study by middle of the year.

And I would also say with continuing the team lever on hematology and JMO our complement pathway in antibody Sutimlimab, the BLA has been submitted for Cold Agglutinin Disease or hemolytic anemia with the FDA. It's also been filed in Japan.

And we also have achieved the recruitment – fully recruited the follow-on randomized study for that same indication. So overall in hematology we're progressing well..

Thanks, John. So we're not really expecting to miss any of our pr-stated deadlines, where and if the situation continues and we slowed down a little using the new tools, we expect to accelerate and catch up to be on or ahead. I think John used the word heroic.

And it is indeed that I think between our industrial affairs group and our ongoing clinical development team, it's really quite exceptional. Jean-Baptiste, I think there was a part of question for you, which was around the unwinding in Q2 and trying to describe the four quarters.

Do you want to make a quick comment?.

Yeah. Yes, Paul. Thank you very much. I think two aspects, first, that we have an incredible portfolio in Sanofi to navigate this crisis because we see that we have a very good response on the right mix for the situation. So second one is a mindset of efficiency that is now well rooted in Sanofi with Play to Win plan.

That give us flexibility to reinvest, to accelerate growth or to modulate the way we navigate with our OpEx savings. So yes, I don't have an insight, more than you what will be the context in H2, but what I'm convinced is that the teams are really in the right mindset to navigate this crisis and meet expectations we have expressed in our guidance..

Thank you..

Thank you, next question..

The next question is from the line of Steve Scala from Cowen. Please go ahead..

Thank you. I have two questions. What specifically is your mark on manufacturing capacity for Kevzara in units and how quickly can this be delivered should trial show benefit? So that's the first question. And second question, Paul, superb marketing is one of your many skills.

How do you assess the effectiveness of virtual marketing versus face to face marketing, for instance, is virtual marketing only half as likely to generate a prescription three quarters is likely and how does it differ for a new product versus an existing product? Thank you..

Okay, thank you. Philippe – is Philippe connected. I think we have a question around Kevzara manufacturing. Again, I'm not quite sure how much we share, but if you're on the line would you like to answer. Okay..

Philippe is not on the line..

Okay, I apologize. So we had worked extensively of course providing enough treatment for the rheumatoid arthritis population and beyond. And we finished the medicine here in Europe taking drug substance from the US. We stepped up as soon as we knew that this may or may not play a part. So we took all our manufacturing to the maximum.

Now this is the biologic ff course. So we would be in the hundreds of thousands of people that could be treated and not in the millions. But we would be in a good position, I think, for critical patients. If that is what, indeed, the evidence says.

We'll have to wait to see what the outcomes are to see whether we have the right efficacy, and then look at the type of patients and what the needs would be – whether we can match the needs. Your other question is into one Steve about marketing and digital marketing.

There's sort of two aspects for it I guess, the first one is, we – there was always an under appreciation for digital marketing. But it was basically on both sides. Remember, physicians were not always craving it, at least we thought in that moment, too.

And I think we all sort of come around to realize in this new world that the appetite for healthcare professionals to get information digitally has also increased exponentially. I think we've always waited if that's the right word, the digital contact at a lower impact ratio to the face to face.

I think we all believe that the ideal is a blended mixture of high touch what we call high touch and high tech, digital and face to face over time, which should allow us by the way if these practices stick with us to be more efficient, to lower the overall cost to serve a healthcare professional, or to broaden our reach at the same cost.

And I think we're optimistic about what that could mean for delivering on our BOI objective, and yet still maintaining a world class service to those that require it from us. Okay, so next question..

Next question from the call is from Thibault Boutherin from Morgan Stanley. Please go ahead..

Yeah. Thank you for taking my questions. I have a couple. First, on Kevzara allocation and in particular on the consumer healthcare space, so we are seeing a consolidation in consumer healthcare and we are seeing a streamlining of conglomerates.

Would you consider acquisitions in the space in particular kind of mid to large size acquisition? Would you consider that this would be too disruptive in the context where you are carrying out the business and given the need you have to invest in some of these lines? Second question is on the operating costs.

There is an assumption that the COVID-19 situation lock downs and covenant frictions will lead to some level of cost savings across organization.

So based on what you're seeing so far do you expect this proceeding to be material and are there other areas worker I've had to encourage them to make and that we may be overlooking and is there any aspect of your positive initiative that could be accelerated, delayed or eventually cancelled because of COVID-19?.

