Sanofi is planning $1.6 billion in cuts and considering selling its animal health and European generics businesses as it seeks to improve its fortunes.
But with lackluster diabetes sales dragging on profits in the coming years, the company said not to expect any meaningful growth through 2017, leading investors to give the turnaround strategy a frosty reception.
The strategy presented in Paris today is the first clear indication of how recently appointed Sanofi CEO Olivier Brandicourt plans to break from the past and build his vision for the business. Diversification remains central to the strategy for Sanofi between now and 2020, but Brandicourt is only interested in playing in areas in which he thinks the firm can win. This outlook has prompted Brandicourt to rebuild Sanofi around three units: Global medicines and emerging markets, specialty care and diabetes and cardiovascular.
“If we want to win, we need to be more focused on businesses where we have, or can, build a strong position,” Brandicourt said. The rejig leaves animal health unit Merial and the European generics unit on the outside looking in. Brandicourt views Merial as a good business, but the lack of synergies with other Sanofi units make it a candidate for the chop. “Therefore we are exploring all options … from IPO, to sale, to [joint venture], to retention within the group,” Brandicourt said. The thinking mirrors the approach of Pfizer ($PFE), which spun out its animal health unit in a $2.2 billion IPO.
The sales of Merial and the European generics businesses would leave Sanofi with four units that Brandicourt thinks are already market leaders–diabetes/cardiovascular, vaccines, rare diseases and emerging markets–and four in which Sanofi plans to invest to claim a spot on the leaderboard. The four subscale units are multiple sclerosis, oncology, immunology and consumer healthcare. Each of the businesses has its shortcomings today, but Brandicourt is willing to spend his way to the top. “[In consumer health], we will … build scale through bolt-on acquisitions,” he said.
Cash for the investments will come from cuts in other areas. Sanofi is planning to generate cost savings of $1.6 billion by 2018, while also potentially selling Merial and the European generics unit. “In this environment, there is no room for excess cost. Our company must become a simpler organization,” Brandicourt said. At this stage, it is unclear exactly where the ax will fall. Brandicourt said two thirds of the savings will come from the “simplification of the organization,” with the rest being generated by “investment prioritization.” Brandicourt, who has already warned unions in France that manufacturing costs must fall, said some of the savings would come from a “reshape” of the manufacturing network.
The plan is to put the savings back into the business, an approach that Sanofi thinks will set it up to deliver faster earnings growth from 2018 onward. Before then, the pressure on the diabetes unit and need to invest will drag on profits. Investors reacted badly to the news, sending shares in Sanofi down almost 6% on the Paris stock exchange.
Source: Fierce Pharma
Giovanni Caforio, the former CEO of Bristol Myers Squibb, is set to become the next board chairman of Novartis, which on Tuesday proposed the pharmaceutical industry veteran as its pick to replace Joerg Reinhardt in the role next year. Reinhardt has served as Novartis’ chair since 2013 and plans to retire when his 12-year term ends in 2025.
GE HealthCare has raised the curtain on two ultrasound systems equipped with artificial intelligence programs designed to assist in diagnosing conditions in women’s health, including obstetric exams. The Voluson Signature 20 and 18 imaging systems include AI tools capable of automatically identifying and annotating measurements of fetal anatomy.
Scientists from the University of Edinburgh’s School of Chemistry have revealed a new sustainable method of manufacturing complex molecules that could reduce waste produced during drug production. The method published in Nature Chemistry could help to prevent severe side effects caused by drugs that can exist as enantiomers.
