As outlined in our weekly note, A good start to the year, but where do we go next?? we maintain a bearish bias. Growing geopolitical uncertainty, higher oil prices, and signs of a weakening job market will likely exert further pressure on cyclical sectors, particularly in Europe. EU Healthcare continues to trade at a discount to the broader STOXX 600, a gap we expect to narrow as the market begins pricing in a cyclical slowdown.
We revisit our previous Sanofi Trade idea, as spot has retraced to our prior entry, and technical support levels, amid expectations of a US vaccine slowdown and mixed clinical trial outcomes (i.e., the failure of tolebrutinib in multiple sclerosis). Nonetheless, Dupixent delivered strong growth in its 4Q25 results (+32% YoY), while Sanofi will also benefit from higher Amvuttra royalties and improved cost control through earlier-stage pipeline discontinuations. Valuation is attractive at 9x PE both compared to its long-term average (12% discount), and relative to the EU healthcare sector (8% discount). With several potential catalysts in 1H26 (including amlitelimab Phase 3 results in atopic dermatitis, the lunsekimig Phase 2 trial, SP0230 vaccine Phase 2 trial) we seek to play the upside potential and propose Long Sep26 85 calls, costing approximately 2.7% of underlying.