Sources Say Sanofi’s European Generics Business Sale May Be Delayed or Abandoned

March 2, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Paris-based Sanofi ’s plan to unload its European generics business may take longer than originally thought, according to unnamed inside sources.

In November 2015, Olivier Brandicourt, Sanofi’s chief executive officer, laid out the company’s new strategy, which included spinning off its animal health unit, Merial, and its European generics business. In mid-December, Sanofi and Germany-based Boehringer Ingelheim announced they had plans to exchange business units. The intention was for Sanofi to swap Merial with Boehringer Ingelheim’s consumer healthcare (CHC) business. Boehringer Ingelheim’s CHC China business would not be part of the deal.

But now sources are indicating that the European generics deal may not occur until later this year or even early 2017. Originally, it was planned for this quarter. The sources also told BloombergBusiness that the deal may not occur at all.

“Geographic synergies are limited and market complexity is increasing,” Sanofi stated in November, referring to the European generics operations. In 2015, the EU generics business was expected to bring in about 1 billion euros. Worldwide, Sanofi’s generics generated about 1.92 billion euros.

Sanofi’s generics unit is Zentiva, and includes generics of Plavix and Aprovel, among many others. It sells products in 50 markets, with a strong presence in the Czech Republic, Romania and Turkey.

Sanofi has had a longstanding relationship selling vaccines in Europe with Merck & Co. , but those revenues are dropping and as Brandicourt reshuffles the deck, there are rumors that this might get cut as well. Sanofi Pasteur MSD, which generated about $330 million in the first six months of 2015, supplies about half of Europe’s flu vaccines, in addition to shingles vaccines, and Gardicil, a vaccine for cervical cancer. It is currently rolling out a vaccine against dengue fever, and working on a vaccine for clostridium difficile.

Earlier this week, there was a focus on the changing jobs situation with Sanofi. The company indicated it was shifting employees from its Sanofi Genzyme facility in Framingham, Mass. to a new 53,879-square-foot space. On Feb. 1, Sanofi executives met with French union representatives to discuss restructuring and layoffs. About 296 research and development jobs that were expected to be filled in France were eliminated. Another 100 corporate jobs in France would be cut, and another 155 positions in French commercial operations were eliminated.

It recently laid off about 36 research-and-development employees in Massachusetts.

However, given that the company employs 110,000 people worldwide, a few hundred job cuts seems fairly minor, particularly in light of Brandicourt’s plan to cut $1.63 billion in costs over the next five years.

Sanofi and Brandicourt have good reasons to look at efficiencies. According to Bloomberg, Sanofi ranks nine out of ten on sales per employee in the 10 largest pharma companies. Chicago-based AbbVie tops the list, with nearly $800 million in sales per 1,000 employees. Pfizer ranks seconds, with about $640 million per 1,000 employees. Sanofi reports about $400 million per 1,000 employees.

And while discussions of a Merial spinoff and generics swap are ongoing, there is a lot of speculation that Sanofi will engage in some acquisition-and-merger activity this year. The company recently appointed Alban de La Sabliere to head its mergers and acquisitions area. He formerly worked as a banker for Morgan Stanley.

Analysts have speculated that potential targets might include BioMarin Pharmaceuticals , with a market cap of about $13 billion, Ionis Pharmaceuticals , with a market cap of $4 billion, and Ultragenyx , which has a market cap of $2.5 billion.