Sanofi ingredients spin-out EuroAPI rises on market debut

Sanofi has completed the spin-out of its pharma ingredients business EuroAPI, with shares in the new company rising more than 3% on its starting price of €12 in early trading on the Euronext exchange this morning in a declining market.

The separation makes EuroAPI the world's single largest producer of small-molecule active pharmaceutical ingredients (APIs) – and the second-largest API producer overall after Israel's Teva – with a market valuation of more than $1.2 billion.

It has around 200 APIs in its portfolio, and also provides contract development and manufacturing services for more than 500 other pharma companies.

The spinoff was first announced in 2020, as Sanofi looked to pivot its resources to the development of medicines for oncology, immunology and rare diseases and away from the lower-margin ingredients business.

At the time, there were concerns about the reliance of European drug producers on ingredient producers in countries like India and China, particularly as supply chains became disrupted by COVID-19, and those concerns have only been exacerbated by Russia's attack on Ukraine.

By operating independently, EuroAPI plans to increase its sales to third parties and to expand its partnerships with other pharma companies in order to take advantage of new growth opportunities. Sanofi has retained a roughly 30% stake.

The company targets an API market valued at €72 billion in 2019 and is expected to grow at an average rate of 6% to 7% per year until 2024, as well as an outsourcing category that has been forecast to grow at 7%-8% per year over the same period.

It operates six European API production sites at Brindisi in Italy, Frankfurt in Germany, Haverhill in the UK), St Aubin les Elbeuf and Vertolaye in France, and Újpest in Hungary, and employs around 3,350 workers.

"We are fully confident in our ability to unlock further value for all our stakeholders," said chief executive Karl Rotthier, as he rang the Euronext bell on what is his birthday.

The company "looks forward to writing this new chapter alongside Sanofi, which will remain a long-term strategic partner, BPI France and L'Oréal, and to serve our clients in Europe and globally," he added.