Sector News

Sanofi puts 2 units on the block, commits to $1.6B in cuts

November 9, 2015
Life sciences

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

comments closed

Related News

September 25, 2022

Rise of the machines: Novo Nordisk pledges $200M to create first quantum computer for life sciences

Life sciences

Big Pharma has long seen the potential for AI and machine learning to accelerate drug development. But Novo Nordisk is going a step further by channeling $200 million toward the creation of a computer that will outrun anything in existence.

September 25, 2022

Mount Sinai AI uncovers new brain analysis method to predict dementia, Alzheimer’s disease

Life sciences

Current methods for diagnosing Alzheimer’s disease rely on a complex combination of self- and caregiver-reported symptoms, a physical examination and either a PET scan or a spinal tap to look for evidence of amyloid plaque build-ups in the brain. But a new artificial intelligence-based method may make the diagnostic process a much more objective one.

September 25, 2022

New AstraZeneca-backed report finds big money behind diverse owners and entrepreneurs in Europe

Life sciences

There is lots of talk about diversity and inclusion in business, including in pharma and medtech. A new report by the Open Political Economy Network (OPEN), a think tank focusing on migration and diversity, released its “Minority Businesses Matter: Europe” report highlighting the successes and challenges of ethnic minority-owned businesses in Europe.