Sanofi To Divest European Generic Unit, Streamline Business

Sanofi (PA:SASY) (NYSE:SNY) has entered into exclusive negotiations with private equity firm, Advent International to sell its European generic unit, Zentiva. Advent has offered a binding and fully financed offer to buy Zentiva for $2.4 billion (1.9 billion euros).

The potential divesture of Zentiva is part of Sanofi’s 2020 strategic roadmap to streamline its business. Sanofi remains committed to its Generics business in other parts of the world and will focus on developing the same in the emerging markets.

The transaction is expected to close by the end of this year, subject to finalizing of definitive agreements and approval from relevant regulatory authorities.

Shares of Sanofi have lost 5.4% so far this year compared with the industry’s 2.7% decrease.

Sanofi is shifting its focus toward businesses with higher potential for growth like rare disease drugs and biotechnology. In 2018 so far, the company has spent almost $16 billion in acquiring assets in these segments, which include Bioverativ Inc. for hemophilia treatments and Ablynx NV for a rare bleeding disorder candidate.

Sanofi swapped its animal health business with Boehringer Ingelheim’s consumer healthcare (“CHC”) business in early 2017, building a strong and innovative CHC Global Business Unit.

Per an article posted on Bloomberg.com, generics is an expanding market in Europe with several patent expirations of branded drugs in the cards. However, competition and pricing pressure are also increasing along with governments’ effort to cut healthcare cost. Sanofi’s decision to sell Zentiva is prudent in this tough market.

Investors expect Sanofi to invest the proceeds from this sale in acquiring other biotechs.

However, Sanofi is not the only company re-prioritizing and consolidating its products and pipeline. Novartis AG (NYSE:NVS) acquired US-based AveXis Inc. to add a rare disease candidate to its pipeline. GlaxoSmithKline (NYSE:GSK) has announced that it will transfer its rare disease gene therapy portfolio to private biotech, Orchard Therapeutics. Both the deals happened last week. Earlier this week, Shire (NASDAQ:SHPG) announced the sale of its Oncology business to France-based company, Servier, to focus on rare disease leadership.

Sanofi Price

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Sanofi 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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