Okay, I missed the last question Thibault. Sorry, I couldn't hear the last part of your question..

Okay, sorry. The last question was on just operating costs and basically the positive potential from COVID-19, if you look down and so on.

And is there any possession of additional cost because COVID that is damaging?.

Okay, alright, got it. So, maybe I'll just give you a short – sharp answer to the consumer health question. You sort of asked it that answered it yourself, I think.

We outlined at Capital Markets Day that we wanted to unencumbered the business, make it standalone, put the agility back into it, let it make its own decisions, and to move at a higher speed, with an ambition of getting back to and then beyond industry growth rates hopefully by the end of the year, I think our focus is really on that.

And I think that takes enough energy and we think we have enough in hand to do that and to get to a very good place. Jean-Baptiste, in terms of OpEx opportunities, savings, anything that you want to add that you didn't mention earlier..

Yes, I just can add some colors to what I was saying. We have of course, some less cost because of travelling or maybe in country because sales reps are not travelling either. But the bulk of the cost is still there.

And by the way, the first quarter, a lot of our – for instance, plane transportation was already booked without possibility to be cancelled. And it was balanced by extra cost of trials, mask, reimburse to employees to go to work, helps for their children to be looked after. So there were plus or minuses, but it's not really material into Q1.

Looking forward, I think your point is very interesting because I see a lot of opportunities to boost our plan to achieve the 2 billion by 2022. That's what we are working on..

Thank you, Jean-Baptiste. Next question, Felix..

The next question from the phone is from Geoffrey Porges from SVB Leerink. Please go ahead..

Thank you very much for taking the question.

A couple, first on Dupixent, very strong quarter congratulations, but perhaps a few delays in the MBRXs, so could you tell us how you're tracking to your $10 billion target – EUR10 billion target given that trajectory? And then secondly on the R&D side just a couple of logistics questions, is the IL-33 still ongoing in asthma? Second, have you thought about completely or for that matter, Sutimlimab as a treatment for COVID given what we're learning about the inflammatory syndrome? Thanks..

Okay, thank you, Geoff. So John I'll turn to you on the Sutimlimab piece. I'll take a stab at the first for Bill. We haven't drawn a direct line from Q1 MBRX to 10 billion. I think what we would say is at 776 million in the twelfth quarter from launch, I think anybody would have to accept that this is an outstanding performance.

And if we continue to amass, we'll be at a slightly lower rate right now, but better than industry and better than almost any other medicine MBRX. TRX strong growth, you've seen the data already in April. But it is also holding up. So our 10 billion aspiration is built on that, of course and having a best in class profile safety and efficacy.

We're adding the data to that, as you can see in the indications, and we have something like 89 launches of indications or in countries over the next 12 months. So very confident – remain very confident in that ambition. For the IL-33, I think your question is it's in the pipeline update. Of course, we've explored it in a few indications.

I think as we sit here, looking at COPD, there are very few biologics or no biologics and COPD. I know team is taking because it's such a heterogeneous patient populations taking a look at some subject data to decide when and if we push on because we can add some value. And I think if we can add some clinical value we will and that's in the works.

Bill anything to add to those two points?.

No, regarding the Dupixent, absolutely confident in the ambition of this product..

Great, thanks..

Yeah. Good. Well, Bill, I mean, they may be the best signal statement we've heard the whole call. Thank you for that me too.

John, probably to Sutimlimab and COVID-19?.

Yeah, Jeff thanks for the question. I think more and more there's an appreciation that there's a vascular component to the COVID story when at least it comes to patients who are experiencing the more severe forms of the pathology.

Whether those agents would be the right solution however, I think is to be debated at least what little I think the scientific community knows about it. And then thinking about the specific mechanisms of Sutimlimab and JMO, we don't see necessarily a great fit there.

So we haven't just – we're not planning to conduct refurbishing studies at this point.

I think maybe a broader question is even for the general medicines project that we have that are anti-thrombotic whether some of those might be considered in the medical management in some of these patients give the emerging appreciation for the vascular component..

Great, thanks, very much. Thanks for the color..

Yeah. No, thank you. Thanks, Geoff. And next question..

The next question from the phone is from the line of Parekh Keyur from Goldman Sachs. Please go ahead..

