Sanofi is a French multinational pharmaceutical company that has recently made headlines for its corporate bond deal, valued at €8bn, the largest corporate bond deal of 2018 thus far, and of Sanofi’s previous capital raisings.
This raises questions regarding Sanofi’s business strategy as a pharmaceutical giant. The six-tranche deal is intended to fund the company’s 2017 acquisitions of Bioverativ and Ablynx. Bioverativ is an American biotechnology company specialising in the treatment of hemophilia, for which Sanofi paid a whopping $11.6bn. In addition, Sanofi paid $4.8bn for Ablynx, a Belgian biopharmaceutical company that focuses on developing nanobodies. Investors were not hesitant in investing in Sanofi; as a result, the bond deal was a success and will successfully fund these acquisitions. However, there are reasons to be hesitant to invest in a pharmaceutical giant that spends more money on its acquisitions than its own R&D.
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When looking at Sanofi’s 2017 R&D expenditure, the company invested $6.78bn in its own research division. This includes the autoimmune, cardiovascular, infectious disease and oncology teams, among others throughout the company. However, with stagnant research, the company is expanding through acquisition, and transitioning through technology acquisition into markets where it has little expertise. Investors view this to be a low-risk investment, but Sanofi’s business success will hinge on the success of products with which it has little expertise.
For instance, Sanofi’s acquisition of Ablynx was made with the aim of becoming a leader in treating rare blood diseases with Ablynx’s successful drug, caplacizumab. However, recently, Ablynx’s anti-IL-6R nanobody, vobarilizumab, failed in a Phase II dosing study. This has directly impacted Sanofi’s value. As Sanofi begins to expand into new areas of expertise to diversify its market presence, the company needs to pay attention to its own R&D team. Without its core specialty, Sanofi will end up similar to Johnson & Johnson, forced to sell revenue-driving businesses to fund new acquisitions.
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