Sanofi (NYSE:SNY), one of the largest pharmaceutical companies on the planet, was in a dire situation when CEO Chris Viehbacher took the reins in late 2008. Over the last five years, however, the company has moved into the orphan drug space through the acquisition of Genzyme, entered into a rewarding partnership with biotech Regeneron, and shifted its focus to the development of products that are less sensitive to intellectual property. The market has rewarded this strategy, and shares are up a solid 68%.
In the following video, analyst Max Macaluso discusses Sanofi's turnaround in detail with Bernard Munos, a pharmaceutical industry expert and founder of the Innothink Center for Research in Biomedical Innovation. They discuss Sanofi's unique strategy and why its CEO is one of the best in the pharmaceutical industry today. A transcript follows the video.
Max Macaluso: How about Sanofi? This is a company that had a lot of problems five years ago, six years ago. Chris Viehbacher comes in. He's currently the CEO, and when he came in he rather quickly turned things around. How did he do it?
Bernard Munos: Sanofi is a very interesting example, for multiple reasons. The first one is, as you said, back in 2008 when Chris Viehbacher took over, Sanofi was a weakened company. Not only that, but ... I grew up in France. I know a little bit about what it takes to manage a business in France and turn around a French company. It is the ultimate managerial challenge, in my view. I can say that, in my view, Chris Viehbacher has rescued Sanofi from oblivion. If it hadn't been for him, the company was basically on the path to implosion.
Now, the other reason why I think Chris Viehbacher's example is interesting is that he's not a scientist. You often hear the opinion that, "You really need to be a scientist to run a pharmaceutical company." It certainly helps, but it is not a requirement. Chris Viehbacher is probably one of the best, if not the best CEO, around today -- and he's an accountant by training. But he has a very good instinct, and he came up with a very innovative model, which is unique in the industry.
He basically looked at the situation and said, "You know what? I'm going to have to manage patent cliffs at Sanofi, and I've managed patent cliffs before, and it just is really not fun. So I am going to restructure the company so that I and my successor will never have to worry about patent cliffs anymore."
He repositioned the company onto therapeutic areas that are not IP sensitive. This is diabetes, which basically runs on the ultimate generic product, insulin -- but look at what Novo [Nordisk] has achieved. Look at what Sanofi has achieved -- so it's quite possible to build a thriving business on the back of a generic product.
Vaccines, not IP sensitive; consumer health, it's all about brand management; animal health; and rare diseases. He identified those areas and then has done a number of moves in order to reposition the companies on those areas, and it seems to be working for them. Certainly, Sanofi is not on its deathbed, in my view, as it was in 2008. They brought one product to market this year, and they are putting themselves as they continue to implement their model. I believe they will survive.
Now, Chris Viehbacher did another interesting thing, which is that he recruited Elias Zerhouni, who had been an academic, a successful entrepreneur, a successful civil servant, and now he is a Big Pharma leader. Clearly, he had plenty of training to deal with the Sanofi situation. On top of that, he speaks French and understands the French culture, which is a requirement for that job.
The tandem of Elias Zerhouni and Viehbacher, I think, has worked quite well for Sanofi.
Max Macaluso, Ph.D. and Bernard Munos have no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.