UBS Cuts Sanofi to Neutral Amid Pipeline Setbacks and Dupixent Patent Concerns

UBS has lowered its stance on Sanofi SA (EPA:SASY), sliding the rating from buy to neutral while chopping its price target from €105 to €88. The main gripe? A faltering drug development pipeline that's struggling to replace Dupixent once its patent protection fades, combined with fresh doubts about safety and delayed approvals.

The pharmaceutical heavyweight's woes deepened after tolebrutinib, an experimental drug, missed its primary goal in a primary progressive multiple sclerosis trial. This wasn't the first blow; the FDA also postponed approval for another use due to concerns over serious liver injury. As a result, UBS axed tolebrutinib from the progressive MS forecast and heavily slashed its approval chances and anticipated sales in secondary progressive MS.

UBS analysts flagged that shifts in U.S. pediatric vaccine recommendations are likely to curb demand for Sanofi's RSV antibody Beyfortus, decreasing the expected uptake by 5 percentage points. This adds to expected declines in vaccine sales, further complicating Sanofi's near-term earnings picture.

Reflecting these headwinds, UBS trimmed its core earnings per share estimates by nearly 3% for 2026 and over 6% for 2027. The anticipated compound annual growth rate for operating income between 2025-2030 was dropped to 7.8%, from a healthier 9.5% forecast previously. This downgrade largely stems from several clinical disappointments throughout 2025, including lackluster phase 3 results for amlitelimab, which fell short of expectations and underperformed against other biologics.

From a valuation standpoint, Sanofi looks cheap at around 10.5x 2026 earnings compared to European pharma peers trading at 14.7x, and it trades at a roughly 40% discount to net present value. Yet UBS sees little upside for a valuation rerating because the company's research productivity remains below average while catalyst events are thin on the ground.

Talks about extending Dupixent's patent beyond 2031 in the U.S. and 2033 internationally were dismissed as a meaningful upside. Even pushing the patent life to 2034 only adds a modest 3.6% bump to Sanofi's valuation per share. Dupixent still stands as a blockbuster, with peak sales projected at $27.8 billion by 2030, but UBS cautions this revenue will eventually wane.

One interesting impact of the dimmer pipeline outlook is UBS halving its forecast on share buyback activity from over €6 billion to just €3 billion spanning 2026-2028. It appears Sanofi may have to save cash and maintain financial flexibility, possibly gearing up for a sizable acquisition to bolster its mid-term drug development lineup.

At closing on January 15, Sanofi's share price was €81.63, suggesting there's still some room to hit UBS's lowered price target. However, with DBS pointing out a laundry list of pipeline and regulatory setbacks, the road ahead looks bumpy for the French pharma giant as it grapples with replacement risk and market uncertainties.