Sanofi — FY2021 Form 20-F
Reporting period: Year ended December 31, 2021; this is an annual report, not a standalone fourth-quarter filing. Financial statements use IFRS as issued by the IASB and endorsed by the EU. Amounts below are in euros unless stated otherwise.
Business context and performance
Sanofi is a global healthcare company operating in Pharmaceuticals, Vaccines and Consumer Healthcare. Management’s “Play to Win” priorities are growth, innovation, efficiency and changes to how the company works. The audited financial statements received an unqualified opinion; auditors also reported effective internal control over financial reporting as of year-end.
Key financial metrics
| Metric | FY2021 | FY2020 | Change/comment |
|---|---|---|---|
| Net sales | €37.761bn | €36.041bn | +4.8% reported; +7.1% at constant exchange rates (CER) |
| Gross profit / margin | €26.920bn / 71.3% | €25.210bn / 69.9% | Margin improved 1.4 percentage points |
| Operating income | €8.126bn | €14.113bn | FY2020 included a €7.382bn gain from the Regeneron divestment |
| Net income attributable to Sanofi shareholders | €6.223bn | €12.294bn | Basic EPS €4.97 vs. €9.81 |
| Business net income (non-IFRS) | €8.213bn | €7.346bn | +11.8%; business EPS €6.56 vs. €5.86 |
| Business operating income / margin (non-IFRS) | €10.714bn / 28.4% | €9.759bn / 27.1% | Income +9.8%; margin improved 1.3 percentage points |
| Operating cash flow / free cash flow (non-IFRS) | €10.522bn / €8.096bn | €7.418bn / €6.982bn | Free cash flow increased €1.114bn |
| Cash and cash equivalents | €10.098bn | €13.915bn | Cash decreased €3.817bn |
| Total debt / net debt | €20.250bn / €9.983bn | €22.631bn / €8.790bn | Net debt rose €1.193bn; lease liabilities are excluded from net debt |
| Gearing ratio (non-IFRS) | 14.5% | 13.9% | Net debt divided by total equity |
Operating cash flow benefited from improved operating cash flow before working-capital movements and a €1.409bn reduction in working capital. Investing activities used €7.298bn, principally reflecting acquisitions; financing activities used €7.056bn, including €4.008bn of dividends and debt repayments. Sanofi reported €8bn of undrawn confirmed credit facilities and expects cash resources and operating cash flow to cover foreseeable working-capital needs and debt repayment. Credit facilities are not subject to financial-ratio covenants.
Research and development expense was €5.692bn, or 15.1% of sales, versus €5.530bn and 15.3% in 2020. Capital expenditure on property, plant and equipment was €1.479bn. Total assets were €120.242bn and total equity €69.031bn at year-end.
Material changes versus FY2020
- Sales growth was led by Specialty Care, Vaccines and Consumer Healthcare; General Medicines sales declined.
- Specialty Care sales rose 16.4% reported (19.7% CER), including Dupixent sales of €5.249bn, up 48.5% reported.
- Vaccines sales increased 5.9% reported (6.8% CER) to €6.323bn; Consumer Healthcare rose 1.7% reported (4.6% CER) to €4.468bn. General Medicines fell 3.4% reported (1.4% CER) to €14.218bn.
- Reported earnings fell sharply because FY2020 included the Regeneron gain; business net income, which excludes specified items, increased 11.8%.
- Acquisition cash outflows were €5.594bn, including Translate Bio, Kadmon, Kymab and Kiadis. Net debt increased despite higher free cash flow.
- Net sales lost €231m on a reported basis from selected products facing generic or biosimilar competition. The company expects further erosion in 2022.
Outlook, commentary, risks and unusual items
- Strategy and targets: Management targets €2.5bn of savings by the end of 2022 and reported approximately €730m achieved in 2021. Strategic ambitions include Dupixent annual sales above €10bn; Vaccines mid-to-high single-digit sales growth for 2018–2025; and more than doubling Vaccines sales by the end of the decade versus 2018. These are ambitions, not guarantees.
- 2022 pressures: Sanofi expects its China insulin glargine sales (Lantus and Toujeo) to decline around 30% after volume-based procurement tenders, from 2021 China sales of €459m. Generic competition is expected to continue affecting sales and income. The filing text provided does not give a clear consolidated 2022 earnings-growth guidance figure.
- Pipeline and COVID-19: Sanofi discontinued development of its COVID-19 mRNA vaccine candidate and focused on its recombinant vaccine with GSK and other mRNA programs. Fitusiran regulatory submissions were expected to be delayed to 2024 following dose-regimen changes. R&D outcomes, trial timing, approvals and commercial uptake remain uncertain.
- Pricing and competition: Management cites government cost controls, payer rebates, formulary restrictions, tendering and generic/biosimilar entry as ongoing risks to revenue and margins. Foreign-exchange movements also affected 2021 sales; the reported growth rate was below CER growth.
- Legal, regulatory and operating risks: The company faces product-liability matters, including Taxotere, Zantac and Depakine litigation, as well as pricing, marketing, patent, tax and environmental proceedings. Product liability, litigation and other provisions totaled €1.374bn; environmental provisions were €650m; uncertain tax-position liabilities were €1.463bn. Outcomes and ultimate costs can differ from estimates, and some exposures are not reliably quantifiable. Supply disruption, manufacturing compliance, cybersecurity, data protection and customer concentration are also identified risks.
- Unusual items and accounting: The 2020 Regeneron divestment gain (€7.382bn) materially distorts the year-on-year comparison in reported operating income and net income. FY2021 included €820m of restructuring costs and €192m of intangible-asset impairments. Retrospective accounting-policy changes followed IFRIC decisions on SaaS configuration costs and defined-benefit plan service periods.
- Shareholder return: A €3.33-per-share dividend for FY2021 was proposed, subject to shareholder approval at the May 3, 2022 meeting; the stated payout was 50.8% of business net income.
Important facts for investors to verify
- Reconcile reported versus CER sales growth and non-IFRS measures, particularly business net income, business EPS, business operating income and free cash flow.
- Assess the durability of Dupixent-led growth, vaccine performance and the expected 2022 China insulin price/volume impact.
- Review acquisition spending, purchase-price allocations, milestone obligations and whether acquired pipeline assets meet development and commercial expectations.
- Examine the underlying cash-flow and debt detail, including the €3.817bn cash decline, €9.983bn net debt and lease liabilities excluded from that measure.
- Track material litigation, rebate estimates, uncertain tax positions and environmental remediation provisions; the filing notes significant estimation uncertainty.
- Confirm shareholder approval and payment of the proposed €3.33 dividend, and monitor delivery of the €2.5bn savings target.