Sanofi will create a spinoff company to produce active pharmaceutical ingredients.
Those ingredients, also known as APIs, are the molecules used to create drugs.
The company will be formed from six of Sanofi's production sites and will employ about 3,100 people.
Sanofi will have a 30 percent stake in the company, which doesn't yet have a name. It will be headquartered in France.
Sanofi said it plans an IPO of the company by 2022 and predicts sales of 1 billion euros by then. It would be the world's second-largest API company.
Sanofi said it decided to create the company to help balance the drug industry's "heavy reliance on API's from the Asian region."
Currently, 60 percent of APIs are produced in China, and 13 percent come from India, according to STAT.
"With increasing medicine shortages that critically impact patient care, the new entity would contribute to supporting and securing API manufacturing as well as supply capacities for Europe and beyond," Sanofi stated in a Feb. 24 news release.
News of the company comes as experts warn of drug shortages in the U.S. caused by the coronavirus and the country's dependence on China for APIs.
Read the full news release here.