SANOFI CONSIDERING $30 BILLION SPINOFF OF CONSUMER PRODUCTS DIVISION

by John G. Baresky on 11/21/19

SANOFI IS A GLOBAL LEADER IN PRESCRIPTION DRUG AND CONSUMER HEALTHCARE PRODUCTS

Global pharmaceutical leader Sanofi S.A. ( NASDAQ: SNY ) is reportedly weighing options to make significant changes to its commercial organization and its consumer 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 products business unit as a separate spinoff or enjoin it through a partnership with another company.

SANOFI CONSUMER PRODUCTS DIVISION

Sanofi’s consumer products division is sizable; its annual sales are just over $5 billion. 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 dollar annual sales and brand franchises' worth along with associated assets and liabilities, it is estimated Sanofi’s consumer business unit could be valued as high as just over $30 billion as a standalone company. Spinning the consumer 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. 

SANOFI 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'S CLINICAL AND COMMERCIAL GLOBAL MARKET PRESENCE REMAINS FORMIDABLE WITHOUT CONSUMER BUSINESS UNIT

Whether Sanofi spins off or enters a partnership with its consumer products division, it will have plenty of options to reinvest income generated from it. Sanofi’s non-consumer, 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 MULTI-BILLION ACQUISITIONS AND SALES 

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:

• Baxter acquires Sanofi's Biosurgery Seprafilm product franchise for $350 million cash in 2019
• 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 may use the proceeds generated from the offloading of the consumer products unit to pay off debt, invest more in existing pipelines or conduct additional acquisitions. Sanofi's market capitalization is roughly $117 billion and its debt load is just under $28 billion; jettisoning some of this burden would brighten its balance sheet.

SANOFI'S OPTIONS:

Sanofi has been actively involved with fortifying the consumer 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 brands while putting more focus on biotech, prescription drug and other advanced therapies ( it is also conceivable Sanofi could choose to sell the consumer unit outright to another company). The advantages of a spinoff arrangement are Sanofi could partition the consumer unit away from their organization, benefit from the initial sale of shares and also choose to be a shareholder in the new organization. 

PRESENT STATUS

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. 

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