Concall Notes – May 2023
Demerger of Consumer Healthcare Business
- Sanofi India Limited approved the decision to demerge the consumer healthcare business from the pharma business.
- Sanofi has been dedicating structures for their consumer healthcare portfolio since January 2020.
- The demerged entity, Sanofi Consumer Healthcare, is proposed to be listed on both the BSE and the NSE.
- The manufacturing unit in Goa will remain with the general medicines business.
- The demerger is expected to unlock significant value creation for shareholders by providing more clarity for the CHC business to be properly evaluated and unlocking value for shareholders.
- GenMed will be able to focus on its key growth drivers, while CHC will take off as a fast-moving consumer healthcare organization with the proper capabilities.
- Sanofi India Limited and Sanofi Consumer Healthcare Limited will largely be separate entities, with no common services or transactions between them, except for contract manufacturing arrangements in Goa.
Consumer Healthcare Business
- The consumer healthcare market is estimated to be worth $158 billion globally, projected to be over $200 billion by 2027.
- India is the sixth-ranked market for consumer healthcare globally and a key market for Sanofi’s consumer healthcare business.
- CHC business is positioning to create a fast-moving consumer healthcare company by enhancing the portfolio innovation, increasing market penetration, and shaping the modern OTC regulation.
- Sanofi aims to build a consumer-centric mindset by deepening affinity with consumers through research, enhancing marketing efforts, and building love brands in India.
- The company plans to become a best-in-class digital organization with strong e-commerce capabilities, stepping up e-commerce and building a world-class digital marketing capability.
- Sanofi is evaluating opportunities for inorganic growth and exploring direct-to-consumer opportunities in the consumer healthcare segment.
- Consumer healthcare has seen a growth rate of around 8-8.5%, with a good portion of the growth coming from price increases due to being largely out of price control.
- The margin profile for consumer healthcare is expected to be 8-10% higher than the blended margins of the consolidated entity.
- The working capital profile of CHC is generally good, but CHC would be slightly better.
General Medicines Business
- General medicines business will focus on strengthening the strategic therapeutic area, accelerating innovation, and evolving its go-to-market strategy.
- Sanofi is focusing on the diabetes care market in India, which has a large unmet demand and prevalence, with plans to increase the sales force, reposition brands, and bring new products to the market.
- Sanofi plans to explore global brands that are not present in the Indian portfolio yet and bring local innovation to the existing portfolio by working with local manufacturers.
Q1 Results and Guidance
- Sanofi India Limited reported strong Q1 2023 results, with operating profit growth at 21%.
- The Q1 results were strong across the board, with growth well-distributed across the portfolio.
- Q1 margins were driven by growth in both the domestic and export segments and the India for India strategy implementation, which started in 2022.
- Sanofi cannot provide guidance on future EBITDA margins.
- The impact of revised pricing on Lantus, Cardace, and Frisium will mostly be seen from Q2 onwards.
- Operating profit percentage to sales will remain constant despite the correction in Lantus prices.
Other Points
- Sanofi has a long history in India and exports to over 28 countries worldwide, with a strong CSR and ESG focus.
- Sanofi India launched its India for India growth platform in Q3 2022, focusing on five growth pillars, including diabetes, CHC, innovation, new ways in terms of go-to-market, and partnerships.
- Sanofi is becoming more customer-centric and patient-centric by organizing itself around a patient and healthcare professional perspective, creating categories in business units that cater more fully to healthcare professionals that deal with a certain disease, and engaging with trade customers on a portfolio basis.
- Enterogermina is not a Sanofi India product and will not be a part of Sanofi Consumer Healthcare.
- The company’s integrated annual report for FY22 has been received by all participants.
- The 67th annual general meeting will be held through audio-visual means, where shareholders can interact with the company.
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