By Donato Paolo Mancini 

French pharmaceuticals company Sanofi SA has been making drug-shortage contingency plans for more than a year to prepare for the U.K. failing to reach a deal with the European Union on Brexit, according to a person familiar with the matter.

The move is the latest sign large European companies are worried about the prospects of a hard Brexit, where the U.K. doesn't reach a deal over its future relationship with the European Union, despite repeated attempts at reassurance from British government officials.

A no-deal scenario is expected to result in wide-scale disruption in the U.K.'s import of products from the Continent, and vice versa.

Food, medicine and transport could be affected if no transition period is agreed upon, and jointly agreed regulation would no longer apply. While it has been a possibility since the U.K. voted to leave the EU in 2016, a no-deal scenario has only recently become a more plausible option as talks between the bloc and the U.K. have stalled.

Sanofi isn't the only pharmaceutical company making contingency plans. Swiss drugmaker Novartis AG told The Wall Street Journal on Wednesday that it too was planning to hold increased inventories in the event that the U.K. and EU don't reach a deal before the departure. AstraZeneca PLC said in recent weeks that it had increased its stockpile by about a month to protect itself from a disorderly Brexit.

Sanofi, which generated global sales of about EUR35 billion ($40.9 billion) in 2017, of which EUR850 million were in the U.K., is one of the Continent's largest insulin and vaccine producers.

The company's Brexit-related preparations began about a year ago, the person said, adding that its U.K. division began building its stocks about six months after. Stocks have been increased for all therapeutic areas by about four weeks to a total of 14, the person said, excluding medicines that are in constant shortage. The stock for vaccines has also been increased where possible. Stockpiling is the accumulation of drugs beyond levels that a company would otherwise deem necessary.

Quality control, for which Sanofi sends batches of medicine back to the Continent from its two plants in the U.K., would no longer be possible in the case of a hard Brexit. The person added that some staff reductions to its 1,800-strong workforce in the U.K. would become necessary.

There hasn't been any guidance from the U.K. government in terms of what would be possible or even feasible in case of a no-deal departure from the EU, the person said.

Sanofi follows in the footsteps of other major pharma players like AstraZeneca PLC, which said earlier this month that it had increased its stockpile by about a month to protect itself from a disorderly Brexit. The increase, however, represented only a small portion of its total manufacturing.

A hard Brexit would affect far more than one industry. The EU has warned that air licenses issued in the U.K. and the EU could no longer be valid for travel in each other's territories. Legal arrangements that regulate road travel also would no longer apply.

A Sanofi spokesman confirmed stockpiling was taking place in the U.K. in preparation of a no-deal Brexit but declined to comment further. He also said the company continued to closely monitor the evolving tariff situation between the EU and the U.S.

Separately, the London-based European Medicines Agency said it was already feeling the pinch from Brexit. The regulator has already announced plans to relocate to Amsterdam, and warned Wednesday it would have to curtail some activities because of staff shortages linked to the move. The agency said it expects "a staff loss of about 30%, with a high degree of uncertainty regarding midterm staff retention."

 

(END) Dow Jones Newswires

August 01, 2018 10:22 ET (14:22 GMT)

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