Will a Change Cure Sanofi?

If new leadership were all a beleaguered drugmaker needed to revive its operations, the pharmaceutical sector would be a very different place. Yesterday, shares of Sanofi-Aventis (NYSE: SNY  ) rose nearly 6% on the news that it would hire a new CEO later in the year. But in the long run, that announcement alone won't satisfy investors.

After a positive 2007 that saw Sanofi and partner Bristol-Myers Squibb (NYSE: BMY  ) resuscitate one of their most important compounds, 2008 has been rough for the French drugmaker. In the middle of the year, generic versions of its coronary artery disease drug, Plavix, were allowed onto the market in Germany much sooner than expected. Meanwhile, its anti-obesity compound, Acomplia, brought in only approximately $80 million in sales in the first half of year.

Sanofi's new CEO, arriving in December, is Chris Viehbacher, the former head of GlaxoSmithKline's (NYSE: GSK  ) North American operations. In conjunction with yesterday's announcement, Sanofi also announced operational areas on which the company will be focusing, including efforts to boost its sales in emerging markets.

Glaxo also emphasized this renewed focus on emerging markets when it performed its own CEO shuffle back in May. To better reach these markets, and expand its generic-drug operations, Sanofi has been trying to acquire the shares it doesn't already own of Czech drugmaker Zentiva, much like Barr Pharmaceuticals' (NYSE: BRL  ) did for Croatia-based Pliva two years ago.

While some investors may be cheering Sanofi's management shakeup, a new CEO alone cannot cure the generic-drug issues that plague both this company and rivals such as Pfizer (NYSE: PFE  ) . Sanofi's vaccines division has been growing strongly over the past several years. But until the rest of its pharmaceutical operations can start pumping out innovative compounds, Sanofi will be fighting falling sales, as its existing top drugs gradually lose their patent protection. 

Pfizer is an active Inside Value pick. Pfizer and GlaxoSmithKline are Income Investor selections. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool's disclosure policy is the cure for uncertainty.


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