July 25 (Bloomberg) -- Workers at Sanofi had a message for politicians at protests in Paris this month: Job cuts by the nation’s biggest drugmaker are crushing morale among researchers and hurting the company’s ability to develop new products.
Chief Executive Officer Chris Viehbacher is unswayed by those arguments. Buying Genzyme Corp. for $20.1 billion last year inspired him to refashion Sanofi in the Cambridge, Massachusetts-based company’s image, a project he is pursuing at full bore. He has organized scientists into “hubs” to open up research among teams and academia and sprinkled the company’s new Paris headquarters with coffee bars where workers can mingle, ideas both influenced by Genzyme. He chose Genzyme executives to run the Boston R&D hub and Sanofi’s U.S. business development. His daughter is even interning at Genzyme.
“Genzyme has changed everything for Sanofi’s research,” said Vincent Meunier, an analyst at Exane BNP Paribas in Paris. “It meant a complete restart at Sanofi, a new foundation in the U.S. Cambridge is now the center of the world for them in terms of R&D.”
Viehbacher is so high on Genzyme because he has seen it succeed in an area where Sanofi has failed: developing new patented drugs to replace sales that are lost to competition from generics. Included in his remake of the company is reducing spending by 2 billion euros ($2.4 billion), part of an industrywide trend to lower expenses after repeated failures to bring new products to market.
Sanofi hasn’t spared its U.S. operations from the pain. The company is eliminating about 1,000 jobs as it closes its Bridgewater, New Jersey, site, which had been operated by Sanofi and its predecessors for 43 years. The company, which reports second-quarter earnings tomorrow, also is cutting research positions in Italy, Hungary and Germany.
Still, Viehbacher, 52, has made clear where he sees the company’s future. It’s Genzyme’s culture and dynamism, exemplified by the idea of research hubs, that must change Sanofi, instead of Sanofi swallowing up Genzyme.
“What was amazing at Genzyme is that there weren’t silos, there was fluidity,” Viehbacher told reporters visiting Genzyme’s headquarters in March. “I wanted to recreate this notion of fluidity between the teams, and this is why we created the hubs, to try and have someone who knows what’s taking place in each team and make sure there are exchanges” between researchers and with outside institutions, he said.
Since becoming CEO in 2008, Viehbacher has ended unpromising projects, axed jobs, shut plants and stepped up acquisitions and partnerships, including a hostile takeover offer for Genzyme. The overhaul sped up after the deal closed in 2011.
“It’s a U-turn in terms of strategy,” says Jean-Francois Chavance, a representative of the CFDT labor union. “Until now, about 50 percent of Sanofi’s R&D employees were in France. We don’t know how this will evolve. The idea now is to scout for molecules outside the company, in small innovative groups, either in academia or in biotechs.”
The takeover gives Sanofi a bigger platform in the Boston area, home to research institutions such as the Massachusetts Institute of Technology and Harvard University and more than 240 biotech companies. Even before Genzyme, Viehbacher had started grouping some businesses in the region, such as a large part of Sanofi’s oncology research.
Some Genzyme executives also won top positions in the U.S. Viehbacher picked Jim Burns, formerly the chief of Genzyme’s bio-surgery business, as head of the Boston hub. Sanofi’s U.S. business development chief, Constantine Chinoporos, also comes from Genzyme.
Sanofi held off on giving details of planned cutbacks in France during the presidential campaign that ended in May, during which the candidates sparred over preserving employment.
Executives met with unions on July 5 to discuss areas in which the company wants to reduce expenses, with the goal of coming up with a plan in September.
Sanofi intends to end research in the southwestern city of Toulouse, where the blockbuster Plavix blood thinner was developed, and Montpellier, union officials said after the meeting. The overhaul may cost as many as 2,500 jobs in France, said Chavance, of the CFDT union. That would be on top of about 4,000 positions eliminated in the country over the past three years, according to the unions.
The layoffs, applauded by investors, have sapped morale among Sanofi’s researchers and provoked the fury of French politicians. The decision to shut Toulouse in particular shocked local officials because in March the company signed a partnership with the Toulouse-based Claudius Regaud Institute and other government agencies as part of a plan to build a hub for cancer research in the city.
“You cannot sign a partnership on March 29 and announce an opposite strategy on July 5,” said Jean-Louis Chauzy, a former union official who serves as president of the regional council on the economy, social affairs and the environment of the Midi-Pyrenees region, where Toulouse lies. “Sanofi is turning its back on its home country. We cannot accept this pillage. France and Europe cannot allow this to happen.”
Arnaud Montebourg, the government minister mandated to work on job-creation policies, decried the cuts as “abusive” because the company had billions of euros in profit last year.
Viehbacher has been vocal about the need to look outside his company’s walls for the best science. “The reality is, the best people who have great ideas in science don’t want to work for a big company,” he said at a February conference in Raleigh, North Carolina, according to MedCity News. “They want to create their own company. If you want to work with the best people, you’re going to have to go outside your own company.”
Labor unions wrote a letter to Sanofi Chairman Serge Weinberg and to the company’s board to protest the comments, said Thierry Bodin, a representative of the CGT union.
“Management is doing everything to break up Sanofi’s internal research, to sap the morale of researchers,” Bodin said. “It’s this and the successive job-cut plans that are making our research unproductive, not anything else.”
The Genzyme purchase isn’t the first time a takeover target in the drug industry has helped to reshape the acquirer. After Roche Holding AG’s $46.8 billion purchase of Genentech, the producer of some of the world’s top cancer drugs, scientists from the acquired company took key jobs, Roche’s existing U.S. operations bore the brunt of job cuts and the parent adopted Genentech’s research structure.
Viehbacher, who personally oversaw Genzyme’s integration last year, remains involved in Cambridge, giving speeches to business groups, and is occasionally in touch with former Genzyme executives. In January he was invited to the Genzyme alumni evening while in San Francisco for JPMorgan Chase & Co.’s health-care conference.
Turning Sanofi into a company more similar to Genzyme is still a work in progress, Viehbacher said in March.
“The irony of it is that I attacked Genzyme for months, and the minute the deal was done, I became its staunchest defender,” the CEO said with a smile while sipping a glass of Macallan 18-year-old scotch one evening in March at the bar of a Boston hotel where he stays on trips to Cambridge.
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