UK at risk of losing healthcare innovation race with European rivals, warns Sanofi boss

The UK is at risk of falling behind European competitors in healthcare innovation because of “short-term dramatic measures” the government has taken to plug the country’s deficit, the chief executive of Sanofi has warned.

“If I see how quickly science is developing in France, how quickly innovation is developing in clinical operations in Spain, there is a real risk that other countries take a big lead [over Britain],” said Paul Hudson, the French pharmaceutical company’s chief executive, despite how “brilliant” the UK’s scientific community is.

“Governments and in particular the UK need to be a little bit careful that any short-term dramatic measures against the industry don’t lead to an erosion in the sector and access to medicine for patients,” he added, noting that in the past two years clinical research has declined in the country by 50 per cent.

Hudson said he had called for a stop in cuts to healthcare and life sciences research in conversations with Number 10 and the Treasury. Major pharmaceutical companies have also criticised the scale of clawback costs NHS pricing policies impose on the industry, which accounted for more than a quarter of last year’s UK sales.

Drugmakers signed a voluntary agreement with the UK’s NHS in 2019 to limit any rise in the total branded drug bill to 2 per cent a year. But a combination of the pandemic and an increase in use of more expensive treatments led to unusually high clawbacks in the past two years.

The Department of Health and Social Care did not immediately respond to a request for comment.

The comments from Sanofi’s chief executive come amid a wider struggle between big pharmaceutical groups and governments around the world over drug prices, as policymakers have to contend with tight budgets and drugmakers face a tough commercial environment.

Sanofi predicted in annual results released on Friday that it will grow at a more moderate pace this year, after delivering strong sales growth in 2022 driven by its hit Dupixent anti-inflammatory drug, which is used for diseases such as eczema, and vaccines.

Demand for Dupixent is expected to continue to grow — with the company saying it aims to exceed sales of €10bn this year, up from €8.3bn in 2022 — but this will be partly offset by competition from generics for Aubagio, a treatment for multiple sclerosis.

Sanofi reported a fall in sales last year in key areas including immunology and oncology, which the company is investing heavily in, as it seeks to reduce its dependence on Dupixent. It expects to bring two new products to market: Altuviiio, a treatment for haemophilia, and Beyfortus, a vaccine against a common respiratory virus in young children.

Sanofi said adjusted earnings per share, excluding currency movements, would be “in the low single digits” for 2023. They grew 17 per cent to €8.26 per share in 2022 while sales rose 7 per cent to €43bn.

Sanofi is pursuing a five-year turnround plan under Hudson, who is in his fourth year at the company’s helm. However, it has faced questions from industry stakeholders about the strength of its drug pipeline even as he presses ahead with changes at the group including exiting categories such as cardiac disease and diabetes while investing heavily in cancer treatments and immunology.

Sanofi’s failure to develop a Covid-19 vaccine despite being one of the world’s biggest vaccine manufacturers has hung over the company, as has the failure of several drugs the company had had in development. Analysts say Hudson needs to embark on a more ambitious dealmaking spree.

“M&A is probably on the agenda for 2023,” wrote Michael Leuchten, an analyst at UBS. “We don’t think Sanofi’s valuation pivots on near term estimates but on the company’s ability to create optionality that will eventually allow for an offset of the dependence on Dupixent. Smart capital allocation could change investor perception.”

Sanofi’s share price has fallen more than 4 per cent in the past year, a less drastic decline than peers Pfizer, Johnson & Johnson, and Novartis, but its shares have lagged behind peers since Hudson took over leadership of the company.

Additional reporting by Hannah Kuchler