French pharmaceutical multinational Sanofi has begun to plot its exit from Nigeria, a development analysts link to the persistent loss of grip on profit margins.
The company announced Wednesday it has appointed a third party distributor to solely handle its commercial portfolio of medicines from February 2024.
Folake Odediran, Sanofi general manager (general medicines) and country lead, said: “This strategic move is driven by our commitment to continually improve access to our medicines and to better serve our patients and the Nigerian health system.”
Analysts however say the move signals a consequence of the troubles foreign-owned businesses are facing with foreign exchange-related losses.
Oluwafemi Olaleye, head of health banking at FSDH Merchant Bank, said Sanofi’s decision was not due to the recent naira devaluation as many companies had planned to exit as far back as three years ago.
For instance, GSK, a British multinational pharmaceutical and biotechnology company, already had a third-party manufacturing deal with Fidson as far back as 2020 which was only consummated in practice last year.
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“GSK and Sanofi are making purely business decisions in a bid to drive efficiency of their balance sheet. There is no point operating in an economy where your margins will continually be eroded,” Olaleye told BusinessDay.
An acute FX shortage sparked by lower oil revenues has badly affected multinationals operating in the country.
For some, there weren’t enough dollars to import raw materials while others were unable to repatriate profits to their parent companies due to the FX challenge.
“For the records, the fall of the naira was due to decades of poorly managed national economy, and not vice versa. No matter how you slice it, you can’t avoid having a strong economy as the backbone for a big, strong and reliable currency,” Boason Omofaye, CEO of FAR said on social media platform X.
Sanofi’s eventual exit adds the healthcare company to a list of foreign companies that have dumped Nigeria.
The list includes South African retailer Shoprite, Abu-Dhabi based-telecommunication company Etisalat, and UK-based Intercontinental Group.
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Experts said the exit of another multinational makes the job of President Bola Tinubu to lure foreign direct investment even harder.
A senior business executive questioned why the federal government has not introduced initiatives to significantly improve the ease of doing business, facilitate markets, and streamline the multiplicity of agencies set up as gatekeepers at the export gates.
“I know we are in a crisis. At times like this, you also need to start projecting and planning for the medium to longer term. What can be done now so that we start to see the dividends in two to five years down the road? That would be a start,” he said.
In 2019, May & Baker Nigeria announced a contract manufacturing agreement to produce four brands from Sanofi, a deal the management labelled as an effort to increase the local production of drugs and boost Nigeria’s drug self-sufficiency.
The deal enabled May & Baker to use Sanofi’s facilities to produce flagyl tablets and suspension and tarivid tablets, anti-infective medicines and malareich tablets – an anti-malaria drug, May & Baker said in a note.
By then, the revenue of May & Baker slowed by 9.57 percent to N5.9 billion in the nine months to September 30, 2019.
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The company noted an improvement in its beverage segment while the pharmaceuticals segment saw a decline, with its food business being dormant in the period.
It also saw a sharp drop in sales weigh on gross profit, which fell by 9.36 percent.
A chief executive of an agrochemicals company told BusinessDay that there is a need for a shift from the notion that if a company does not manufacture in Nigeria, it doesn’t matter.
“Let’s look at the other qualitative benefits of such local operations. Additionally, things must have gone so bad for Sanofi to hand over to May & Baker, which itself is struggling seriously under the current operating conditions,” he said.
“We need to see these exits as a symptom of an underlying problem and address them. Many more of such discussions could be going on in many other boardrooms.”
Sanofi has a manufacturing plant in Lagos, which produces a range of essential medicines, including anti-malarials, antibiotics, and vaccines.
The company also imported drugs from its other manufacturing facilities around the world to supplement local production.
Globally, the company produces about 4.8 billion units of medicines, vaccines, and consumer healthcare products annually.
It invests about one billion euro annually in modernising and digitising its manufacturing and supply networkacross 170 countries served by its distribution operations.
In the US, for instance, the French drugmaker secured an agreement of up to $2.1 billion to supply the US federal government with 100 million doses of its experimental coronavirus vaccine in 2020.
