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Outsourcing

Sanofi to create new firm from its drug-making facilities

Venture will combine six active pharmaceutical ingredient production sites in Europe

by Rick Mullin
February 25, 2020

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Credit: Sanofi
Sanofi plans to spin off its business of making the active ingredients for pharmaceuticals.

With the worldwide pharmaceutical supply chain on alert over the novel coronavirus that originated in China, the French drugmaker Sanofi says it will create a new company comprised of six of its European active pharmaceutical ingredient (API) production sites.

Sanofi plans an initial public offering for the firm on the Euronext Paris stock exchange by 2022. The new company will rank as the world’s second-largest API maker, with about $1.1 billion in annual sales by then, Sanofi says. The Swiss firm Lonza is generally considered the largest API producer.

Sanofi says the company will bolster European supply of APIs and “help in balancing the industry’s heavy reliance on API sourced from the Asian region.” It will include Sanofi sites in Brindisi, Italy; Frankfurt, Germany; Haverhill, England; St. Aubin les Elbeuf, France; Upjest, Hungary; and Vertolaye, France. It will employ 3,100.

“This new entity would help ensure a greater stability in supplying drugs to millions of patients in Europe and beyond,” Philippe Luscan, executive vice president of industrial affairs at Sanofi, says in a statement. “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.”

The planned move is the latest manufacturing reconfiguration by a pharmaceutical drug company. For years, drug makers have been selling unwanted API production facilities to outsourcing specialists and putting their focus on research and marketing.

Sanofi had been an exception to this trend. In 2008, the company created a group called Cepia to formally promote its production network to third parties. But Sanofi’s commitment to manufacturing wavered. In 2017, the firm revealed it had canceled a plan to divest the manufacturing business.

Jim Bruno, president of the consulting firm Chemical and Pharmaceutical Solutions, isn’t surprised by the IPO plan. “I think you’re going to see more of this happening with drug companies trying to split manufacturing off and make separate entities,” he says. “It’s not really their business, and with all the outsourcing going on, companies say they really don’t need these assets anymore.”

Sanofi says it plans to hold a 30% stake in the new company and remain a customer.

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