Balancing sovereignty and innovation - the Doliprane deal controversy

Renee Kaddouch
Squair, Paris
rkaddouch@squairlaw.com

Sanofi, a leading global healthcare company based in France, recently announced the sale of 50 per cent of its subsidiary, Opella, to the American private equity company, Clayton Dubilier & Rice. Opella is the entity behind the marketing of Doliprane, one of the most widely used over-the-counter pain relievers in France, with its active ingredient, paracetamol, well-known globally. This transaction, designed to fund groundbreaking treatments, particularly those using messenger RNA (mRNA), has raised concerns, even among French government officials, about its impact on national sovereignty. The question at the heart of this debate is how to balance openness to foreign investment with the protection of national interests.

The legal framework for foreign investments in France

The legal framework governing acquisitions of French companies by foreign players (as opposed to the establishment of subsidiaries) is set out in Article L.151-3 of the French Monetary and Financial Code, alongside Decree No 2023-1293 of 28 December 2023. The guiding principle is simple: freedom prevails, with regulation being the exception. Only acquisitions in sectors deemed ‘sensitive’ are subject to prior approval.

For a transaction to be regulated, three key conditions must be met.

First, the investor must be a foreign entity, even if incorporated within the European Union. This includes companies and investment funds, as is the case with Clayton Dubilier & Rice.

Second, the target company must operate in a sector deemed critical to national security or the public interest, as defined in Article R. 151-3 of the French Monetary and Financial Code. This includes sectors such as defence, telecommunications, cybersecurity and, of course, healthcare and biotechnology.

Lastly, the proposed transaction must: (1) result in the acquisition of the control of a French company, (2) surpass the threshold of 25 per cent of voting rights in a French company (for non-EU investors), or (3) concern the acquisition of a business unit.

If these conditions are met, the acquiring party must seek approval from the Ministry of Economy, which can approve, block or approve the deal with conditions. These conditions may include maintaining industrial capabilities in France or commitments regarding jobs and technology transfer.

The Doliprane controversy: much ado about nothing?

In the case of Opella, it is worth asking: how does selling 50 per cent of a pharmaceutical subsidiary’s capital, which markets a product whose active ingredient has long been in the public domain, threaten national sovereignty? The backlash surrounding this transaction seems excessive. Wouldn’t it be more appropriate to focus on France’s lag in regard to health sector innovation, which poses a genuine threat to our national sovereignty? Instead of blocking a deal that aims to fund the future, shouldn’t we be encouraging such initiatives?

More broadly, it is time to reconsider the ever-growing list of sectors classified as strategic. Today, technologies like artificial intelligence, robotics and quantum technologies, while not directly related to national security, are still classified as ‘sensitive’. However, these innovations depend on private investment, which the government cannot provide. The importance of exit opportunities in private equity is well-established. Founders are rewarded for their efforts and sacrifices at the exit stage, while investors realise the capital gains anticipated when they entered. Exit opportunities are one of the key factors, alongside the team and product, influencing investment decisions. However, if these opportunities are subject to political discretion, it could stifle or even dissuade investment, particularly in more mature companies. In short, we must not stifle offensive sovereignty, which thrives on innovation, by adopting a purely defensive approach to national sovereignty.

Contrary to the rhetoric of ‘economic patriotism’, which is merely a form of protectionism, if France truly wants to secure its future and foster the emergence of disruptive technologies, the best guarantee of sovereignty, it may be time to rethink the foreign investment framework. For instance, applicable law could distinguish more clearly between the countries of origin of investors, whether they are EU nationals, from allied nations or others, and tailor regulatory controls accordingly. This would enhance France’s competitiveness, while preserving its strategic interests.

Sanofi’s sale of 50 per cent of Opella’s capital raises a fundamental question: how do we strike a balance between protecting our national sovereignty and maintaining openness to foreign investment? While the current regulations are designed to safeguard national security, they must not hinder breakthrough innovation, the only true safeguard of our sovereignty, by restricting access to the vital funding required for its development.