Shares of French drugmaker Sanofi fell as much as 16% on Friday after hiking its research-and-development expense guidance as well as its expectations for taxes.
The company unveiled what it called the “next chapter of play to win strategy,” and investors were dismayed. What it calls “business EPS” is forecast to fall by low single digits next year, hurt both by rising R&D costs as well as changes to global tax rules that will take its rate to 21% next year from 19%.
Analysts had forecast a 6% rise in next year’s business EPS.
Sanofi
SAN,
SNY,
said it will no longer target a 32% profit margin for 2025, and will separate out its consumer health business, likely by a spin off in the fourth quarter of 2024.
“In this new chapter of our strategy, we are deepening our investment in R&D, taking steps toward becoming a pure play biopharma company, and further optimizing our cost structure. This will help us accelerate innovation and strengthen our growth drivers, while ensuring long-term profitability and enhancing shareholder value,” said CEO Paul Hudson.
Third-quarter results weren’t too far from consensus. Sanofi’s adjusted earnings per share fell 11.5% to €2.55, compared to analyst estimates of €2.61, as revenue fell by 4.1% to €11.96 billion ($12.63 billion), vs. the consensus of €12.1 billion.
“Our early take on these strategic actions is that the separation of [consumer health] is the right thing to do strategically, but we are expecting a negative reaction in shares today on the 2024 and 2025 numbers cuts,” said Barclays analysts led by Emily Field.
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