Sanofi’s Chief Says Investors Underestimate Drug Pipeline

Sanofi (SAN) Chief Executive Officer Chris Viehbacher says investors are still underestimating the French company’s pipeline of experimental drugs.

Sanofi has gained 31 percent over the past year in Paris trading, giving the company a market value of 96.4 billion euros ($129.8 billion). Sanofi last year surpassed Total SA (FP) as the biggest company by value in France’s benchmark CAC 40 (CAC) Index.

“People have started to recognize the value of our diversified model, and I think the future increase is going to come from the R&D pipeline, which is underestimated,” Viehbacher said during an interview today with Bloomberg Television in Davos, Switzerland, where he is attending the World Economic Forum.

Viehbacher, who became CEO in December 2008, has been bolstering Sanofi’s pipeline by reorganizing research and development, dropping the least promising projects and accelerating acquisitions and partnerships. Paris-based Sanofi needs the new products to make up for sales declines caused by generic competition to its biggest medicines, such as the Plavix blood thinner.

Sanofi shares can rise further, Viehbacher said today.

“There is still value in the stock,” he said. “All that we’ve done is really caught up to the rest of the industry because we clearly were at a discount. I think the whole industry is still poised for a re-rating.”

Deadly Virus

Sanofi shares sell for 11.7 times this year’s estimated earnings, compared with an average price-earnings ratio of 12.7 for the world’s biggest drugmakers. Three years ago, after Viehbacher’s first year on the job, Sanofi fetched only 8.2 times earnings.

Aubagio, a pill to treat multiple sclerosis, Zaltrap for cancer, and the diabetes medicine Lyxumia are among the new drugs Sanofi is bringing to market. Viehbacher has cited a vaccine against dengue, a deadly mosquito-borne virus, and a cholesterol-lowering drug targeting an enzyme called PCSK9, as experimental therapies he’s excited about.

“I am very happy with our late-stage pipeline,” he also said.

Sanofi continues looking at acquisition opportunities but doesn’t want to overpay for assets, the CEO said. The company is targeting “bolt-on” transactions in the price range of between 1 billion euros and 2 billion euros, he said this month.

‘Constantly’ Looking

“It is fair to say that there is not much that goes by us that we don’t evaluate,” he said. “You constantly have to be looking outside your company and see what’s going on. You don’t want to have someone steal a march on you.”

The French drugmaker “does acquisitions well” and has been successful in integrating Genzyme Corp., the U.S. biotech acquired in 2011 for $20.1 billion, Viehbacher said.

“The problem is, today all of our competitors have cash and everything is pretty much fully valued,” he said. “I only want to do acquisitions where I can find the value.”

In the months to come, Sanofi will do some deals or find a way to return the cash to shareholders if it fails to find assets at attractive enough valuations, he said.

The French drugmaker is among companies that have shown interest in the eye-care company Bausch & Lomb Inc., people with knowledge of the matter said this month. Viehbacher declined to comment on specific interest in Bausch & Lomb.

More in general, ophthalmology is becoming an increasingly important area as the population grow older, the CEO said.

“With the aging population, eyesight is extremely important from the quality of life point of view, eyesight diseases are becoming visible that weren’t, and you are seeing some interesting science in there, Viehbacher said. However, ‘‘from a company point of view, you have to decide whether or not you can create value in there,’’ he added.

To contact the reporter on this story: Albertina Torsoli in Paris at atorsoli@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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