June 8, 2014 6:32 pm

Chris Viehbacher shuns deal frenzy as Sanofi focuses on growth

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Chris Viehbacher

Chris Viehbacher is not someone who usually likes sitting on the sidelines. Known as a charismatic and dynamic leader, the 54-year-old German-Canadian chief executive of Sanofi has been busily reshaping the French pharmaceuticals group since taking charge six years ago.

However, during the recent burst of dealmaking in the drug industry – the most intense for several years – Mr Viehbacher has remained an observer.

Several assets have come up for sale this year that could have fitted Sanofi’s portfolio, including the vaccines, animal health and consumer products businesses traded by Novartis . Sanofi has also been touted as a potential white knight for Allergan as it seeks to repel the advances of Valeant .

However, Mr Viehbacher has repeatedly said he is in no hurry to join the deal frenzy. Last week he told Bloomberg : “Unlike everyone else, we feel we’ve got critical mass in all of our businesses.”

This marks a change from the early stages of Mr Viehbacher’s tenure at Sanofi when he bought more than 20 companies, including Genzyme, the US biotech company, which he acquired for €20bn in 2011.

Those deals reflected the urgent need for new sources of growth as several of Sanofi’s biggest-selling drugs, such as its Plavix blood-thinner and its Ambien sleeping pill, lost patent protection.

Three years on from the Genzyme deal, Mr Viehbacher says Sanofi has moved on from the acquisitions and integration phase and is now focused on delivering growth.

He has forecast that in 2014 the company’s annual profits will increase for the first time in four years – with earnings set to rise by between 4 and 7 per cent. Some other big drugmakers are still struggling to reverse patent-related declines.

Much of the growth is coming from Lantus, the world’s most prescribed insulin product. Last year it brought in revenues of €5.7bn as Sanofi responded to the rising incidence of diabetes worldwide.

However, with the US patent for Lantus due to expire in 2015, Mr Viehbacher is relying on a revival of Sanofi’s research and development pipeline – moribund for several years – to keep growth going.

He points to seven drugs and vaccines awaiting regulatory decisions or due to be submitted to regulators for approval this year, with several more in late-stage trials.

“We’re starting to use a lot of muscles that haven’t been exercised for a long time,” Mr Viehbacher told the Financial Times recently.

Much of the optimism stems from Genzyme, which increased revenues by almost 26 per cent last year and has become Sanofi’s strongest source of innovation.

We’re starting to use a lot of muscles that haven’t been exercised for a long time

- Chris Viehbacher, Sanofi chief

Mr Viehbacher insisted that his decision, announced last week, to relocate to Boston was a family decision with no strategic implications. But the move symbolises the growing importance of Massachusetts, where Genzyme is based, to Sanofi’s fortunes.

About 80 per cent of Sanofi’s R&D is now concentrated in cutting-edge biological medicines of the kind that Genzyme specialises in, marking a shift from the traditional chemical-based pharmaceuticals of the past.

Mr Viehbacher has also increased the company’s diversity by beefing up its presence in vaccines, animal health and consumer products – all growing businesses that are less exposed to patent expiries than pharmaceuticals.

Emerging markets have been another focus, together accounting for a third of sales last year – more than those from the US or Europe.

While ruling out large acquisitions, Mr Viehbacher says Sanofi will continue looking for small and medium-sized deals and there has been speculation over a possible sale or spin-off of some older drugs. Several of its rivals, including GlaxoSmithKline and Merck, have been reviewing strategic options for their established product portfolios as they seek to focus resources on growth areas.

Damien Conover, an analyst at Morningstar, says most investors are broadly happy with the job Mr Viehbacher is doing. Shares in Sanofi have risen nearly three-quarters since he took charge.

However, the stock has fallen 2 per cent in the past year after two cuts to earnings guidance in 2013 – in part because of inventory management problems in Brazil. There was more disappointment in April, when first-quarter earnings missed market expectations, leading some analysts to argue that Mr Viehbacher still has work to do before declaring the turnround complete.

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