Why Sanofi is Not Exiting Nigeria, Changing its Global Business Model
By Sunkanmi Vaughan
The reason is unusual and too technical for most people to understand, including most journalists who cover business and political news.
As one with an understanding of that highly technical professional sector, I will break down the technicality in the Sanofi strategy for easy understanding and explain why the misunderstanding or misreporting occurred.
In the business world covered by economy/business-reporting journalists, everything boils down to profit. It can be a real struggle indeed for the journalists to understand the priority of Sanofi. If you add the unpatriotic politics of disinformation, then you have a bigger problem to convince those who yearn for only bad news about our country Nigeria.
Already, there are twists to the new Sanofi model and it is necessary to understand why it has absolutely nothing to do with Nigeria or any other country but Sanofi’s medium and long-term strategy to sacrifice profit for now and focus on research and development of new drug molecules.
Sanofi S.A. is a French multinational pharmaceutical and healthcare company headquartered in Paris, France. Sanofi is present in about 100 countries and it’s listed on EURONEXT: SAN and NASDAQ: SNY.
Sanofi CEO defends company’s move to abandon profit guidance and boost research
Sanofi CEO Paul Hudson on Wednesday, November 8, 2023, defended his company’s recent moves to abandon future profit guidance and up its investment in its research programs, arguing that the dramatically negative market response didn’t reflect the potential rewards that could stem from the plan.
“Would I have liked the stock market reaction to be more generous? Of course,” Hudson said at a Financial Times event in London. “But this is a long-term game, and if you’re trying to deliver long-term value, you try not to make too many short-term decisions.”
Sanofi unveiled its R&D plans on October 27, 2023, as it announced its third-quarter performance and said that it was spinning out its consumer health division.
As the company said it was going to spend more money on research, it also withdrew earnings outlooks for 2025. Company executives have argued that this was the moment — when Sanofi has a strong pipeline and isn’t facing patent expirations for years — to increase its R&D resources, even at the expense of short-term profits.
What is Research and Development (R& D) in the Pharmaceutical industry?
Pharmaceutical Research and Development (R&D) is a critical process of discovering new active pharmaceutical molecules that cater to human diseases.
The Institute of Medicine, 2007, refers to Pharmaceutical R&D as the pharmaceutical research and development of new medicines.
The process begins with understanding the disease and selecting a target (usually a receptor site on a cell) that can potentially be affected by a drug molecule.
The process usually takes a long time to complete, from discovery and isolation of the molecule of the Active Pharmaceutical Ingredient (API), the conduct of clinical trial phases, filing for approval and getting to a successful approval stage, the release of the patented pharmaceutical product to the market can cumulatively take between10 to 15 years.
The process is very expensive, the London School of Hygiene & Tropical Medicine estimated that the median cost of bringing a new drug to market is $985 million, and the average cost is $1.3 billion. It is mostly big pharmas like Sanofi that play in the pharmaceutical R&D field, and it’s usually a huge drain on their human and financial resources.
Pharmaceutical R&D is equally very lucrative when the drug produced from the process becomes a phenomenal commercial success and remarkably improves the healthcare of humanity. The pharmaceutical company is incentivised with exclusive right to manufacture and market the new medicine as the innovator brand owner for up to 10 years like Pfizer’s Sildenafil citrate of Viagra popularly used for treating erectile dysfunction in men.
Pharma R&D involves multidisciplinary teams across the spectrum of healthcare and volunteers to participate in the trials. If during the approval phase of the drug, there’s an unintended adverse reaction or life-threatening side effect seen in a larger population size, the approval may be suspended or withdrawn completely. All the resources running into billions of dollars may be lost! High risk but high rewards for success too.
The change in the model adopted by Sanofi has nothing to do with Nigeria or our local economic policies. It’s for strategic reasons that Sanofi reallocated its resources towards the long-term priority of discovering new drugs.
Sunkanmi Vaughan is an author and a Lagos-based Pharmacist