Olivier Brandicourt got his first shot at Sanofi's lead role in an annual investor day, and the reviews are not good.
Brandicourt had a tough message to sell. The company's diabetes franchise is getting hammered, with the all-important Lantus business weakening, which means that R&D as well as SG&A are going to eat up a higher percentage of revenue for at least a couple of years.
Analysts hate that.
"The stock remains cheap relative to peers, but its uninspiring growth profile--along with a lead franchise in flux and a weaker R&D track record--says this is warranted," says an unimpressed Tim Anderson at Bernstein. "In the context of other names we prefer that have a more cohesive story and a better outlook, we are moving to the sidelines."
|Sanofi CEO Olivier Brandicourt|
Sanofi ($SNY) is talking about selling off its animal health business and might buy a new business to replace that, but Anderson doesn't see any reason to get whipped up about a switch like that.
Seamus Fernandez at Leerink concluded that the diabetes weakness and the general message was "hard and disappointing," reducing his price target on the stock.
Sanofi's internal R&D operations have been a mess for years. Its base in Paris leaves the company hamstrung on R&D, unable to make major cuts in France in the face of a guaranteed government and union backlash. (Brandicourt--who was brought in at least in part to satisfy the company's essentially Gallic culture--says more cuts can be spread globally.) So it will look to its Genzyme operations in Boston, which has been doing deals like the buy-in at Alnylam ($ALNY), while its close partners at Regeneron ($REGN) are being bankrolled in a major effort to spearhead a late assault on immuno-oncology--long after the leaders were already positioning approved products and after Sanofi threw in the towel on its own, failed cancer R&D ops.
"We are not saying we will become leader, … but it means participating in a meaningful way," Brandicourt told the Financial Times in an interview. "We think we can leapfrog and catch up very quickly. … I know people are doubtful but we will make sure we prove them wrong."
The problem is that Sanofi has adopted the same bold line before, and aside from some big advances over at Regeneron, only has a new CEO to show for it. Its fate remains largely in the hands of its R&D partners, for now. And Brandicourt's first performance has only served to reinforce negative market assumptions. -- John Carroll, editor-in-chief (email | Twitter)