Sanofi, French Government at Odds Over Fate of Research Site

Sanofi and the French government presented conflicting views on plans for the future of the drugmaker’s research site in Toulouse, adding another wrinkle in the company’s reorganization attempts.

Industry Minister Arnaud Montebourg said in a statement that Paris-based Sanofi accepted the recommendations of a state-commissioned report to retain the facility for at least five years and keep most of the jobs. Company spokesman Jean-Marc Podvin said in a telephone interview that while Sanofi will aid the site’s transition into “autonomous structures” over the next five years, it’s making “no commitment” on posts.

The diverging views highlight the difficulty companies in France face as they seek to reorganize operations in the face of recession, which has pushed joblessness to a record high. Sanofi and the government have been in a tug-of-war for almost a year over the site, where the company’s blockbuster Plavix blood thinner was developed. The French drugmaker said last year it would end research in both Toulouse and Montpellier, sparking uproar among politicians and employees.

In July, Montebourg criticized the planned cuts as improper, citing the drugmaker’s billions of euros in profits. The Sanofi struggle is the latest in a string of efforts by the minister to stem French unemployment, which at 10.6 percent is at the highest since 1999.

`A Pity'

In November, he called for the nationalization of a troubled local unit of ArcelorMittal (MT), which the world’s largest steelmaker was looking to shut down. He last month blocked the sale of France Telecom SA’s Dailymotion SA unit to Yahoo! Inc.

In an internal note sent to employees today, and obtained by Bloomberg, Sanofi’s global head of research and development Elias Zerhouni suggested the company would no longer be in Toulouse in five years. Meanwhile, Pierre Cohen, the mayor of the southwestern French city, said in a statement he was “pleased” that the drugmaker had accepted the government’s recommendations.

“It’s a pity,” Thierry Bodin, a Sanofi union representative, said in a telephone interview. “Top management was forced to revise its original plan, meaning its exit from the Toulouse site will take longer, but that’s it. The government did a little something” to save the site “but not enough.”

Retaining Jobs

Sanofi should retain about 500 out of 612 jobs at the Toulouse site, with no firings, according to the government-commissioned report presented today in Toulouse to Montebourg. The company should use the facility to identify new drug candidates and validate experimental medicines before they enter licensing agreements or partnerships with biotechnology companies, it said.

The report is a “road-map” Sanofi will use to work with labor unions on the facility’s transformation, Podvin said. Sanofi will consider options such as creating a technology platform in Toulouse to provide services for itself and other companies, and establishing local start-ups in its premises, the drugmaker also said in an e-mailed statement.

Chief Executive Officer Chris Viehbacher began an overhaul of Sanofi’s research in 2009, cutting headcount, closing plants and dropping less-promising projects. He also stepped up acquisitions and partnerships to gain new products, including the $20.1 billion purchase of U.S. biotechnology company Genzyme Corp., the world’s largest maker of treatments for rare genetic diseases.

Reorganizing Research

The 53-year-old CEO has repeatedly stressed the importance of his plan to reorganize drug research in France, saying this was critical to its future. Competition from cheaper copies of Sanofi’s best-selling products, including Plavix, has eroded earnings over the past year. Viehbacher has said Sanofi scientists in Toulouse and elsewhere have failed to develop enough new products.

Sanofi (SAN) today confirmed plans to regroup its French research activities in the regions of Paris, Lyon, and Strasbourg. It also said it’s sticking to plans to transform the Montpellier research facility in a development center.

While it has been seeking to pull out of Toulouse, the drugmaker has increased investments in other parts of the country, including Lyon.

Marianne Zalc-Muller, a spokeswoman for Montebourg, didn’t respond to an e-mail and a phone call seeking comments on the Sanofi statement.

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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