Please ensure Javascript is enabled for purposes of website accessibility

Sanofi Plans to Spin Off Drug Ingredient Business

By Mark Prvulovic – Feb 24, 2020 at 6:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The resulting spinoff would become the world's second largest drug ingredient producer.

Sanofi (SNY -2.45%) announced on Monday that the company intends to spin off its drug ingredient manufacturing assets into a separate business. This new entity, which doesn't have a name yet, will employ over 3,100 employees and own six active pharmaceutical ingredients (API) factories in the UK, France, Germany, Italy, and Hungary.

The pharmaceutical giant went on to say that this new spinoff would become the second-largest API manufacturer in the world, with expected sales of around $1.1 billion in 2022. Sanofi would become a customer to this new API business while owning a 30% minority stake while the remaining 70% will be floated on the Paris stock exchange via an initial public offering (IPO).

Mutliple scientists working in a laboratory.

Image source: Getty Images.

Around 60% of the world's active pharmaceutical ingredients are produced either in China or India. Europe, on the other hand, has had a relative lack of pharmaceutical ingredients, which are crucial in developing new drugs.

"With this endeavor, this new entity would be agile as a standalone company, and able to unlock its growth potential, especially in capturing new third-party sales and all the opportunities of a market growing at a pace of 6% per year," said Philippe Luscan, executive vice president of global industrial affairs at Sanofi.

A potential drug ingredient shortage

The U.S. Food and Drug Administration warned that as many as 150 prescription drugs could face shortages if the coronavirus (COVID-19) outbreak in China gets worse. With the country being a major supplier of pharmaceutical ingredients to the U.S., it's possible that the medical product supply chain could face significant disruptions in the near future.

Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sanofi Stock Quote
Sanofi
SNY
$37.46 (-2.45%) $0.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.