3 years in, Sanofi CEO has transformed drugmaker

NEW YORK (AP) ? When France’s top drugmaker lured Christopher Viehbacher away from a British rival in late 2008, the hope was he would be a savior.

The company, Sanofi SA, faced several daunting challenges, including repeated research failures and a deluge of generic competition starting to wipe out billions in annual revenue.

His predecessor had been replaced after less than two years, after failing to satisfy investors and the scuttling of a heralded obesity drug, Acomplia. The drug was pulled off the market in Europe and never got U.S. approval because of links to depression and suicidal thoughts.

Viehbacher had gained broad experience over two decades with Glaxo in Europe, the U.S. and Canada, including running its U.S. business for five years. His understanding of regulators, investors and the market in the U.S., where Sanofi needed to boost sales, made him particularly appealing. And while he was born in Canada to German parents, he was fluent in French.

Today, nearly 3 years after being tapped to shake things up at Sanofi, Viehbacher, 51, can take credit for reorganizing the company, divesting into growth areas and making enough smart deals that last month he promised investors 5 percent annual revenue growth for the next four years.

That tops the outlook for many rivals. Some will see their revenue decline over that stretch, as patents expire on drugs with billions in annual sales and patients switch to cheaper generic versions.

Sanofi, which reports its third-quarter results Nov. 3, has been hurt by a succession of its drugs getting generic competition over the past couple years. Sales fell for 13 of its 19 top drugs in the first half of the year, including blockbuster bloodthinner Plavix, blood pressure pill Avapro, insomnia treatment Ambien and Lovenox for preventing blood clots. Sales of Plavix and Avapro will fall further next year, when their U.S. patents expire.

Viehbacher has maneuvered to avoid another “patent cliff.” He’s shifted Sanofi’s focus from blockbuster patented drugs to six growth “platforms” ? areas with products with indefinite lifespans, not the typical 10 years before prescription pills get generic competition.

Those areas are vaccines, consumer health products, medicines for pets and livestock, diabetes treatments and testing supplies, biologic drugs for rare or complex disorders, and products for emerging markets ? China, India, Brazil and other countries where a growing middle class is buying more medicine.

Some promising biologic drugs came with Sanofi’s biggest deal under Viehbacher, the $20.1 billion purchase of Massachusetts biotech company Genzyme Corp., in April. Sanofi tapped into the U.S. consumer product market in 2010 by buying Chattem Inc., which sells nonprescription Allegra allergy pills, Gold Bond moisturizer and Unisom sleeping pills.

On top of the Genzyme deal, Sanofi has been spending 1 billion to 2 billion euros a year (about $1.4 billion to $2.7 billion) on small and midsize acquisitions that fit into existing businesses. And it’s a leader in emerging markets.

Viehbacher restructured Sanofi’s research organization to start more outside partnerships and focus on products with major commercial potential. In 2009 alone, the company scrapped 30 research projects, because the experimental drugs didn’t work well, had bad side effects or weren’t seen as big sellers.

Despite that, Sanofi will apply for approval of six drugs in nine months through next March, including two for multiple sclerosis and drugs for colon cancer, clot prevention, type 2 diabetes and extremely high cholesterol.

Like its rivals, Sanofi has been cutting sales and research jobs and trimming other costs. It’s lopped off nearly 2 billion euros in annual spending under Viehbacher, and he just announced plans to cut another 2 billion euros by 2015. That’s needed to adjust to the hits from generic competition, European government health programs reducing what they’ll pay for drugs and declining success in the lab.

Viehbacher visited The Associated Press in New York recently to discuss his plans and his view of the industry.

Q: Are you nearly finished with the company’s turnaround?

A: I’m actually feeling pretty good about the company. Now, when I came in, in 2008, it was a company where two-thirds of the sales were with 15 blockbusters and, you know, a lot of those things were going to go off patent, (with) no real plan to get through it. Sanofi had one of the most concentrated and one of the biggest (patent cliffs) … When you think about being France’s second-biggest company and recruiting, first of all, not only from outside but recruiting a non-French person from outside, it was pretty clear that the board was looking for some pretty significant change. … So we decided to create what have become six platforms for growth and then to really align our resources.

Q: How are you going to deliver on your promise to produce 5 percent revenue growth through 2015, with key products such as Plavix and Avapro getting U.S. generic competition next spring?

A: The growth platforms are really the story of new Sanofi. In 2008, they represented less than 40 percent of sales. In 2011, they represent two-thirds of the company already. And by 2015, they’re 80 percent of the business. So this has been a process of using the cash flow to invest, to … really build these businesses. We are almost through the patent cliff, from the sales point of view, this year. And we will be through the patent cliff, from a profit point of view, next year.

Q: As Sanofi’s leader, how do you drive the execution of your strategy?

A: The first thing is, people have actually got to know what you want them to do. You’d be surprised how difficult we sometimes make that. The second thing is … you’ve got to get people to understand that what you’re doing is important. Then you’ve got to make sure that what you’re outlining has a number of key milestones, that you can actually define what success looks like. And if you can define what success looks like, you can tie a number of metrics to it. … You want to empower people to actually go do these things. … So there is a whole effort to find those people in organizations that can kind of overcome the bureaucratic odds and make things happen. Because if you can get the right person in the right job, you give him what’s the mission, why is the mission important, what does success look like, and how am I going to reward you if you get there, you know, you can make things happen. It’s not rocket science.

Q: What do you see as the biggest challenges for your company and the industry?

A: As we’re looking at deficit reduction in both Europe and the U.S., there’s huge threats to our industry. … I think it’s going to be extraordinarily important to preserve the ability of the NIH (National Institutes of Health) to invest in research, make sure the FDA (Food and Drug Administration) has the means that it needs. … It’s never been the case that science has been so promising in terms of what it can do for increased health. People are really starting to understand causes of disease, understanding the genomics behind this. … But at the same time, it has never been more difficult to fund a new idea. Venture capital has pretty much gotten right out of healthcare. … So I think there has to be a greater demonstration that we can convert a great idea scientifically into a patient benefit with increased frequency ? and faster.

Q: How does your accounting background affect your perspective?

A: I spent five years (as a CPA) with Price Waterhouse … I had clients that were in oil and IT and banking and I actually chose to go into the pharmaceutical industry. I joined this industry the day (AIDS drug) AZT was launched. I was at Burroughs Wellcome. … The first few years, you’re totally intimidated by the scientists. Five years later when you’re on the commercial side, you kind of realize that there are some aspects to how you get an idea transformed into the marketplace that’s not all just about science and technology and that, often, as companies, we have been way too focused on science and technology and not even thought about it from a patient point of view. So that’s also driven our vision of not just being a maker of pills but to becoming a company that offers healthcare solutions.

Q: What do you do in a typical day? How do you run things?

A: I don’t spend very much time in an actual office. I do spend an awful lot of time on personal interaction. … If we’re going to go and invest in emerging markets, I want to be deeply versed personally in that. I want to actually go and spend time there and not just look at stats. I like to sit down with government members. I was in China and I sat down with 10 biotech CEOs in Shanghai. If we’re talking about academic research collaborations, I like to go and … I’ll spend an afternoon with a bunch of MIT scientists. … I like to know what’s going on and I like to get out and see and talk to people.