Sanofi (SNY) shareholders should be forewarned that they are about to go on a rollercoaster ride. That ride, however, should end with Sanofi riding a streak of success. It may just take some time to get there.
Sanofi has plans to lay off 112 workers in its Kansas City manufacturing plant by July 1 of this year. This is the first of other layoffs scheduled for December 31, June 30, 2013, and December 31, 2013, in a bid to close the plant completely by 2016. In short, Sanofi has plans to relieve 337 people of their jobs come 2013.
The reason given by Sanofi to close the 36-year-old plant is that the volume of products being manufactured in the plant has been on a decline since 2009. Hence, it does not make much business sense to keep the plant open. However, a representative for Sanofi, Jack Cox, has said that the affected workers have been offered severance pay, outplacement services and health benefits.
It is still too early to state what effect the development will have on the stock, but it is safe to assume that given the negative publicity that usually accompanies layoffs, the outcries will be great. However, investors would surely benefit from the move, as it will result in a reduction in the overhead costs. In addition, if the severance package that is being offered to the workers is good enough, there is not likely to be much outcry about the move.
In other news, Yuan Li, a Chinese national who was formerly a research chemist with Sanofi, was sentenced to 18 months in prison for the theft of company trade secrets and trying to sell them through the U.S unit of a Chinese company. News has it that Li had pleaded guilty in January to the charges, however, she was sentenced a few days ago, and her sentence includes a $131,000 restitution, after which she will be deported to China.
The good news for Sanofi is that the plan was discovered before she was able to get a willing buyer for her "goods". However, this fiasco is a reflection of the security system that is in place in Sanofi, and without much ado, it can be said that its security system is ineffective.
For one, Li was able to transfer information about the drug compounds by transferring them to her home computer by email or using a USB thumb drive. The only thing that got her apprehended was that her plan on how to sell the secrets was ill-conceived from the onset. Unfortunately, a more apt thief may have gotten away with it.
However, the uncertainties surrounding the outlook of the stock may be pushed in favor of a bullish climb with the recent news that Sanofi IBGStar Blood Glucose Monitoring system will now be available in the United States. The news invariably means that Sanofi is the first among its competitors to produce a FDA approved Blood Glucose Meter that can be connected directly with mobile devices like the iPhone and the iPod touch.
The point is that the availability of the compatible Blood Glucose Meter will surely lead to a point of massive sales. The United States has 26 million people suffering from diabetes, with another 57 million estimated to have pre-diabetes, as of 2010. In essence, I can see Sanofi rising with increased sales.
In another development that will surely see Sanofi rising, Genzyme, an arm of Sanofi, has announced that the FDA and the European Medical Agency EMA have approved its second suite filling and finishing products at its Waterford manufacturing plant in Ireland. The approval will in no doubt ensure that Sanofi is able to develop a vigorous manufacturing network that is capable of supplying patients with its products consistently.
Pfizer (PFE) may be just the stock to buy, as it has the potential to garner in between $2 billion to $3 billion in sales with its new drug Tofacitinib, which was developed to treat rheumatoid arthritis. However, this is only a possible outcome, and it is subject to the FDA approving the drug as safe for sale to the general public.
Pfizer's Tofacitinib has already passed the first and second clinical stage trials, but some answers remain largely unanswered. The unanswered questions include some claims that Tocacitinib is able to induce the growth of cancerous cells. While this is common to most drugs that offer a solution to rheumatoid arthritis, its risk are more pronounced in Tofacitinib with its recommended high dosage.
However, if the FDA can conclude that the benefits of Tofacitinib outweigh the risks, then it will stand to become a major blockbuster, and you may see Pfizer rising. However, if it fails to secure the FDA approval, it means that its functionality will be regulated as a last resort for people who have tried other drugs all to no avail.
In another news, GlaxoSmithKline (GSK) is involved in a hostile takeover of Human Genome Sciences (HGSI). The move sees GlaxoSmithKline placing an offer of $2.6 billion to take over Human Genome Sciences. It was reported that GlaxoSmithKline is set to take its bid to shareholders this week in a bid to get a quicker deal.
You will remember that GlaxoSmithKline's previous bid had been rejected, and in a statement issued by the management of Human Genome, it was addressed as seriously undervaluing the small company. However, GlaxoSmithKline has responded that its offer is fair. Nonetheless, the coming days may see GlaxoSmithKline raising the bid, but there is hardly any chance that the bid will be raised significantly.
GlaxoSmithKline has also been linked to another takeover involving AstraZeneca (AZN). Technically, the merger of the two competitors will produce a significant amount of cost savings for GlaxoSmithKline. Nonetheless, CEO Andrew Witty refuted such an idea firmly, saying that GlaxoSmithKline does not intend to buy AstraZeneca. In fact, in his words, he said such a move would be "very distracting" given the present stage that GlaxoSmithKline's experimental drugs are entering.
Sanofi's competitors are certainly making moves toward profitability. The company should be focusing on its Blood Glucose Meter and its subsequent marketing, and trying to put the layoffs and legal issues to rest. When it can do that, the rollercoaster should arrive at a place investors will be very pleased with.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.