Hi, good afternoon. Two questions, please. First, I know you guys have spoken – you guys have been kind of a bit conservative in talking about the flu capacity for the year.

But, Paul, if you could give us some magnitude of if the demand was there, could you do 50% more doses? Could you double your kind of number of flu vaccines you sell during a normal year, any kind of magnitude to be helpful.

And then secondly, Paul in your opening remarks you described the Kevzara opportunity as a long shot? This is for COVID-19 obviously, just wondering if that is based on any kind of early data you might have seen or was it just being cautious given you haven't done a full kind of Phase I for Kevzara in this indication? Thank you..

Thank you, Keyur.

David, why don't we take another crack at flu capacity for this season?.

Okay, you might have missed it at the beginning of the question of Graham. It goes very much in the same direction.

We do not give details on the flu capacity, what we can say is that we do have an upside on egg bass, but also, of course, on the Flublok, the only limiting factor on Flublok that we have to further scrape it up is short-term, the field impact capacity.

We're working on this and then midterm we have of course, more capacity, especially also coming from Flublok. But we also opening up a new vaccine plan for Fluzone High-Dose next year in the United States and that factory can produce for the whole world, but we don't give details of it for competitive reasons..

Sorry maybe it's just word choice. I mean, I tried to say up front that we are working on vaccines because we think that is very much within our control. Trying medicines that have previously approved for different indications is always going to be a little bit serendipitous. I think you have to accept that.

We watch like everybody else, the emerging publications and the data and the anecdotes and the experiences. And as we already have hydroxychloroquine in the mix, I can tell you that one day we get some encouraging news and another day we don't. All I can say is, as a team, we try not to speculate.

It's imminent, totally, really imminent, we'll get some type of readout from our own studies and know better where we stand. I can't tell you how much we'd love to have an effect, right, but I'm just pragmatic. So it's a fingers crossed situation. And I'm sure it is all the IL-6 manufacturers to try and work out what we can do.

But no, we're just waiting for the evidence and then and then I've said earlier, we arise to the challenge of manufacturing of both Plaquenil or hydroxychloroquine and Kevzara and see what we can get to. Okay, next question..

Next question is from the line of Jean-Jacques Le Fur from Bryan, Garnier. Please go ahead..

Yeah. Thank you for taking my questions. The first one will be for Jean-Baptiste and regarding OpEx. I remember you Jean-Baptiste guiding us in the past for 1% or big decrease for this year and next year of 2. In Q1, you realized minus 2.9%. And you alluded to extra saving, you may realize in the future.

So is this – are these 3% the new direction we have to take into account on a yearly basis? This is my first question. And the second question is regarding COVID vaccine capacity.

The up to 6 million doses you alluded to, is it on top of your global capacity for all your vaccine business? Or would it be detrimental to some of the other vaccines? And if it's on top, how do you plan to have his vaccine manufacturing, with flu increasing from H2 and probably the year after? Thank you..

Okay. Jean-Jacques, thank you very much. Jean-Baptiste OpEx management. I think it's worth restating our philosophy on that and also that we take the opportunity where we can to invest in growth opportunities, but the fundamental underlying maturity of cost management is essential to our long term equity stories.

So Jean-Baptiste, do you want to comment?.

Yes. Thank you, Jean-Jacques for this question to clarify completely. Before when we had 1% growth, plus 1% growth guidance on average for the years to come, but it has been dropped with our – since the Capital Markets Day. And we just said that we will be delivering on our EUR2 billion savings by 2022.

So is the 2.9 that you are seeing in Q1 a trend? Not at all. As Paul has just explained, we are very happy to reinvest those savings to accelerate our growth engines in –behind Dupixent and behind vaccines each time we can. So no it's not a trend.

We will be modulating our spend, but we will be delivering on our savings to make sure we can fuel the gross and navigate any up and down of the market..

Thank you. David I'll come to you. Just one observation from me as being a relative newcomer to vaccines, it's interesting how there are a lot of questions around the opportunity cost of manufacturing COVID-19 vaccines versus flu. We don't think that's the case while David will give you more detail.

But there are not enough questions about what I said up front. There are 76 vaccines in development. And there's almost no capacity for those to do anything meaningful at scale, which is why it's so important where we stand in our relationship with GSK to probably be the only company that can get there significantly.

