The French drugmaker’s shares dropped more than 15% Friday morning on the announcement that it has abandoned its goal of a 32% operating profit margin for 2025, focusing on long-term profitability.
Pictured: Sanofi Distribution Center/iStock, JHVEPhoto
Following in the footsteps of other drugmakers, Sanofi plans to spin off its consumer health business next year, while abandoning its prior goal to achieve a 32% operating profit margin for 2025. The company touted the decision as the “next chapter” of its “play to win” strategy released on Friday alongside third-quarter financial results.
Though the spin-off has the potential to be a positive development for investors, Terence McManus, fund manager at Switzerland’s Bellevue Asset Management, told Reuters the cuts to earnings for the next two years were substantial. Sanofi shares dropped more than 15% Friday morning on the announcement.
Sanofi’s Consumer Healthcare unit employs over 11,000 employees across 150 countries. The French pharma believes separating into two separate entities will drive growth and shareholder value in the long term.
Sanofi has not yet shared details on listing the business but announced that “the most likely path would be through a capital markets transaction, by creating a listed entity headquartered in France,” according to a company statement. The transaction is expected to occur in late 2024.
The consumer health spin-off has become a popular choice for pharma. Johnson & Johnson launched Kenvue this year, lowering its revenue guidance to $83.2 billion and $84 billion, from a range of $98.8 billion to $99.8 billion. Glaxo SmithKline created Haleon in 2022 as a joint venture with Pfizer. Pfizer has since announced its intentions to offload its stake over time, citing a strategic shift in focus to replenishing its drug pipeline.
Sanofi also cites its own focus on transformative medicines as its reason for the split, with an emphasis on higher spending for immunology and inflammation clinical drug trials. Analysts are watching how the company handles the launches of its newest drugs—a type 1 diabetes drug acquired in a $2.9 billion buy of Provention Bio, an RSV pediatric drug and a hemophilia A drug with Sobi.
While abandoning its previously stated profit margin goal for 2025 to “focus on long-term profitability,” Sanofi reiterated its mid-single digit growth guidance for 2023. A decline of low-single digits has now been forecasted for 2024 with increased R&D investment and a “strong rebound” predicted in 2025, the company said.
In the third quarter, Sanofi’s specialty care division grew over 13% driven by Dupixent, its monoclonal antibody (mAb) for allergic diseases, and hemophilia A therapy Altuviio. Sales increases from these helped offset the market share lost by its multiple sclerosis drug Aubagio to generic competition.
Sanofi is also shaking up its pipeline, ending enrollment in a study investigating the anti-ICOS mAb picked up in its $1.5 billion buy of Kymab. Scarce details were provided regarding the decision, except to say it was not based on any observed safety signals. Future trial plans for a RIPK1 inhibitor and a BTK inhibitor were also slashed after failing Phase II trials.
Kate Goodwin is a freelance life science writer based in Des Moines, Iowa. She can be reached at kate.goodwin@biospace.com and on LinkedIn.
