Sanofi to beef up U.K. pension scheme with $52M infusion after regulator threatened crackdown

Sanofi has agreed to immediately invest £37 million into its U.K. pension fund, with more contributions to come in the next few years. (Sanofi)

Sanofi struck several acquisitions and selloffs during the past few years, prompting U.K. regulators to probe whether the deals had weakened the company's pension plan there. With a deal Tuesday, the company will commit tens of millions of pounds to help fund pensions for about 16,500 workers.

After striking up a probe of Sanofi's pension plan in August 2019, U.K.'s Pensions Regulator said it was well prepared to take action against the drugmaker for deficiencies in the program. Instead, the sides have reached a deal under which Sanofi will pour an immediate £37 million ($52 million) into its pension fund, the regulator said Tuesday.

Further, Sanofi has agreed to certain annual contributions to gradually beef up its pension scheme toward a “prudent long-term funding target,” the agency said. The company also offered £730 million ($1 billion) as a safety net in case can't pay off its debts.

When the regulator started its probe years ago, it found a funding deficit of £279 million ($393 million) for the scheme, which covers around 16,500 employees.

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Sanofi has changed significantly over the years as a result of M&A, including its large acquisition of Genzyme in 2011 and its consumer health and animal health asset-swap deal with Boehringer Ingelheim in 2016. Some of the transactions involved large dividends being paid to other companies within the Sanofi group, which the agency said hurt direct support for the pension scheme.

The company introduced a backup plan in 2015, which included matching the payments paid to the scheme by the company's U.K. outfit. Still, the pension watchdog considered that commitment to be insufficient to mitigate the risk as it wasn’t legally binding. In the new agreement, Sanofi has made that contribution legally enforceable.

The Pensions Regulator started its probe right around the time Sanofi installed its current CEO Paul Hudson. Quickly after joining as CEO, Hudson kicked off another round of changes at the drugmaker, including scaling back investments in diabetes and cardiovascular diseases.

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In late 2019, Sanofi bought Synthorx in a $2.5 billion deal and obtained an IL-2 candidate for solid tumors. Last year, it acquired Principia Biopharma for a BTK inhibitor with potential use in inflammatory disease. And earlier this year, it took in Kymab—a British biotech—for $1.1 billion upfront to gain control of an anti-OX40 antibody that has shown promise in atopic dermatitis.

Meanwhile, on the divestiture side, the company has restructured its longtime collaboration with Regeneron by taking a smaller role in lagging PCSK9 cholesterol drug Praluent. Earlier this year, Sanofi also unveiled a plan to offload about 150 consumer health brands to focus on first-in-class Rx-to-OTC opportunities.