Sanofi Plans Increased R&D Spending and Potential Spinoff of Consumer Healthcare Unit by Late 2024

Investors React Negatively to Sanofi’s R&D Spending Increase and Expected Earnings Fall Ahead of Proposed Spinoff; Consumer Health Unit Worth an Estimated 25 Billion Euros

• Sanofi plans to increase its R&D spending to build a better pipeline of future drugs, forecasting a fall in 2024 earnings at a low single-digit rate compared to 2023 levels before rebounding in 2025.
• The French pharmaceutical giant is also planning to spinoff its consumer health unit as early as late 2024 - the unit is valued at an estimated 25 billion euros.
• Sanofi's increase in R&D spending sparked a negative reaction among investors, causing shares to drop by 15% as there are concerns about the company's past performance on R&D investments.
• The planned spinoff follows similar moves by rival companies such as Johnson & Johnson, Pfizer, and GSK. However, there is skepticism from investors regarding the strategy, reflected in Sanofi's current trading multiple being below most of its competitors.
• Despite the reluctances from investors, Sanofi's core innovative drugs business improved significantly in recent years, enabling it to potentially forego the predictable cash flows from consumer products. This improvement, along with cost-saving initiatives, is expected to facilitate long-term growth.

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