6. Sanofi: Checkbook research surges as the internal pipeline flounders

Elias Zerhouni, Sanofi's global R&D chief

2013: $6.63 billion (€4.77B)
2012: $6.76 billion (€4.90B)
Change: Down 2%
As a % of revenue: 14.5%
Head of R&D: Elias Zerhouni

(Editor's note: Pharmaceutical R&D accounted for the lion's share of the total R&D budget, with a little more than €518,000 for vaccines and a slice for animal health.)

Some weeks ago, Sanofi CEO Chris Viehbacher was on Bloomberg TV discussing Sanofi's ($SNY) late-stage pipeline. Viehbacher took the chance to tout the company's pipeline as "one of the top 5" in the industry, which is questionable at best. But he had some remarkably frank comments about the R&D process and how a company like Sanofi, which has had a bleak internal record when it comes to drug development, can get its hands on promising new drugs and sell them--which it is very good at.

During the conversation, Viehbacher highlighted 4 key late-stage programs: The PCSK9 cholesterol drug alirocumab, an IL-4 therapy for atopic dermatitis (the Phase II drug dupilumab), a Phase III IL-6 treatment for rheumatoid arthritis (sarilumab), and a vaccine for dengue. (Curiously, Viehbacher neglected to mention the late-stage diabetes drug U300, its best shot at fighting back competition for its big Lantus franchise.)

It's no coincidence that the first three drugs Viehbacher cited are being worked on at Regeneron ($REGN), a biotech company that has been joined at the hip with Sanofi on developing new treatments. Sanofi owns a significant minority share in Regeneron, which brought up the inevitable question of whether Sanofi would buy the company.

No, replied Viehbacher, "that's a quick way to screw it up."

For a pharma executive who had engineered a $20 billion-plus buyout of Genzyme, it was a particularly telling remark. The FDA recently rejected Genzyme's Lemtrada for multiple sclerosis, one of the top drugs in the company when it was bought out, after blasting its safety and efficacy results. That drug may now never make it to the U.S. market, though Sanofi is making a second attempt at an FDA approval after adding extension data from its late-stage studies. Genzyme overall has done little to propel Sanofi's near-term R&D prospects aside from an OK for the MS drug Aubagio, which has paled in comparison to Biogen's ($BIIB) new Tecfidera.

Sanofi's attempt to build up its drug portfolio has met with repeated failures as a wave of generic competition hit. Iniparib was axed last year. Four months later fedratinib was on the chopping block after the FDA ordered a clinical hold on trials. The application at the FDA for lixisenatide, another GLP-1 drug facing a crowded field, was put on hold as the company waited for more Phase III data.

Stymied by French authorities in completing a major reorganization and downsizing of the pharma company's R&D ops as it shifts focus to Boston, Sanofi has been turning increasingly to outside biotech companies to deliver real innovation. So at the beginning of this year Sanofi bought into Alnylam's ($ALNY) resurgent RNAi pipeline, paying $700 million for a 12% stake in the biotech in the hope it will replicate the bountiful partnership Sanofi has with Regeneron. It is almost the last major pharma company to view RNAi as a major new research field--as evidenced by the recent exits of Merck ($MRK) and Novartis.

The Alnylam deal also makes Genzyme a cross-town partner on patisiran, in development at Alnylam for TTR-familial amyloid polyneuropathy, with Sanofi gaining marketing rights outside of North America and Europe. 

Alnylam, Viehbacher noted in his interview, had just bought out Merck's RNAi tech--acquired in the Sirna buyout and sold for a pittance of what Merck had paid for it. But that's the Big Pharma experience when it comes to buying companies, he noted.

"I think if we had bought it we would have managed to screw it up too," Viehbacher told Bloomberg. The CEO should get credit for frankness, but it's a testament to Big Pharma's innovation travails. 

Sanofi's best attributes at R&D now rest with how it uses its check book to buy into new partnerships. Understanding that, and acting accordingly, may well be half the battle in Sanofi's innovation struggles.

For more:
Special Reports:
Biopharma's Top R&D Spenders of 2012 - Sanofi | 20 Highest-Paid Biopharma CEOs of 2012 - Christopher Viehbacher - Sanofi
Sanofi bets big on dengue with eyes on a blockbuster
Sanofi launches a vaccine R&D program with blockbuster Prevnar 13 in its sights
Sanofi's Zerhouni, analysts warn sequestration could cripple R&D
Sanofi, Regeneron take the lead in blockbuster PhIII race of PCSK9 drugs

6. Sanofi: Checkbook research surges as the internal pipeline flounders
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