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Sanofi Unveils Restructuring Plans, Prunes Business Units - Analyst Blog

Zacks Equity Research
Updated

Sanofi’s SNY newly appointed Chief Executive Officer Olivier Brandicourt, after just three months of being at the helm, has made a big move by declaring plans to reorganize its business. Brandicourt intends to restructure the seven existing business units into five global business units. Along with its existing vaccines unit – Sanofi Pasteur – and the animal health business – Merial, the company plans to create three new global business units, namely, General Medicines & Emerging Markets, Specialty Care and Diabetes & Cardiovascular.

We note that the company was so far centered around seven growth platforms – Diabetes, Vaccines, Consumer Healthcare, Genzyme, Animal Health, Other Innovative Products and Emerging Markets.

Sanofi's first unit will combine the company’s established products, generics, consumer healthcare and all pharmaceutical businesses in Emerging Markets under the name, General Medicines & Emerging Markets Global Business Unit.

The restructuring puts the company’s rare diseases, multiple sclerosis, oncology and immunology medicines including the two experimental biologics, sarilumab and dupilumab, under the Specialty Care Global Business unit, to be called Sanofi Genzyme.

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In addition, the diabetes as well as cardiovascular segment including the company’s potential multi-billion dollar cholesterol management candidate, Praluent (alirocumab), will be clubbed into one single unit called the Diabetes & Cardiovascular Global Business unit.

While Pascale Witz, who currently serves as the Executive Vice President (EVP), for global divisions and strategic development, will head the Diabetes & Cardiovascular unit, the current EVP of global commercial operations, Peter Guenter, will take on the General Medicines & Emerging Markets unit.

The Sanofi Pasteur and Merial business units will remain untouched and will continue to be run by Olivier Charmei and Carsten Hellmann, respectively.

Sanofi informed that while the composition of the Executive Committee remains unaffected, the new structure comes into effect from Jan 2016. Additionally, all corporate functions will be globalized in order to better serve the business units as the company had done with Research and Development and Industrial Affairs.

Our Take

We are positive on Sanofi’s restructuring plans focused on simplifying the structure of the company and driving long-term growth. Considering that several products in the company’s portfolio have gone off patent, putting pressure on its top line and its diabetes segment facing increasing pressure at the payor level, the company needs to speed up the development of its pipeline.

Sanofi’s target of launching up to six new medicines in 2015 and approximately one new medicine every six months between 2016 and 2018 is encouraging. Important late-stage candidates in the company’s pipeline include Praluent, sarilumab (rheumatoid arthritis) and dupilumab (atopic dermatitis, asthma and chronic sinusitis with nasal polyps) among others. We note that all three are being developed in collaboration with Regeneron Pharmaceuticals, Inc. REGN.

Meanwhile, a key regulatory event is coming up with the FDA expected to respond on Praluent by Jul 24. With an FDA advisory panel voting in favor of clearing Praluent, chances of gaining approval look high. Approval would be a huge boost for the company.

Sanofi currently carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks in the health care sector are AMAG Pharmaceuticals, Inc. AMAG and Eleven Biotherapeutics, Inc. EBIO. Both hold a Zacks Rank #1 (Strong Buy).

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