Nestlé plans U-turn on peanut allergy drug with possible sale on the cards

29 Nov 2022 --- Nestlé could be potentially divesting its peanut allergy treatment Palforzia following slower than expected adoption by patients and healthcare professionals. Nestlé expects the review to be done in the first half of 2023 and says that Nestlé Health Science will increase its focus on medical nutrition and consumer care.

Palforzia, the first drug for peanut allergies in children to be approved by the US Food and Drug Administration, is aimed at consumers from the ages of 4 to 17 with a confirmed peanut allergy diagnosis. The drug may alleviate some of the symptoms associated with the allergy such as constriction of airways, hives and swelling. 

The food giant has decided to “explore strategic options” for the business as part of its strategy for sustainable value creation and targets for 2025.

Nestlé Health Science (NHSc) entered into a definitive agreement to acquire Aimmune Therapeutics back in August 2020. The biopharmaceutical company develops treatments for life-threatening food allergies. 

The move extended NHSc’s food allergy portfolio, creating a broader spectrum of solutions for children living with food allergies, which was a strong part of the company's strategy at the time.

Now, with a potential divestment on the horizon, this looks like an apparent U-turn.Nestle is conducting a review of peanut-allergy treatment Palforzia, with a potential divestment in the future.

Investor call
Food innovation, data-driven transformations, productivity and plans for leading coffee brands Nespresso, Nescafé and Starbucks are some of the additional topics set to be explored in Nestlé’s investor seminar taking place in Barcelona, Spain, today. 

The company is also discussing its sales growth expectations and profit estimation through 2025.

The seminar will also highlight the company’s nutrition, health and wellness strategy, including how nutritional health products offer an additional platform for growth for Nestlé Health Science.

“We have made significant progress in recent years, accelerating organic growth, increasing margins and enhancing capital efficiency,” says Nestlé’s CEO, Mark Schneider.

“We will continue to invest for future growth, investing behind our brands, delivering impactful innovation, leveraging digitalization and improving speed and agility.

The company further states that it repurchased an estimated CHF 9.7 billion (USD$10.2 billion) of its own stock this year so far and reaffirms that it will continue its ongoing program to repurchase CHF 20 billion (USD$21.052 billion) in shares from 2022 by 2024.

Generating growth
The company anticipates its mid-single-digit organic sales growth expectations will return to an underlying trading profit margin in the range of 17.5% to 18.5% by the end of 2025, despite the margin impacts of increased inflation and supply chain impacts that occurred in 2021 and 2022. 

Additionally, the company has set its earnings per share growth target in the range of 6% to 10% and predicts a trend toward free cash flow of 12% of sales with a return on invested capital of 15% by 2025.

For 2022, Nestlé now expects an organic sales growth of 8% to 8.5% and for the underlying trading profit margin to hit 17% by the end of the year.

“Creating shared value for stakeholders remains our focus,” affirms Schneider.

“Regarding financial metrics, Nestlé pursues a value creation model that balances growth in earnings per share, competitive shareholder returns, flexibility for external growth and access to financial markets,” the company states.

Moreover, the company states that since 2018 it has experienced net annual returns on acquisitions in the range of 11% to 13%, with many transactions meeting or exceeding initial forecasts.

Due to this, Nestlé plans to continue its pursuit of external growth opportunities.

Edited by William Bradford Nichols