Paris, France based Sanofi SA (ADR) (NYSE:SNY) is a global healthcare company possessing a diversified product portfolio. It has a presence in several therapeutic areas including cardiovascular diseases, diabetes, oncology, and central nervous system disorders, among others.
It looks like a great stock to buy now, and here are many of the reasons to add Sanofi to your portfolio:
Favorable Rank and Solid VGM Score: Sanofi carries a Zacks Rank #2 (Buy) and a favorable VGM Score of ‘A’. Back-tested results show that only stocks with a VGM Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Rising Estimates & Attractive Valuation: Sanofi’s earnings estimates for 2017 went up 0.3% while that for 2018 moved up 1.2% in the past 60 days. Sanofi’s earnings performance has also been pretty impressive, with the company reporting positive surprises consistently. The average earnings beat over the last four quarters is 4.77%.
The stock also trades at an attractive valuation as evident from its favorable P/E, P/S and P/B ratios compared to the large cap pharmaceuticals industry.
Its P/E F12M (forward twelve months) is 14.44, which is close to the stock’s 6-month high P/E F12M of 14.55.
Nonetheless, the P/E still trades at a discount to the large cap pharmaceuticals industry’s P/E F12M of 15.5, which shows that the stock has the potential to grow further.
Similarly, price to sales (P/S) ratio for Sanofi is 3.0, a discount to the industry’s 4.1. Moreover, the price to book (P/B) ratio for Sanofi is 1.8, less than 4.3 for the industry.
Shares Trending Up in 2017: After declining in 2016, share price of the company has picked up in 2017.
Shares of Sanofi have risen 11.7% this year so far while the Zacks classified Large-Cap Pharma industry registered an increase of 5.3%.
Successful New Products & Strong Pipeline: Sanofi has several new products in its portfolio and candidates in its pipeline that can contribute to growth in 2017 and beyond. Products like Toujeo (diabetes), Aubagio and Lemtrada (multiple sclerosis) have been doing well and the trend is likely to continue. Importantly, Dupixent (dupilumab) was approved last month for the treatment of atopic dermatitis inthe U.S. while the regulatory application for the same indication is under review in the EU. Dupixent is also being evaluated for the treatment of asthma and nasal polyposis in phase III studies.
An important pipeline candidate is Kevzara (sarilumab), which was approved in Canada in Feb 2017 while in the U.S., the regulatory application is expected to be re-submitted to the FDA this year. The regulatory application in the EU was submitted in Jul 2016. Soliqua, a once-daily titratable fixed-ratio combination of Lantus and Lyxumia, was launched in the U.S. in Jan 2017 and is expected to be launched in Europe later this year. Other phase III candidates include sotagliflozin (SGLT-1 and SGLT-2 inhibitor for diabetes) and atuximab (multiple myeloma).
Meanwhile, Sanofi’s focus on streamlining its business and pursuing business development deals is encouraging. Sanofi has collaboration agreements/partnership deals with companies like Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) and AstraZeneca plc (ADR) (NYSE:AZN) among others.
Aggressive Cost Cutting Initiatives: Sanofi reviewed its cost base and conducted an extensive review of its research and development operations in order to reallocate resources to the highest growth and most promising development programs. Sanofi expects to deliver cost savings of at least €1.5 billion by 2018. Moreover, its new operating model is expected to streamline the company’s business and drive long-term growth. In 2016, the company generated €650 million of savings and targets to double that amount in 2017.
Sanofi’s cost savings come from simplification of its organization, enhanced manufacturing productivity, streamlining of products portfolio and alignment of sales force.
Conclusion: Sanofi Poised for Growth Despite Some Obstacles
Sanofi faces its share of challenges such as generic competition for many drugs including its blockbuster drug, Plavix and slower-than-expected uptake of new products like Praluent. Also, the outlook for its Diabetes franchise is bleak.
However, we believe that new drug approvals, a solid pipeline and aggressive savings will pave the way for growth this year.
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