Sanofi: Clearly the story is now moving to the next stage
BUY, Fair Value EUR88 vs. EUR90 (+15%)
We had been thinking about some changes in the Sanofi story, kind of a new chapter to be written, well before the Q2 release. But actually this quarter probably precipitates the development of the investment case. Since Chris Viehbacher came in, the recovery was driven exclusively by structural changes to face the cliff and adapt the organisation for the long-term. Most if not all of the growth platforms were R&D success-free and as such were offering a very linear and de-risked growth profile to the company. Now these platforms have become bigger, more mature and are less predictable than they used to be, starting with emerging markets. And so the focus is progressively but increasingly shifting towards good execution in R&D and in commercial launches. This raises the bar to claim for success and introduces some more volatility and uncertainty, although the upside remains significant. Our Core EPSs are only marginally revised beyond 2013 but as changes need to be swallowed and relative comparison to peers re-assessed, we would imagine that share price could recover only progressively.
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