Shares in French drugmaker Sanofi (SNY) were healthier today after a leading analyst said it was now a buying opportunity despite disappointing drug news.
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Kneejerk Reaction
SNY’s shares were up over 2% in pre-market trading, after they dropped 9% yesterday following late-stage trial data for its experimental inflammatory disease drug amlitelimab, which is being developed to treat severe forms of the skin condition eczema, failed to meet analysts’ forecasts.
Despite Sanofi stating that the trial had met its goals on skin clearance and disease severity in patients compared with a placebo, analysts at Jefferies said the results for the drug fell short of its earlier trial and looked weak against rival biologics drugs.
Sanofi believes the treatment could generate peak sales in excess of $5 billion, and Deutsche Bank analyst Emmanuel Papadakis today said that reaction to the trial data had been “overdone.”
“Further reflection has only strengthened our view that the severity of the knee-jerk market reaction to a miss on the benchmark for skin clearance is overdone in the context of some of the data details and that present a buying opportunity for those with some patience,” Papadakis said. “Investors have interpreted this as a miss, but we think this is a positive first step to validating a blockbuster opportunity. It is a minor positive.”
Risky Business
Its blockbuster medicine Dupixent treats the same skin condition, and Sanofi hopes its new drug could complement or eventually succeed it. Dupixent is set to lose patent protection in 2031.
Eczema affects approximately 204 million people around the world, with about 101 million adults and 103 million children affected.
This is the opportunity drug makers and investors see, but they also acknowledge the inherent risk in devising new treatments.
As seen above in the Sanofi Risk Overview, legal and regulatory risks as well as tech and innovation are high up on the list. Production is also a major concern, being above the sector average.
These risks are important for investors to consider when looking at stocks.
Is SNY a Good Stock to Buy Now?
On TipRanks, SNY has a Moderate Buy consensus based on 2 Buy and 1 Hold ratings. Its highest price target is $67. SNY stock’s consensus price is $63.50, implying a 40.08% upside.
