Sanofi Ups and Down, Downs and Up!

Sanofi ups and down, downs and up!

On March 17th of this year, a first delivery of 400,000 doses of hope has reached Gwalior and Jabalpur (Madhya Pradesh, India). First delivery of many to come…

December 2014, after 2 years of an international tender, Shantha, a subsidiary of Sanofi Pasteur (Sanofi vaccines) in Hyderabad, India, was selected to supply, over the next 2 years, 37 million doses of Shan5™, a 5-in-1 vaccines for children. After Sanofi’s “Kick in the nest” episode, with the ex CEO Christopher Viehbacher (see retrospective article at the bottom), followed by a controversy with their 4 million package for new CEO, Olivier Brandicourt, finally we can write some positive news about Sanofi!

It is indeed a success. Delivering millions of pediatric vaccines to countries that are in deep need, projects the right image for the pharmaceutical giant, while falling within several of their 7 strategic growth platforms (diabetes, vaccines, consumer healthcare, rare diseases and multiple sclerosis, other innovative products, animal health, and emerging markets).
Sanofi has just scored at all levels.

The countries to be receiving Shan5™ are all part of Gavi; the Vaccine Alliance is pretty new, but it is huge. Created in 2000, Gavi has serious partners, like The Bill & Melinda Gates Foundations, the WHO, UNICEF, The World Bank, and plenty of others. They aim to get public and private funds to give the poorest countries access to the latest vaccines for children. Since 2000, Gavi has immunized about 500 million children in about 60 countries. Today, with Shan5™, they will increase their numbers, immunizing 10 million children against 5 serious diseases: diphtheria, tetanus, pertussis, Hib infection, and Hepatitis B. The vaccine is in a liquid form and can be given to children as young as 6 weeks old.

Shantha was created in 1993 by Dr. K. I. Varaprasad Reddy in Hyderabad and acquired by Sanofi Pasteur in 2009. This ultra-modern pharmaceutical site specializes into biotechnology and is certainly one of the most advanced pharmaceutical sites in Asia. The WHO has already validated 3 other vaccines from Shantha: Shanchol (cholera), Shanvac-B (hepatitis B), and ShanTT (tetanus), but this vaccine is a 5-in-1 shot that will save millions of children in the world.

Sanofi: Kick in the nest

While on October 27 last year, Christopher Viehbacher, CEO of Sanofi, attended the funeral of his friend Christophe de Margerie (the CEO of Total, who died earlier in an aircraft accident in Moscow), the 15-person board of Sanofi was meeting to plan Viehbacher’s inevitable exit from the group.
Viehbacher was brought in by former Chairman Jean-Francois Dehecq in 2008 to breathe new life into the pharmaceutical giant, so why such a kick in the nest 6 years later?

Who is Christopher Viehbacher?

A Canadian-German dual citizen.
A chartered accountant, who graduated from from l’ENA (Ecole Nationale d’Administration), the most prestigious French school for politicians.
A talented consultant at PricewaterhouseCoopers.
An ex-international GSK manager for 20 years (Europe, US, and Canada).

What was Viehbacher’s strategy for Sanofi?

1/ Expand and diversify the operations by launching new drugs, developing new markets in emerging countries, and developing generics and other over-the-counter portfolios.
Even if it looked a lot like the strategy he implemented at GSK previously, it actually made lots of sense for Sanofi as well. In February 2013, in an interview at BFM Business, Viehbacher explained the dramatic cliff Sanofi experienced between 2010 and 2012.

In total, 9 patents expired: Plavix (a blood thinner – dropped to 505 million euros in 2012), Aprovel (a hypertension drug – dropped to 334 million euros), Eloxatin (a colorectal cancer drug – dropped to 129 million euros), and Multaq (a drug for cardiac arrhythmia – dropped to 65 million euros etc…), causing a total impact of 5 billion euros.

This is why the 7 platforms of growth were defined: vaccines, diabetes, biologics, emergent countries, general public health, generics, and animal health, to give the company some confortable cash flow to re-invest in innovations, which is the risky part of the business (Sanofi invested around 1.9 billion euros in R&D in 2012). Despite this patent cliff, Sanofi succeeded in increasing revenues in 2012 (34.9 billion euros +4.7%), but the margins fell (-12.8%), so Viehbacher didn’t stop there.

The general goal of Viehbacher was to turn Sanofi into a health company instead of a pharmaceutical company, and he aimed to do this by creating a strategy beyond the pill. For example, in the case of diabetes in Brazil, Sanofi supplies a package for diabetes itself but also for the side effect of diabetes (hypotension, cholesterol, etc.), and all this for an all-inclusive price. This also comes along with an application on the patients’ smartphones to record their glucose levels, so the patient gets an all-in-one treatment.

In 2013, Sanofi was expected to launch 18 new drugs by 2015.

2/ The 2nd main line of Viehbacher’s strategy was to restructure internally (and more specifically the R&D).
If Sanofi is expected to launch 18 new products by 2015, Viehbacher says that only a single one is coming from research and development at Sanofi. The 17 others are all coming from the 28,000 collaborators that work with Sanofi on innovative products. Moreover, these 18 products have only been successfully registered in countries other than France, so with 26 factories in France, if the export sales are not to the level forecasted, the future of Sanofi could be far away from being stable.

The sacker gets sacked
Viehbacher saved 700 millions euros in 2012 by restructuring, including a new R&D facility in Lyon specializing in infectious diseases and a plan for cutting 2500 jobs in France. Mid-2012, a massive strike occurred at Sanofi France, and Jean-Louis Chazy said that Sanofi was turning its back on its home country; Viehbacher was called “the smiling killer” by the trade unions. Finally, under French government pressure, the layoffs were scaled back to 800, and the cancer center in Toulouse wasn’t closed down. However, according to the French newspaper Les Echos, this has caused one of the 2 major fallings-out between Viehbacher and the board.

Indeed this year, and according to Serge Weinberg (Sanofi’s chaiman), Viehbacher had planned to sell an 8-billion-USD portfolio of off-patent medicines affecting 6 sites, mainly in France, without board approval.

Between his style of management, abrupt, and without board cooperation, and the destabilization of the group by constantly trying to lay people off in France, Viehbacher was finally let go himself.
Two days after, Sanofi capitalization lost 15 billion euros…

Does that mean that capital investors liked Viehbacher’s strategy? Or that competitors are taking advantage of the situation in Sanofi today? Maybe both? Maybe not! Who knows what Sanofi is going to come up with next?

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Image Credit : Circus Mondao, 'Cinderella'. Bradford, UK 2011 by DirkJan Ranzijn is licensed under CC BY 2.0

“ The article is based on the information available in public and which the author believes to be true. The author is not disseminating any information, which the author believes or knows, is confidential or in conflict with the privacy of any person. The views expressed or information supplied through this article is mere opinion and observation of the author. The author does not intend to defame, insult or, cause loss or damage to anyone, in any manner, through this article.”

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