An example of undervalued earning power

After a series of disappointments, the fundamentals and operating environment for the French pharmaceutical group Sanofi are improving. Following positive litigation news in the Zantac class action late last year, yesterday the company could indeed present rather stunning late stage clinical results for its blockbuster drug Dupixent when it is used for the treatment of the smoker’s lung. We believe the earning power of the company is improving at a time it trades at a valuation discount to the pharmaceutical sector and the market in general. In terms of price / earnings it is valued at 10.5 times next year’s earnings and the company scores well on both quality and value scores. This defensive large cap remains a core holding in our European value portfolio and deserves in our opinion a re-rating (all usual disclaimers apply).