On May 6, 2022, a photographer immortalizes a jubilant group. Smiles on their lips, hands impatient to ring out applause, around twenty men and women gather around the general director of Euroapi, Karl Rotthier, in the Euronext premises. Radiant, the fifty-year-old Belgian celebrates the IPO of the French pharmaceutical company, born shortly before its separation from Sanofi. Does the bell that he then vigorously rings actually sound the death knell for the company?
Since its listing, the history of Euroapi has been that of a descent into hell. The mid-sized company (ETI), with 3,600 employees, regularly misses its financial goals. To the point of costing Karl Rotthier his place, who arrived last October for the benefit of his compatriot Ludwig de Mot, one of the fleeting general directors of the sugar company Tereos. This did not prevent Euroapi from suspending its outlook for 2024 in mid-March, after a production stoppage in a factory. Shortly before, the group had reported a net loss approaching 190 million euros for 2023. Under the effect of massive investments, its debt increased sixfold in one year to reach 171 million euros.
A glimmer of hope in this chiaroscuro picture: the increase in sales has enabled it to cross the billion-euro turnover mark. In doing so, the ETI fulfilled the objective it had set for itself a year late… Without the news causing its stock price to take off again. On May 15, the action stagnated at 3 euros when it exceeded 18 euros in October 2022. Results far from the performances of its competitors, such as the Swiss Siegfried and Lonza. And light years away from the bright future that Sanofi promised for its former activities.
An ally of European sovereignty
Eager to refocus on the most lucrative part of its business, in 2020 the French laboratory is adorning its Pluton project – which precedes the birth of Euroapi – with all the virtues. By outsourcing six factories located in France, Germany, Italy and Hungary, it is committed to creating nothing less than “the European leader in active ingredients”, the famous APIs which give drugs their therapeutic properties. The argument is timely. Shaken by Covid, the EU and France are discovering with horror the extent of their dependence on Asia in the production of medicines.
With its broad portfolio of active ingredients, the future Euroapi appears to be an ally of the health sovereignty policy that the Old Continent is seeking to build. The group has expertise in anti-infectives, opiates, corticosteroids, etc. It claims to be the world’s leading supplier of prostaglandins, which are used in treatments for conditions such as glaucoma and high blood pressure. And prides itself on being the “only Western manufacturer of vitamin B12 for the pharmaceutical industry”.
What’s more, certain molecules are particularly popular. “The annual growth level is 6.5% for vitamin B12, between 7 and 8% for prostaglandin. In cytotoxic products [NDLR : utilisés en majorité dans le traitement des cancers]we climb to 11 or 13%”, illustrates Laurent Deloire, partner within the firm SIA Partners. To top it all off, Sanofi assures that once free of its movements, the ETI will have every leisure to develop its subcontracting activity. -contracting with large laboratories, until now unwilling to entrust their production to a direct competitor.
The drop in orders from Sanofi, a shock
Through the public bank Bpifrance, the French State ended up joining the project by increasing the capital of Euroapi, while the employees signed up to the employee shareholding plan. But the project nicely packaged by Sanofi quickly crashes against the wall of reality. The dozens of steps required to obtain the precious active ingredients make production energy-intensive. Results: Euroapi is bearing the brunt of the rise in energy prices following the Russian invasion of Ukraine.
At the same time, the deterioration of the economy affects its biotech clients. “Unable to access financing, some of these companies find themselves filing for bankruptcy in Europe and the United States. Suppliers like Euroapi are directly affected and must give up on clinical developments,” explains Martial Descoutures, analyst at Oddo BHF. The setbacks of the French champion of active ingredients are also industrial. In Budapest and then in Brindisi, “deviations from good manufacturing practices” and “quality control failures” led to production stoppages.
A harmful cocktail for a structure barely out of the egg. This is to take into account Sanofi’s decision to reduce its orders faster than expected. “The slowdown in demand has affected our results to the tune of one billion euros in 2023. Our needs for active ingredients have been reduced,” the laboratory explains soberly. The shock is enormous for Euroapi. Despite the efforts made to attract new customers, Sanofi remains by far its largest buyer: in 2023, it represented 47% of its turnover. His change of heart naturally has serious consequences. In February, the president of Euroapi, Viviane Monges, recognized that the average utilization rate of factories was “around 60%”, a level considered low in the industry. Worse, some sites display levels below 30%, a worrying threshold.
Enough to explain that Sanofi’s disengagement accentuates the resentment of employees towards their former company, which they suspected from 2021 of wanting to shed activities that it no longer considered strategic. “Landing customers takes time. Once we have approached them, we have to prove to them that we are capable of producing in the quantity and quality required. Sanofi was supposed to support us until 2027: they are once again letting us down too much early”, notes the central delegate of the CGT, bitter. Especially since for Magali Mathevon, history repeats itself. “From the start, we said that Euroapi was not viable, that we were being let go too early, without adequate resources or the right people. Everything we wrote is coming true today,” regrets She.
“A weight loss cure” to wait for
In a 2021 leaflet, the CFDT already made “the alarming observation that the future society [manquait] cruelly lacking in assets to be sustainable in the long term. created the company without debt to give it the capacity to invest.” A sufficient boost? Not sure. “We have been able to make notable improvements, but it is not possible to change everything at once. Especially since we are going to make huge investments to bring our sites into compliance with environmental standards, to the extent that Sanofi has done things to the minimum. Will we have strong enough shoulders to absorb everything?”, we ask ourselves at the CGT.
Some experts prefer to point the finger at the role of Euroapi management, which was slow to take stock of the work ahead of it. “It made the mistake of believing that growth would exempt it from having to refocus its portfolio upon sale: if it invested in the right segments, certain molecules have been in decline for a long time. Not to mention that Euroapi has not digested the complexity of Sanofi. The group finds itself exposed today to a much bloodier weight loss cure than it would have been if it had been implemented from 2022”, predicts Laurent Deloire.
Grievances which management seems to have taken stock of. The tandem led by Viviane Monges and Ludwig de Mot warned that it would discontinue “13 undifferentiated products with low or negative margins”, accompanied by a “potential divestment” of Italian and British factories. A polite way of saying that the two sites could be sold… Euroapi’s strategic plan, which will be presented in the second quarter, should make it possible to redress the situation. But first, its leaders will undergo the thorny exercise of the general assembly, scheduled for May 22. Steps which should be closely scrutinized by the teams of the “consumer health” division from which Sanofi plans to separate, under conditions similar to those of API. It remains to be seen whether lessons will be learned from this unfortunate experience.
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