SANOFI: SHOPPING CONSUMER HEALTHCARE PRODUCTS UNIT
Revenue from the possible spinoff, joint venture or outright sale of would reduce $28 billion debt load
Pivotal Elements:
Sanofi’s consumer healthcare unit is a global enterprise that generates about $5 billion in annual sales
Senior leadership implies it is seeking to better focus its global operations through deploying its clinical and financial resources into advanced life sciences
The company’s debt load of $28 billion is manageable but to improve earnings and better position the company for additional acquisitions in the future a spinoff or partial sale of non-pivotal assets is a strategic move
Global healthcare leader Sanofi S.A. ( NASDAQ: SNY ) is reportedly weighing options to make significant changes to its commercial organization and its consumer health products business unit. Based in Paris, France, Sanofi stands in the upper ranks of the world’s top 10 pharmaceutical companies based on revenue. Employing over 100,000 workers, it generates over $42 billion in annual sales and is ranked at #288 in the Fortune 500.
There is speculation in the investor, healthcare and consumer product business communities that Sanofi may form up its consumer healthcare products business unit as a separate spinoff, enjoin it through a partnership with another organization or sell it outright to another company.
Sanofi Consumer Products Division Has Global Consumer Markets Reach
Sanofi’s consumer health products division is sizable; its annual sales are just over $5 billion and reaches into every corner of household medicine cabinets. They are sold in retail pharmacies, grocery stores, mass merchandiser outlets, online and numerous other consumer shopper venues. It has an established portfolio of familiar over-the-counter ( OTC ) and health and beauty ( HBA) brand products including:
- Allegra
- Aspercreme
- Cortizone-10
- Dulcolax
- Gold Bond
- IcyHot
- Kaopectate
- Nasacort
- Rolaids
- Selsun blue
- Unisom
- Xyzal
- Zantac
Based on its $5 billion annual sales and brand franchises’ worth along with associated assets and liabilities, it is estimated Sanofi’s consumer healthcare business unit could be valued as high as just over $30 billion as a standalone company. Spinning the consumer health products unit off or engaging in a partnership with another company could reduce costs and free up cash for Sanofi to invest in other parts of its organization or service debt.
Sanofi Multinational Corporate Structure
Worldwide Sanofi has 75 manufacturing sites based in 33 different countries. Their leading markets are the United States, Europe and Asia. They organize their commercial enterprise based on 5 divisions:
- General Medicines and Emerging Markets
- Specialty Care ( Sanofi Genzyme )
- Vaccines ( Sanofi Pasteur )
- Consumer
- Diabetes & Cardiovascular
Sanofi Reinvesting In Existing Pharmaceutical Business Or Engineering Other Healthcare Acquisitions
Whether Sanofi spins off or enters a partnership with its consumer health products division, it will have plenty of options to reinvest income generated from it in existing pharmaceutical product franchises or refresh their portfolio with acquisitions. Sanofi’s prescription drug and biotech businesses span brand and generic formulations for rare diseases, oncology, hematological disorders, neurology, immunology/vaccines, cardiovascular and endocrinology. Some of Sanofi’s top prescription drug products are:
- Lantus / insulin glargine ( diabetes care/endocrinology )
- Aubagio / terifluonide ( multiple sclerosis/neurology )
- Lovenox / enoxaparin sodium ( anticoagulant/cardiology )
- Plavix / clopidogrel ( coronary artery disease, peripheral artery disease/cardiology )
- Toujeo / insulin glargine ( diabetes care/endocrinology )
Sanofi’s Significant Debt Load May Need More Attention
Sanofi may use the proceeds generated from the offloading of the consumer health products unit to pay off debt. Their market capitalization is roughly $117 billion and its debt load is just under $28 billion. Jettisoning some of the debt burdens would brighten its balance sheet and earnings. Even the most robust profits in the biotech and pharmaceutical sectors can be noticeably dampened by debt especially when commercial or government payer pressures are applied.
Sanofi Well Experienced In Large Scale Acquisitions And Divestitures
Sanofi has been steadily reforming its business model to build up its brand pharmaceutical and advanced healthcare product operations. The plans for the potential sale or spinoff of the consumer health unit aligns with their ongoing strategy. These are deals Sanofi has orchestrated in the last ten years:
- 2018: Ablynx, a nano antibody biotech company, is acquired by Sanofi for $4.8 billion
- 2018: Bioverativ, a hemophilia drug developer, is bought by Sanofi for $11.6 billion
- 2018: Sanofi sells its generic drug unit Zentiva to private equity concern Advent International for $2.2 billion
- 2011: Sanofi acquires biotech leader Genzyme for $20 billion
Sanofi’s Partial Or Complete Consumer Unit Divestiture Options
Sanofi has been actively involved with fortifying the consumer health products business unit. In 2017 it offloaded its animal health unit to Boehringer Ingelheim in a swap deal for their consumer products division valued at $20 billion. A joint venture with another company would enable them to continue to collect revenue from its consumer healthcare brands while putting more focus on biotech, prescription drug and other advanced therapies ( it is also conceivable Sanofi could choose to sell the consumer health unit outright to another company). The advantages of a spinoff arrangement are Sanofi could partition the consumer healthcare unit away from their organization, benefit from the initial sale of shares and also choose to be a shareholder in the new organization.
Moving Forward, Sanofi Competitors, Suitors And Other Stakeholders Have Much To Speculate On
Sanofi is believed to be meeting with investment bankers plus other advisors and consultants to determine which option is best for them. No companies have emerged thus far as potential candidates for Sanofi to partner with or have expressed interest in buying the consumer unit outright. Through the deliberate or unintentional leaking of details about Sanofi’s possible intentions regarding the consumer healthcare products division, it alerts the marketplace it is interested in having conversations with qualified suitors or partners. It remains to be seen what Sanofi’s immediate or long term plans are if the consumer health product unit does not attract viable commercial interests via co-ownership, spinoff or complete purchase by another company.
Sanofi photo was taken by Christian Hartmann of Reuters ( Paris, France )
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