David, do you want to comment on the opportunity cost on flu? Is it real, is it not?.

Yeah, thanks. Thanks Jean-Jacques for the question, a very good question. So it's not going to cannibalize our Flublok capacity wise. We have large additional capacity that we can upscale in a very short amount of time and we're already looking at doing that together with our partners, that's for the recombinant vaccine.

So our ambition is to go from the current $100 million to $600 million that we have announced based on US territory to go beyond the 1 billion in 12 months including also the capacity we have with Unigen in Japan.

And then on the messenger RNA, in fact, Translate Bio has been working since quite some time on up scaling the production process because their first candidate is from cystic fibrosis, which is inhaled and you need larger amounts of messenger RNA on the cystic fibrosis candidate.

Therefore, for the vaccine candidates they are already producing at hundred gram batches. Now we are moving to 250 gram batches and it is assumed that towards the end of the year, beginning of the year, we go kilogram batches. And that would allow us to significantly upscale to hundreds of millions of doses.

So we are confident that we will be able to deliver on large scale. We are of course, adding sealing and packaging capacity as we speak in our internal network, but also investigating possibilities with CMOS..

Thank you, David. Appreciate it. Okay, maybe the last couple of questions..

The next question from the phone is from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead..

Thanks so much for the question.

So I'm just hoping that on the backhand side, you could help us understand a little bit of what the science is suggesting in terms of the durability of immunity And then just in terms of the efficacy dynamics, whether we should be thinking more than the traditional vaccine versus the MR approach is likely to be meaningfully different.

And then the second is really on the BTK, one of the housekeeping questions, if possible, could you share the lesion count data, which I think was a secondary endpoint? I'm not sure if that was shared.

And then, Paul, just finally, if you could just update us on your business development priorities in terms of the size of transaction that you see and just how you are thinking about the current environment? Is it more or less challenging or about the same? Thanks..

Okay, thank you. Finishing strongly there, Seamus with a number of questions, so David, maybe I'll come to in the first two and John, feel free to add if you'd like to, but aspects of durability of immunity and then likely win between tradition approach and mRNA..

So thanks for the question. It's really a very complex question to answer right now, because we're just at the beginning of it.

Having said that, I think what we can say is on the recombinant platform, the Baculovirus platform, what we do know is on Flublok, of course, which is a registered vaccine, based on the platform, we have seen, very good, durability. So we hope, obviously, that this is going to be the case also for the COVID candidates.

On messenger RNA, there are first candidates that have been developed by CMV the durability also looks good, but of course, we have to be careful on messenger RNA. There is no commercialized vaccine so far based on the platform. The platform is clearly very promising. There is no doubt.

We have also as I announced before, the collaboration with Translate Bio, but we just need to be stay humble and we need to see Phase III data. And the same applies to the efficacy. So it's too early to tell..

Thanks David. I'll answer your second part of your question, the BTK – lesion counts, haven't shared that data yet. We will do in the future. There'll be quite a lot of news flow as we go through the next congresses, et cetera, whatever form they're in on that. What I can say, however, was, I liked the enthusiasm of the question.

We talked about it a little bit yesterday and a little bit in the opening today, but we really do think we're going to have best in disease, and all of those things, including lesion count become important, 4,000 patients and Phase III studies that you get to see how seriously we intend to go after this.

To be the priorities we are – as you would imagine active in many fronts. Whilst it is in challenging times from a pandemic, it doesn't change our strategic interest in a number of opportunities. We'd like to think of adding some cool science to augment or amplify existing pipeline assets.

On the call as recently as yesterday about this, so we'll continue to try and make progress and, deliver that. You asked me sort of my own level of prioritization. It is more focused on adding to the science.

And earlier in discovery and development than later I think we have enough to navigate the next few years and to manage our commitments through 2025 and then some, so really building out the pipeline earlier is going to be an area priority. It's not a surprise, but it's just the truth of it.

Maybe last question, Felix, if you feel we have time? If not feel Free to stop me there..

Unfortunately we're approaching the full hour. We know we have a lot of questions still on the line. But, operator last question please..

And last question from the phone is from the line of Wimal Kapadia - Bernstein. Please go ahead..

Thank you much for taking my questions. Wimal Kapadia from Bernstein, so just a couple for David please, so just on the COVID-19 vaccines, I wanted to get your thoughts on which approach do you think would actually deliver more durable antibody response either recombinant or mRNA.

