Chris Viehbacher took the helm of Sanofi with one clear message about the future: R&D at the Big Pharma had to undergo a radical restructuring. The lost decade in drug development following 2000 proved that Sanofi ($SNY) and others had to mend their ways, he said, forcing the company to reach outside the organization for innovation and shed the dead wood that had accumulated in its research ops.
Viehbacher wanted to build a global operation, looking outside of France--especially to the U.S. And he even moved to the biotech hot spot of Boston last summer, reinforcing a bitter message for the Europeans. (FiercePharma has the full story here.)
|Sanofi CEO Chris Viehbacher|
But aside from building a very close and productive relationship with Regeneron ($REGN), which actually has an innovative record in R&D, Viehbacher can't be considered much of a success when it comes to the research side of the business. His hands were tied in France, where he most wanted the ax to drop. Key R&D initiatives failed (BiPar, for example), collaborations with biotech were few and far between, and the buyout of Genzyme has yet to produce the big new products that Viehbacher needed. A recent licensing deal for MannKind's ($MNKD) Afrezza only raised eyebrows in the industry--including intensely competitive rivals which have notably ignored inhaled insulin in recent years--while a recent buy-in pact with Alnylam ($ALNY) is no sure near-term winner.
Asked for the umpteenth time earlier this year why he just doesn't buy Regeneron, Viehbacher bluntly said that "We'd probably screw it up." That's not a big endorsement for in-house R&D.
Viehbacher got a lot of respect from colleagues, but not a lot of results … in-house. And for the world's sixth largest R&D group, with a budget of $6.6 billion in 2013, that weakness helped prove toxic to Viehbacher's career. That wasn't the deciding factor by any means--this messy transition has more to do with deteriorating personal relationships between board members and the CEO--but R&D wasn't helping.
In addition to some big efforts at Regeneron there was a great diabetes franchise, and when that business started looking shaky, the CEO found that the board he left behind was mad as hell. In the end, he pleaded for his job, and someone leaked the letter.
So now what? The most telling and immediate answer will be derived from who Sanofi's board chooses to replace Viehbacher with. Roche ($RHHBY) vet Pascal Soriot was welcomed at AstraZeneca ($AZN) after that company fired a clueless David Brennan, and after a rough patch at the beginning Soriot has gradually been gaining kudos for progress. He also hit the gas in the race for new deals, another likely strategy for Sanofi, which will look to make a quick, big splash.
Nothing is quicker or splashier in pharma than M&A. But don't look for a megamerger along the lines of the disastrous Pfizer ($PFE) lunge at AstraZeneca. Smaller, digestible bolt-ons are the favorite course of the day for Big Pharma. And that's likely to come back into favor at Sanofi.
An endorsement of the malaise at Sanofi with a seemingly safe promotion from the ranks, though, is only going to raise further alarms among the analysts covering the company. The pharma giant is in a dicey spot. Upheaval brings uncertainty and lots of opportunity for a dramatic round of headlines. Shaping those headlines will be critical to Sanofi's success--and the fate of several high-profile biotechs hangs in the balance.
As of this morning, Sanofi's shares are down more than 6%, and that's after Tuesday's bloodletting. Investors clearly aren't happy to see the turmoil. They'll want to see this train get back on track ASAP. -- John Carroll, editor-in-chief (email | Twitter)