Sanofi’s credit rating upgraded to Aa3 by Moody’s Ratings

Investing.com -- Moody’s Ratings has upgraded the long-term issuer rating and senior unsecured ratings of Sanofi (NASDAQ:SNY) from A1 to Aa3. The outlook for the company has been revised from positive to stable. The senior unsecured MTN rating of Sanofi’s euro medium term notes program has also been upgraded to (P)Aa3 from (P)A1, while the (P)P-1 other short-term rating was affirmed. Sanofi’s P-1 short-term issuer rating and its P-1 commercial paper ratings were also affirmed.

The upgrade to Aa3 reflects Sanofi’s solid operating performance and credit metrics. The company’s revenue growth is supported by Dupixent, its largest-selling drug, vaccines, and newly-launched products. Sanofi’s late-stage pipeline, which includes several new immunology, neurology, and rare disease drugs in phase 3 studies or awaiting regulatory approvals, is improving and is expected to sustain long-term growth.

The rating action also reflects Sanofi’s conservative financial policies, which include limited share buybacks and mergers and acquisitions (M&A) mostly funded by internal sources. This balanced approach was evident in the use of proceeds from the sale of its consumer healthcare division, Opella, which closed on April 30, 2025. The proceeds were split between share buybacks and the company’s growth initiatives.

Sanofi’s Aa3 rating reflects the company’s large scale, with €41 billion of revenue in 2024, its leading positions in pharmaceuticals, including vaccines, a balanced geographical spread, limited exposure to patent expiries until the end of the decade, and its strong credit metrics and excellent liquidity. The rating also takes into account the high concentration of Sanofi’s revenue growth in its bestselling drug, Dupixent, and a degree of acquisition risk, which will depend on the success of its late-stage pipeline.

Despite increased R&D expenses and higher costs driven by ongoing restructuring and new product launches in 2024 and the start of 2025, Moody’s anticipates that Sanofi will maintain leverage (Moody’s-adjusted gross debt/EBITDA) below 2.0x in 2025-26 with EBITDA and cash flows supported by mid-single-digit sales growth and margin improvements from Dupixent and recent products launches like Beyfortus and Altuviiio.

While discussions around policy changes for pharmaceuticals in the United States, such as tariffs and price adjustments, introduce some uncertainty, Moody’s believes these developments are unlikely to have a significant impact on Sanofi’s credit quality in most scenarios. Sanofi is well diversified geographically, with substantial manufacturing and research and development operations in the US, and has the financial flexibility to adapt its operations and supply chain if trade barriers arise.

Sanofi has excellent liquidity. As of December 31, 2024, Sanofi had cash and cash equivalents of €7.4 billion, largely covering €4.2 billion of short-term debt. In addition, Moody’s projects that Sanofi will generate an average Moody’s-adjusted free cash flow of €2.2 billion over the next 12-18 months.

Sanofi’s committed credit facilities total €8.0 billion and comprise one syndicated credit facility of €4.0 billion expiring in December 2027 and one RCF of €4.0 billion expiring in March 2030. Sanofi has a €6 billion French commercial paper program and a $10.0 billion US commercial paper program. The average drawdown was €0.1 billion under the French program and $5.8 billion under the US program, in 2024.

A rating upgrade could occur if Sanofi continues to improve its pipeline and successfully launch new drugs and line extensions, reducing its product concentration of Dupixent. Conversely, a downgrade could occur if Sanofi’s late-stage pipeline weakens significantly or it deviates from its conservative financial policies.

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