- Sanofi will split off its consumer health business as soon as the end of next year, the company said Friday, following a trend of large pharmaceutical companies moving away from over-the-counter products to focus on higher-profit novel medicines.
- The announcement of the planned divestment came as the Paris-based drugmaker outlined third quarter earnings and a near-term outlook that disappointed investors. In the third quarter, revenue and per-share earnings were below analyst forecasts, declining from the same period a year prior. Executives forecast continued earnings declines in 2024 due to higher tax rates.
- Sanofi’s Paris-listed shares declined by nearly 20% following the announcement, erasing about $20 billion in market value, or roughly the equivalent of BioNTech’s entire capitalization.
In recent years, Novartis, GSK, Pfizer and Johnson & Johnson have hived off consumer health units and bet their futures on innovative drugs emerging from their own laboratories or through licensing deals and biotech buyouts.
Sanofi, which owns consumer brands like IcyHot, Allegra and Gold Bond, is making the spinout part of its “play to win” strategy. The company said the shift will provide “greater management focus and resource allocation to the needs of the biopharma business.”
Executives are weighing how best to divest the consumer health unit, but stated “the most likely path” would be the creation of a publicly listed company headquartered in France through an initial public offering or other capital markets transaction.
The separation would leave the company with a biopharma portfolio of specialty care, general medicine and vaccine products that collectively earned 10.7 billion euros, or $11.4 billion, in the third quarter 2023. By comparison, the consumer health business brought in 1.2 billion euros.
Sanofi’s top seller remained the fast-selling eczema and asthma drug Dupixent, part of its longstanding collaboration with Regeneron, which brought in 2.8 billion euros in revenue.
The overall growth from its biopharma drugs was weighed down by major products that have lost market exclusivity, including most recently the multiple sclerosis drug Aubagio. The biopharma division’s revenue grew 3.1% in the third quarter over the same period in 2022 when the effects of currency exchange rates were excluded, while the consumer division grew 4.6%.
With changing currency exchange rates, however, revenue fell 4% over 2022, a larger loss than Wall Street analysts anticipated. Moreover, quarterly per-share earnings of 2.55 euros was lower on a reported and currency-adjusted basis over 2022 and also less than analysts had forecast.
Executives expect the per-share earnings decline to continue into 2024 at “low single-digit” rates, in part because of a predicted two-point rise in taxes to 21%, before a “strong rebound” in 2025.
The separation of consumer health will help drive that rebound, the company said, along with cost savings and a focus on new products. The company hopes to save some 1.3 billion euros by improving procurement practices, centralizing research and development in hubs and focusing R&D and technology platforms.
Another 700 million euros will be shifted from oncology R&D to immunology, an area of medicine in which Sanofi has had more success. Sanofi has already made some big bets in this area, committing $500 million to an inflammatory digestive disease drug partnership with Teva and $125 million to private company Recludix for another experimental inflammation drug.