Sanofi’s Sale of $8 Billion Drugs Portfolio Said at a Standstill

Sanofi’s plan to sell or find partners for an $7.9 billion portfolio of established drugs is at a standstill amid disagreements among top managers as to how to move forward, according to people familiar with the matter.

The assets have not been carved out into a separate business unit and management hasn’t decided what to keep or let go, the people said, asking not to be identified as the deliberations aren’t public. A transaction is unlikely to be agreed on soon, they said.

Paris-based Sanofi has no financial details to present to parties interested in the European portfolio of 200 older, off-patent drugs, said two of the people.

The project, involving products with an enterprise value of 6.3 billion euros ($7.9 billion) and about 2.1 billion euros in estimated sales this year, was nicknamed Phoenix, according to an internal Sanofi document dated May 6 that unions made public in July. A carveout of the assets, involving four factories, two distribution centers and hundreds of employees, would be complex and expensive, making a transaction difficult, the people said.

Large pharmaceutical companies are seeking to sell older drugs to invest in developing newer, more in-demand treatments. GlaxoSmithKline Plc is among other drugmakers that are reviewing their portfolios of established drugs. Andrew Witty, chief executive officer of London-based Glaxo, said July 23 there is “significant” interest in some of its established brands from private-equity firms and mid-tier pharmaceutical companies. The Glaxo divestment is on track to complete before year-end, one person familiar with the plan said.

Private-Equity Interest

The Sanofi portfolio has drawn interest from private-equity firms KKR & Co., Blackstone Group LP and TPG Capital Management LP, Bloomberg News reported in July, citing people with knowledge of the matter. The French company held talks with Mylan Inc., Abbott Laboratories and firms such as Warburg Pincus LLC about a possible sale of the portfolio, according to the internal Sanofi document. It has also been considering possible partnerships for the assets, the document shows.

The French company hasn’t been holding substantial talks with prospective buyers in weeks, one of the people said. A specific plan to sell the assets or form a partnership was never presented to Sanofi’s board of directors, one person said.

A spokesman for Sanofi declined to comment.

While Sanofi CEO Chris Viehbacher may have trouble completing a transaction for the entire portfolio, he is keen to find a solution and may end up selling some assets separately, one person said.

Mylan said in July it was buying Abbott’s generic drugs business in established markets to expand its presence in Europe, Japan and Canada. Mylan has considered additional acquisitions and has looked at Sanofi’s assets, two people familiar with situation said in July.

Though sales of drugs often drop once patents have expired, marketing costs are also low, meaning older portfolios can provide strong cash flow for their owners.

Private-equity firms interested in the Sanofi assets would face the challenge of developing distribution methods for the drugs, one person said in July. Sanofi could continue to produce and distribute the drugs for a fee as part of the deal, the person said at the time.

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