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Private Equity Firms Circle Sanofi's Consumer Health Business Amid Potential Spinoff

In October 2023, Sanofi SA (NASDAQ:SNY) announced its plans to spin off its consumer healthcare business as the French pharmaceutical company outlined its strategic update to increase investment in its drug-development pipeline and cut costs.

Sanofi said the spinoff would allow it to increase its focus on innovative medicines and vaccines.

Sanofi's consumer health unit boasts a portfolio that includes popular over-the-counter products like Phytoxil cough syrups, Icy Hot pain relief gels, and Dulcolax laxative tablets.

According to a Bloomberg report, two private equity firms, Clayton Dubilier & Rice and PAI Partners, made separate bids for Sanofi's consumer health division.

The update pushes the European pharma giant closer to one of the largest European deals this year, which could value the unit at 15 billion euros ($16.8 billion) or more, the Bloomberg report added.

The separation is expected to occur by Q4 2024 by creating a publicly listed entity headquartered in France.

In July, Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) said they were preparing to arrange more than $6.5 billion (6 billion euros) in debt financing for potential buyers interested in acquiring Sanofi's consumer health division.

The move highlighted banks' interest in supporting leveraged buyouts through pre-arranged financing.

Sanofi may opt for a spinoff of its consumer health business if the offers aren't appealing, Bloomberg noted, citing sources. A company spokesperson told Bloomberg that Sanofi is evaluating potential separation options, with the earliest possible transaction happening in the fourth quarter of this year, and noted that preparations are progressing as planned.

In November 2023, Sanofi reportedly initiated talks with Rothschild & Co. To explore the possibility of spinning off its consumer health division, which could potentially value the business at over $20 billion.

Rival pharma giants GSK Plc (NYSE:GSK) and Johnson & Johnson (NYSE:JNJ) split their consumer healthcare units Haleon Plc (NYSE:HLN) and Kenvue Inc (NYSE:KVUE), respectively.

Price Action: SNY stock closed at $57.62 on Tuesday.

Sanofi's Promising Portfolio Drives Buy Rating Amid MS, Cancer Breakthroughs, And Vaccine Expansion

Analyst Eric Le Berrigaud from Stifel Nicolaus maintained a Buy rating on Sanofi (SNYNF – Research Report) and increased the price target to €123.00 from €111.00.

Eric Le Berrigaud's rating is based on a variety of promising developments within Sanofi's portfolio, particularly in the field of multiple sclerosis (MS) and cancer treatment. The breakthrough data from the HERCULES trial showcased tolebrutinib's potential in slowing disability progression in patients with non-relapsing secondary progressive MS, a condition with high unmet medical needs, indicating a substantial market opportunity that could surpass $4 billion in peak sales. Additionally, the FDA's approval of Sarclisa for the treatment of transplant-ineligible patients with multiple myeloma, in combination with standard-of-care therapies, could grant Sanofi a significant competitive edge and a first-mover advantage, potentially leading to peak sales nearing $1.5 billion.Moreover, Le Berrigaud's confidence is bolstered by the recent positive developments, including the approval of a second manufacturing line for the vaccine Beyfortus in the US, allowing Sanofi to target the entire US birth cohort. With these advancements, Le Berrigaud has adjusted his forecasts, resulting in an increased price target for Sanofi's stock. The anticipation of further catalysts, such as the potential approval of Dupixent for COPD, and the upcoming data on Opella, further reinforces the attractiveness of Sanofi's stock. These cumulative factors contribute to a stronger investment thesis and justify maintaining a Buy rating on the company.

In another report released yesterday, Barclays also maintained a Buy rating on the stock with a €120.00 price target.

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Sanofi (SNYNF) Company Description:

Sanofi engages in the research, production and distribution of pharmaceutical products. It operates through the following business segments: Pharmaceuticals, Consumer Healthcare, and Human Vaccines. The Pharmaceuticals segment comprises the commercial operations of the following global franchises: specialty care, diabetes & cardiovascular, established prescription products and generics, together with research, development and production activities. This segment also includes all associates whose activities are related to pharmaceuticals. The Consumer Healthcare segment comprises, for all geographical territories, the commercial operations for its Consumer Healthcare products, together with research, development and production activities dedicated to those products. The Vaccines segment comprises, for all geographical territories, the commercial operations of Sanofi Pasteur, together with research, development and production activities dedicated to vaccines. The company was founded in 1973 and is headquartered in Paris, France.

Sanofi's Market Advantage And Growth Trajectory: A Strong Buy Recommendation

Bank of America Securities analyst Graham Parry maintained a Buy rating on Sanofi (SNYNF – Research Report) today and set a price target of €122.00.

Graham Parry has given his Buy rating due to a combination of factors including the underwhelming efficacy of competitor Amgen's rocatinlimab compared to Sanofi's Dupixent and upcoming amlitelimab, as well as Sanofi's strong growth prospects. The data released by Amgen indicated that rocatinlimab's efficacy was less impressive when compared to results from Sanofi's Dupixent, with lower placebo-adjusted EASI-75 scores and overall performance. Furthermore, the potential side effects of rocatinlimab suggest a tolerability advantage for Sanofi's products. Parry's analysis suggests that rocatinlimab will likely be used post-Dupixent, leaving a favorable position for amlitelimab in the market.

Additionally, Parry believes that Sanofi's stock is currently undervalued, considering the company's growth trajectory and pipeline prospects. The expected compound annual growth rate (CAGR) in earnings per share (EPS) from 2025 to 2028 is driven by Dupixent and other upcoming product launches, with no major loss of exclusivity anticipated until 2031 or later. Sanofi's pipeline includes several potentially impactful products such as amlitelimab for atopic dermatitis, positioning the company for continued expansion. Moreover, upcoming catalysts such as product launches and strategic corporate actions could further drive Sanofi's valuation, supporting the Buy rating.

Parry covers the Healthcare sector, focusing on stocks such as Sanofi, GlaxoSmithKline, and Novartis. According to TipRanks, Parry has an average return of 3.6% and a 62.37% success rate on recommended stocks.

In another report released yesterday, Stifel Nicolaus also maintained a Buy rating on the stock with a €123.00 price target.

Sanofi (SNYNF) Company Description:

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