Sanofi Goes The Rival Way: Plans Separation Of Consumer Healthcare Unit

Sanofi SA SNY plans to spin off its consumer healthcare business as the French pharmaceutical company outlined its strategic update to increase investment in its drug-development pipeline and cut costs.

Sanofi said the spinoff would allow it to increase its focus on innovative medicines and vaccines.

Also Read: Pfizer, Sanofi's Respiratory Syncytial Virus Products Faces Insurance And Logistical Hurdles To Protect Infants.

The separation is expected to occur by Q4 2024 by creating a publicly listed entity headquartered in France.

The consumer-healthcare business employs some 11,000 people.

 "Sanofi is reviewing potential separation scenarios but believes that the most likely path would be through a capital markets transaction by creating a listed entity headquartered in France," Sanofi said in a statement.

Most recently, rival pharma giants GSK Plc GSK and Johnson & Johnson JNJ split their consumer healthcare units Haleon Plc HLN and Kenvue Inc KVUE, respectively.

GSK raised £885.6 million (around $1.08 billion) from selling some of its shares in Haleon, reducing its stake to around 7.4%.

Johnson & Johnson unveiled 2023 projections, predicting double-digit profit growth after its recent spinoff of consumer health company Kenvue.

Given Sanofi's decision to support the full realization of its pipeline's long-term potential, its continued investment around the new launches, and pricing headwinds in General Medicines, the company will no longer target a 32% operating income margin for 2025 while maintaining a focus on long-term profitability.

Sanofi said it is targeting cost savings of up to €2 billion from 2024 until 2025-end, of which most will be reallocated to fund innovation and growth.

Sanofi reported a 10.4% decline in Q3 business operating income of €4.03 billion. Business EPS of €2.55, down 11.5% on a reported basis and 1% at CER. 

Revenues fell to €11.96 billion, down 4.1% and up 3.2% at constant currency.

Consumer healthcare sales increased 4.6% to €1.25 billion.

Outlook: Sanofi reiterates its FY23 Business EPS guidance to grow mid-single-digit at CER. 

The negative currency impact on 2023 earnings is expected to be 6%-7%.

The outlook includes about €400 million of expected one-off COVID-19 vaccine revenues in Q4.

Sanofi expects 2024 adjusted earnings per share to decline by a "low-single-digit" percentage, citing increased spending on research and development and a higher tax rate.

Price Action: SNY shares are down 18.10% at $43.69 during the premarket session on the last check Friday.