Feb. 10 (Bloomberg) -- Sanofi-Aventis SA Chief Executive Officer Chris Viehbacher may outline plans to cut as much as 1 billion euros ($1.3 billion) in costs and buy smaller companies after the failure of its most-promising medicine.

Viehbacher, who took over as CEO of France’s biggest drugmaker two months ago, may say he will cut jobs, overhaul research and seek biotechnology companies to replenish Sanofi’s stable of experimental drugs when he meets the press for the first time tomorrow, three analysts said in interviews.

Sanofi, like rivals Pfizer Inc. and GlaxoSmithKline Plc, may see its sales eroded by generic competition and a lack of new medicines. The company’s headcount has hardly changed over the past seven years while drugmakers globally have announced 105,000 job reductions since the start of 2005. Pfizer, the world’s biggest pharmaceutical company, estimates its $68 billion takeover of Wyeth will result in 19,500 job losses.

“The challenge Viehbacher faces is a big one,” said Jerome Forneris, who helps manage $8.5 billion at Banque Martin Maurel in Marseilles and owns Sanofi stock. “He needs to shake things up, motivate his troops, lift their morale, and lead the company back to growth.”

Sanofi fell 28 percent last year, the worst performance among Europe’s top five drugmakers. The stock has dropped 7.2 percent so far this year, compared with a 2.1 percent decline for London-based Glaxo. It rose 62 cents, or 1.4 percent, to 45.30 euros at 9:58 a.m. in Paris.

Cost Reductions

Cost reductions may reach 1 billion euros, according to Morgan Stanley analyst Andrew Baum, Collins Stewart’s James Knight and Societe Generale analyst Marietta Miemietz. Viehbacher may not disclose a target tomorrow when he reports earnings, and wait until he’s gotten to know the company better, said Michael Leacock, an analyst at ABN Amro in London.

“It’s about the 18 billion euros in operating costs he has to deal with,” Leacock said. “How can he reduce that operating cost effectively and efficiently? He doesn’t yet know the vehicle he’s got, so it will be kind of hard to set a destination.”

Adjusted net income probably rose 13 percent in the fourth quarter to 1.62 billion euros, or 1.21 euros a share, according to the median of five estimates gathered by Bloomberg. Sales climbed 3 percent to 7.12 billion euros, the survey shows.

Sanofi’s sales growth comes from older products such as Plavix, a blood thinner, as well as the cancer drugs Eloxatine and Taxotere. The weight-loss pill Acomplia, once the company’s most promising new medicine, was rejected by regulators in the U.S. and Europe on concern about its side effects. That leaves the French drugmaker with few products to spur growth once its current bestsellers lose patent protection.

Generic Competition

About 9.9 billion euros of Sanofi’s annual sales, or 35 percent of revenue, will be exposed to generic competition in the coming six years. Patients traditionally switch to cheaper copies of a drug when they become available, causing sales of the original product to slide. This so-called patent cliff prompted Pfizer’s $68 billion bid for rival Wyeth last month, and may put pressure on others in the industry to tie the knot, analysts said.

In a speech broadcast to workers on Jan. 30, Viehbacher said Sanofi generates 4 billion euros in cash each year and is seeking acquisitions to expand in emerging markets, vaccines and consumer health. He also said the company will bring in a “well known researcher” to evaluate projects and that Sanofi must grow in oncology and increase investments in biotech.

Look for Innovation

Sanofi “has to grow” and must “look for innovation wherever it exists,” Viehbacher said in the speech, according to Thierry Bodin, a representative of the CGT union who listened to the presentation. In an earlier meeting with workers, Viehbacher wouldn’t rule out a large transaction, Bodin said.

Sanofi has looked at Crucell NV, the Dutch biotechnology company that failed to reach a buyout deal with Wyeth last month, Viehbacher said Jan. 30, according to Bodin. And it may make an offer for Icelandic generic- drug company Actavis Group HF, three people familiar with the situation said last week.

Viehbacher is more likely to favor small acquisitions that can give Sanofi access to innovative cancer drugs, biotechnology labs and products in advanced stages of testing, Societe Generale’s Miemietz wrote in a Feb. 4 note to clients.

Viehbacher, who ran Glaxo’s North American unit for eight years, was passed up for the top job at the U.K. company last year. He may now mimic moves by his former employer, which has eliminated 10,000 positions since 2007, revamped research, bought assets in Pakistan and Egypt and plans to slash 1.7 billion pounds ($2.5 billion) in expenses a year by 2011.

At Sanofi, the employee headcount has been steady at about 100,000 for the last seven years and the company “is almost unique in having a cost-cutting program but no defined targets,” Knight and colleague Emmanuel Papadakis of Collins Stewart wrote in a note to clients on Jan. 19.

To contact the reporter on this story: Albertina Torsoli in Paris at atorsoli@bloomberg.net; Trista Kelley in London at tkelley2@bloomberg.net

Last Updated: February 10, 2009 04:07 EST