Sanofi Plans Spin-Off Of API Unit Into A European Company

Sanofi (PA:SASY) (NASDAQ:SNY) announced that it plans to spin-off its active pharmaceutical ingredients (API) business into a separate standalone European company. The new API company will combine Sanofi’s API commercial and development activities with six of its European API production sites located in Italy, Germany, Britain, France and Hungary. Active pharmaceutical ingredients or APIs are the chemicals or biologicals which are used in the composition and the production of any drug.

The new API company, to be headquartered in France, is expected to be the world's second largest API company with sales expected to be approximately €1 billion by 2022. Meanwhile, Sanofi will decide on whether the API company should be listed via an initial public offer (IPO) on Euronext Paris by 2022. Sanofi plans to hold a 30% stake in the new API company and also intends to become its customer.

In Europe, most of the pharmaceutical companies rely on companies in Asia, mainly in China, for supply of the APIs used in their drugs. Sanofi believes that the new company will ensure adequate supply of APIs in Europe and lower the need for sourcing API from China. With the deadly coronavirus outbreak ravaging China, Europe-based pharmaceutical firms are facing supply disruptions.

Sanofi’s shares have outperformed the industry in the past year. The stock has risen 20.5% in the said time frame compared with the industry’s increase of 8.8%.

Last week, Sanofi joined forces with Biomedical Advanced Research and Development Authority (BARDA), a division of the U.S. Department of Health and Human Services to quickly develop a vaccine for COVID-19, the disease caused by the novel coronavirus, also called 2019-nCoV. Sanofi said it will advance the development of the COVID-19 vaccine by leveraging work on a pre-clinical vaccine candidate for SARS (severe acute respiratory syndrome).

In the same week, J&J (NYSE:JNJ) also expanded its partnership with BARDA to accelerate development of potential treatments for COVID-19. J&J and BARDA will mobilize resources to screen potential compounds with promising antiviral activity against 2019-nCoV. Several other drugmakers are working on making vaccines or antivirals to help those infected with this deadly disease.

Earlier this month, Regeneron Pharmaceuticals (NASDAQ:REGN) also entered into an expanded agreement with HHS to develop a 2019-nCoV vaccine. Moderna and Inovio Pharmaceuticals have received grant from CEPI, a public-private nonprofit organization, to develop a similar vaccine. Moreover, Glaxo (NYSE:GSK) is making its established pandemic vaccine adjuvant platform technology accessible to CEPI to develop a 2019-nCoV vaccine.

Sanofi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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