And then kind of this speaking with experts, it seems like optimizing mRNA vaccine a bit of trial and error and so how are Sanofi and Translate actually approaching this optimization? And are you taking a little bit more time than some of your peers for a reason? And then my second question is just on travel vaccines.

So down 20% in 1Q, just wondering when did you actually start to see the main impact from COVID-19? Just want to get a sense of the clients we could expect in Q2 and beyond. So any color you could provide there? I want to incorporate it into your guidance for travel. And then similarly for adult boosters, the same type of commentary will be great.

Thank you..

So David look certainly going to be asking you to bring us home on these questions, first of all on durability again, if you have the – if you want to recap that? But the mRNA optimizing is an interesting one, particularly when you look –with the experience in the companies that have it and what the opportunity could be for us as a standup even if later..

Yeah. Thanks Wimal. On the optimizing being a trial and error. Of course, as I said before, messenger RNA is still young technology in vaccines. So I think there is like in all research, a little bit of trial and error in there.

Messenger RNA itself is not the whole recipe, you also need the lipid nanoparticles and that's something that we're trying to optimize as we speak. So yes, we're taking a little bit of time to do that.

Regarding the travel vaccines, clearly the Q1, the impact was relatively soft because you remember that really travel restriction started to hit, I would say kind of second week of March. So clearly, Q2 is going to be lower and Q3. Now, we all don't have a crystal ball when travel is going to start picking up again.

So that's a bit hard to say, but our assumption is that the upside we see on flu is probably going to compensate for the downside that we have on travel and potentially on boosters because people see their doctors less. If the confinement measures are being kind of lower then people can come back and go and see their doctors again.

Then travel and boosters are going to start normalize very quickly as there might for booster certainly be a catch up opportunity as well, like we see already for pediatrics where there's a lot of catch up ongoing already in China, also the opening up again. So that's where we are.

So we still stick to our word guidance of mid to high single digit growth..

Okay. Thank you. Thank you. If we have a last question, if it's a yes or no answer, we're happy to take it, if it's a short one.

Felix?.

Yes. The next question is from Dominic Lund from Credit Suisse. Please go ahead..

Hello, it's actually Jo Walton. And it's a broader question, which you might like to finish with. I'm just thinking of the legacy of this Coronavirus. Do you think – and given the fact that you've got an unusual geographic mix, you've got much more exposure to emerging markets and rest of world and some of the other companies.

Do you think as we expect to go through next year, we're going to see – we should be thinking of governments with less money having to be more restrictive and more price pressures, rather, like we had after the financial crisis in post 2008, 2009? Or do we think of health care is the new military spending and everybody actually wanting to spend more on health care, and you benefiting? Thank you..

Well, thanks, Jo, what a great question to finish on, a comparison to military spending. I can only give you a view at this point. Clearly, none of us have a crystal ball on that.

What I can tell you is that sentiment towards the company at least and perhaps even the industry has changed a little in terms of people coming to us relying y on us quite heavily in terms of trying to find solutions to repurpose medicines, to accelerate vaccines.

So I think – and I think how we responded is been a good moment to show that we are trying to do the right thing, we are purpose driven, and we do want to collaborate. So I think some good will come out of that.

How that sustains us, given what for many countries will be some of the most difficult economic circumstances they've ever faced, we will see. I think we stand up for by the value we deliver of our medicines, and I think it tries to touch on it earlier.

But our portfolio is a good mix of resiliency and innovation, which we think is going to play a disproportionately positive role in returning life to normal. We think that we'll still be rewarded. So we're confident in our longer term guidance. With that thank you to everybody. We Confirm, we're on track to 2020.

We've been as transparent as we can be about the upsides, we've had from COVID-19. Our underlying cost management and our delivery of both vaccines and indeed of Dupixent continues to impress.

I think our mix is right and our people are showing themselves in a way that I've never had to actually see before in terms of commitment, energy, entrepreneurship and tenacity. And we're going to make sure that we keep a lot of that to keep moving and doing good things for patients and for those that invest in us.

So thanks to all the team and thanks to everybody that dialed in. With that Felix will bring it to a conclusion..

Thank you very much, everyone. Please don't hesitate to contact the IR team for further questions. Thank you. Operator that concludes the call..

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