ANALYSIS-Sanofi lets Genzyme's biotech culture call the shots

Thu Nov 15, 2012 7:56pm IST

Stocks

   

* Genzyme culture change at Sanofi

* Planned reshuffle had frosty reception in France

* Strategy vindicated by share price rise

By Elena Berton

PARIS, Nov 15 (Reuters) - When Sanofi boss Chris Viehbacher first met staff at Genzyme, the U.S. biotech he had just acquired after a long takeover battle, he told them he did not want "planeloads of people coming from Paris over here to kind of Sanofize Genzyme".

More than one year later, the German-Canadian, who is Sanofi's first non-French boss, has kept his promise: it is Genzyme's free-spirited culture and innovative edge that is holding sway at the French drug giant.

Genzyme executives now run the company's U.S. headquarters near Boston, one of its international research hubs which Viehbacher is betting on to revive Sanofi's lacklustre drug research results.

Highlighting Genzyme's dominance, Sanofi's newly-appointed deputy head of research and development operations, virologist Gary Nabel, will be based at Genzyme's head office in Cambridge, Massachusetts.

Nabel, a highly respected scientist at the U.S. National Institute of Allergy and Infectious Diseases since 1999, is a notable catch for Sanofi.

Even the group's new headquarters in central Paris has a biotech feel, with open-plan offices and multiple meeting rooms designed to encourage staff to share ideas.

"It's an approach Sanofi is adopting at a global level," one analyst said on condition of anonymity. "It's a different approach and it will take a bit more time to implement in France, but the decisions that have been taken are being put into practice anyway."

The Genzyming of Sanofi provides another example of how mainstream pharmaceutical companies are increasingly turning to the nimble, risk-hungry biotech sector - not only for new drugs but also for new ways of doing business.

Pharmaceutical giants may have deep pockets to support research, but their hierarchical and bureaucratic style is often considered a hurdle to the innovation they badly need when many of their existing drugs face competition from cheaper copies.

Sanofi's Genzyme deal followed Swiss rival Roche's, takeover of Genentech, the San Francisco-based biotech now driving the drug pipeline of the 116-year old Basel-based drug giant.

SIDE EFFECTS

The French company's track record on drug development has been disappointing. Sanofi has tended to spend more than its peers on drug research and get fewer products to the market, according to Boston Consulting Group.

Sanofi's performance in research is partly a side effect of the multiple acquisitions that have catapulted the company, once a fledgling unit of oil group Elf Aquitaine, into the world's top-five drugmakers.

These deals saddled Sanofi with a cluster of unconnected research centres that relied on the Paris headquarters for decision making, instead of sharing information with each other.

"The decision-making structure and strategy were centralised in Paris," said Matt Gurin, who heads the life sciences team at consulting firm Hay Group and advised on the integration of Franco-German drugmaker Aventis into Sanofi in 2004.

"All of Sanofi's blockbusters were acquired through acquisitions, not innovation," he said.

Now the French company is betting on Genzyme's market-leading line-up of drugs for rare diseases and its multiple sclerosis drug Lemtrada to help restore its pipeline after losing several aging blockbusters to generic rivals.

In addition, to speed up the discovery of promising treatments, Sanofi has strengthened cooperation with universities, merged research centres and stepped up scouting for new drugs outside the company.

Sanofi has also been cutting costs, wielding the axe to boost productivity in research labs in the United States and parts of Europe.

This year Viehbacher caused a stir when his cost-cutting drive targeted France, where he said researchers had not come up with a new product in 20 years.

This got a frosty reception from research staff and the French government which eventually stepped in to force the company to rein in its extensive layoff plan that unions had predicted could affect 2,500 posts.

The company ended up scaling back its country-wide reshuffle to around 900 voluntary layoffs.

Terry Hisey, head of the life sciences team at consultancy Deloitte, said there was too much at stake for Sanofi to ignore the government's requests.

France's national health service generates the majority of Sanofi's 3.1 billion euros ($3.9 billion) in sales in the country, while the group is one of the main beneficiaries of government tax breaks on research costs, saving around 130 million every year.

"In these cases, you can't say one size fits all. Something may make sense on a rational level, but it may be costly once you deal with the practical point of view of labour laws and regulation," he said.

Sanofi's cost-cutting strategy seems to have been vindicated by a 20 percent hike in its share price this year, allowing it to overtake former shareholder, oil major Total, as France's biggest company by market capitalisation.

($1 = 0.7867 euros) (Additional reporting by Noelle Mennella. Editing by Jane Merriman)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Global Growth

Global Growth

IMF cuts outlook, warns of stagnation risk in rich nations  Full Article 

Waning Enthusiasm

Waning Enthusiasm

Markets' post-election enthusiasm lost on consumers.  Full Article 

Monsoon Revives

Monsoon Revives

Monsoon revival keeps rain above average   Full Article 

Banking Sector

Banking Sector

Banks not allowed to trade in bonds for infra lending - RBI.  Full Article 

Just Not Enough

Just Not Enough

Amazon's smartphone fails to kindle a "Fire" among reviewers.  Full Article 

Rising Market Value

Rising Market Value

Facebook goes express to mega-cap status  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage