The European Union's regulatory body is investigating Sanofi SA (SNY.US) over accusations that it unlawfully disparaged a rival's flu vaccine to boost its own profits.

On Friday, EU regulators expressed concern that Sanofi conducted misleading promotional activities targeting CSL Seqirus's Fluad vaccine, which allegedly led to increased sales of Sanofi's own Efluelda vaccine.

The regulators added that the alleged deliberate disparagement was primarily aimed at healthcare professionals in Germany and France, and included false claims suggesting "the evidence supporting Fluad is weaker than for Efluelda."

EU competition chief Teresa Ribera stated on Friday that initiating the investigation "demonstrates the Commission's resolve to address disparagement practices that may unduly harm competition and informed consumer choice."

For years, the EU has prioritized cracking down on unfair competition tactics used by some of the world's major pharmaceutical firms.

The European Commission has repeatedly warned that leading industry players are employing various new methods to circumvent fair market competition constraints, particularly against the backdrop of increasing market concentration in the European and American pharmaceutical sectors.

The investigation into the company was launched following unannounced raids at Sanofi's offices in Germany and France last September.

A Sanofi spokesperson stated that the company is "confident it has fully complied with all applicable laws and regulations, including competition law," and is "fully cooperating" with the regulators.

Investigation Compounds Sanofi's Challenges Amid R&D Setbacks

The EU's escalated action adds to the difficulties facing the French drugmaker as it strives to revitalize its research and development pipeline.

In February of this year, then-CEO Paul Hudson was ousted for failing to bring new drugs to market quickly enough.

The primary task for new CEO Belén Garijo is to establish a more solid foundation of new products for Sanofi before its blockbuster drug Dupixent faces a patent cliff and its revenue growth momentum gradually weakens.

Sanofi suffered its latest R&D setback earlier this month. The company halted a clinical trial for its experimental drug riliprubart, aimed at a rare autoimmune disease, after the trial failed to demonstrate efficacy.

Riliprubart was reportedly considered one of Sanofi's core pipeline assets in the rare disease field.

It was noted that the formal opening of an investigation does not imply the company has committed any wrongdoing, and the company will have the opportunity to submit commitments to address the EU's concerns.

If the investigation ultimately finds Sanofi's conduct improper, it could face substantial fines.

Penalties for breaching EU competition rules can reach up to 10% of a company's global annual revenue, though actual fines rarely reach that level.

In 2024, Teva Pharmaceutical Industries Ltd (TEVA.US) was fined nearly €463 million by EU regulators for unfairly disparaging a competitor's multiple sclerosis drug.

Furthermore, Vifor Pharma also underwent a comprehensive antitrust investigation, with regulators finding the company allegedly disseminated misleading information to suppress Pharmacosmos, described as its "only potential competitor" in the European intravenous iron market.

In pre-market trading on Friday, shares of Sanofi SA were up 0.84% at the time of reporting.