Sanofi loses $21B in market value after dropping 2025 profit target

Sanofi stock plunged, wiping 20 billion euros ($21 billion) off its market value, after it abandoned its 2025 profit target under a plan to list its consumer healthcare business to focus on its core innovative drugs business, Report informs referring to Reuters.

"Sanofi is reviewing potential separation scenarios, but believes that the most likely path would be through a capital markets transaction, by creating a listed entity headquartered in France," the French drugmaker said in a statement.

Under a push to spend more on immunology and inflammation drug development, the company abandoned a target for a 32% operating profit margin for 2025 to focus on "long-term profitability".

The news sent its shares down 15.5% to their lowest level in more than eight months, with the market reaction increasing pressure on CEO Paul Hudson, who joined four years ago with a mandate to turn the company around.

Sanofi shares trade at a 12-month forward price-to-earnings ratio of 11, a discount to AstraZeneca's 16 and global pharma index of 17, according to LSEG data.

Terence McManus, fund manager at Switzerland's Bellevue Asset Management, told Reuters the cuts to earnings ambitions over the next two years were "quite substantial".

Sanofi expects 2024 adjusted earnings per share (EPS) to decline by a "low-single-digit" percentage, citing also a higher tax on top of a "significant" but unspecified increased in development expenditures. EPS would see a strong rebound in 2025 but not enough to sustain the previous margin target.