Major Surgery at Sanofi

Paris — The mood was grim at sanofi-aventis when Chris Viehbacher became CEO a year ago. U.S. regulators had rejected the French drugmaker's heralded obesity pill, Acomplia. Sanofi (SNY) had failed in its legal bid to block generic copies of Plavix, a blood thinner with annual sales of nearly $4 billion. It faced patent expirations on some of its other best-selling drugs, and its labs weren't creating products fast enough to make up for revenues that would be lost to generics.

A year later, some of those challenges still loom—not least the need to create more blockbusters. But much of the gloom has lifted, and many credit the energetic 49-year-old CEO. Recognizing that creating medicines from scratch is a long process rife with uncertainty, Viehbacher eliminated several internal research projects, announced plans to shut or sell 8 of sanofi's 27 production plants, and went on a $9 billion shopping spree, acquiring small, up-and-coming drugmakers in California, Mexico, and Brazil. He has also courted investors and the media more aggressively than his predecessors.

Viehbacher's acquisition binge and charm offensive have worked, at least for some investors. Since a low in March, sanofi stock has jumped 33%. Its shares have returned 22% this year including dividends—the best performance among the world's top 10 drugmakers. Analyst Mark Clark of Deutsche Bank (DB) says the stock, still among the cheapest in the industry, could gain 12% in the next year as more investors buy into Viehbacher's strategy. "We see him as a guy with a story to tell, whose stock is undervalued," says Gregg Tenser, a managing director at NWQ Investment Management of Los Angeles.

U.S. biotech executives and members of the media got a taste of Viehbacher the extrovert when he hosted a seven-hour scientific conference outside Boston in November, then led reporters on a tour of the company's flu vaccine plant in Swiftwater, Pa. Under his predecessor, Gérard Le Fur, sanofi used to hold earnings calls at the usual time in Paris, meaning 2 a.m. New York time. That's over. On Oct. 30, Viehbacher was in the U.S. for the company's third-quarter earnings announcement, doing live television interviews from the floor of the New York Stock Exchange (NYX).

Patent Protection A native of Kitchener, Ont., Viehbacher has Canadian and German citizenship and is fluent in French, German, and English. He joined sanofi from GlaxoSmithKline (GSK), where he worked 20 years, rising to head of the North American pharmaceutical unit. He left London-based Glaxo after losing the top job to Andrew Witty. Soon after taking over at sanofi, he began contemplating acquisitions to fill the drug pipeline and speed expansion in emerging markets. Within months he was signing deals in vaccines and animal health—two areas relatively unaffected by patent expirations.

The new CEO quickly replaced the top finance chief and created an executive slot to oversee acquisitions and strategy. "He has a sense of the deal," says Laurence Debroux, sanofi's chief strategic officer—the position Viehbacher created.

"Creative Deals" Some of the most striking changes have been in biotech. But sanofi wasn't "known in the industry for doing creative deals," says Hoyoung Huh, CEO of BiPar Sciences, which sanofi acquired in April in a deal that may be worth as much as $500 million. That changed when Viehbacher, who collects wine from Bordeaux, persuaded Huh to visit Paris. " 'Just stop in, even if it's just for lunch. We promise at least to give you good French wine,' " Huh recalls Viehbacher saying. "I went in, I sat down. He said, 'Look, this isn't only good French wine, we're trying to transform the company. On top of that we'd like to potentially have BiPar as a West Coast center of innovation.' "

With BiPar, sanofi gained the experimental cancer drug BSI-201, giving it a new foothold in oncology, a high-growth area. Viehbacher next bought the rights to another cancer drug being tested by veteran California biotech Exelixis (EXEL). "I want to fundamentally restructure the sales profile of the company so that we can achieve more sustainable growth," he said in a phone interview.

Viehbacher still needs to make his transformation pay off. Products that account for 20% of annual revenue will lose patent protection by 2013. And sanofi shares still sell for just 8.2 times next year's forecast earnings, the third-lowest in the Bloomberg Europe Pharmaceutical Index. Viehbacher has told analysts he will trim nearly $3 billion in costs and keep 2013 earnings and sales at least at 2008 levels, but "he still has a lot of investors to convince," says Eric Bleines, a money manager at CCR Actions in Paris, which holds about $30 million of sanofi shares.

On top of that, workers aren't fond of Viehbacher's strategy. He intends to cut 1,300 research jobs in France next year, out of a total of about 6,400 such posts in the country, according to Thierry Bodin, a labor union representative at the drugmaker. The CEO is more concerned about rewarding investors than developing the company's research programs, says Bodin, adding: "Mr. Viehbacher is Mr. Restructuring." Jean-Marc Podvin, a spokesman for sanofi in Paris, says about 1,100 research employees in France are eligible for voluntary departures.

Viehbacher contends his 12 months in office have made a difference. "A year ago this was a company facing a major patent cliff, not enough new products, a lot of doubt about research and development capability," he says. Tenser of NWQ Investment backs him up. "His no-nonsense approach really made us sit up and take notice," Tenser says. "That in and of itself might not make the stock price go up, but it is a significant step in the right direction."

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkWhat's NextDrugs for Emerging Markets' Viehbacher is expanding the company's footprint around the globe. But can sanofi earn profits in the Third World? Viehbacher explains how it's possible in a Nov. 23 Q&A with The Financial Times.To read this interview and related stories, go to

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