Sanofi, Europe’s third largest pharmaceuticals firm, is investing €200 million on its insulin production facility in Frankfurt, and will create 500 new jobs there as it struggles to recover from a turbulent year, its chairman and interim chief executive Serge Weinberg told Handelsblatt.
Sanofi shares have slumped 17 percent since the end of October, after the company said that sales of its diabetes treatments would remain flat next year, and then dramatically fired its chief executive Chris Viehbacher the next day.
Mr. Weinberg, who stepped in as Mr. Viehbacher’s temporary replacement, said the sales team in the U.S. had performed badly under Mr. Viehbacher’s stewardship, but the company is still committed to the sector.
“The sales force was poorly managed so our top product Lantus lost market share to competitors,” he said.
Sanofi will lose patent exclusivity on Lantus, a long-acting insulin next year, and Mr. Weinberg admitted this will affect the business. “This will have an impact on prices, of course. And we have factored it in our forecast for the period up to 2018,” he said. Mr. Weinberg expects revenues at the the diabetes business to remain stable. “This means we are likely to see growth in most regions, but a decline in the U.S.”
He denied that diabetes drugs are becoming a commodity.
“Insulins stay complex and are expensive from a production perspective,” he said. “Doctors only switch from one insulin to another if they are convinced that a change is necessary.”
The company has now submitted a new insulin product, Toujeo, for approval but Mr. Weibnberg admitted that Sanofi is unlikely to be able to charge higher prices for it.
He said the company was open to new acquitions in the sector, but ruled out buying Bayer's diabetes diagnostics business, which has been touted as a possible match.
"We are certainly thinking hard about integrating diabetes therapy and blood glucose monitoring, and are also committed to the field. But I don’t think we would be interested in the Bayer division," he said.
The board learned about these plans from newspapers and not from the chief executive. That was unacceptable. Serge Weinberg, Sanofi chairman
He also said the company is on track to generate €30 billion, or $37 billion, of sales from new products from 2018 onwards. He warned that this was a tentative figure and does not factor any risks, but added "this statement speaks of enormous progress.” The company’s new launches in the last five years have accounted for just 4.5 percent of sales and the forecasts for the next five shows that “In terms of innovation, we really are moving into a new dimension.”
Mr. Weinberg also said the company is seeking a new chief executive to replace Mr. Viehbacher, who was ousted in October after a power struggle with Mr. Weinberg and the rest of the board.
Mr. Viehbacher, who has Canadian and German citizenship, was the first non-French chief executive Sanofi had ever appointed. In his six years at the helm, he diversified Sanofi away from traditional charmaceuticals and invested heavily in biotechnology and animal health. Most notably, in 2011, he acquired the biotech giant Genzyme in the U.S.
He had also clashed with unions over his plans for wide-ranging job cuts, and alienated many by relocating from Paris to Boston over the summer for personal reasons. Many at Sanofi feared that decisions about job cuts in France were being made by someone who lived outside the country.
Mr. Weinberg told Handelsbatt said the board sacked Mr. Viehbacher so suddenly because internal discussions about his future were being leaked to the media. He insists however that Mr. Viehbacher was fired not for being a foreigner, but because “operational mistakes have been stacking up since last year.”
He said Mr. Viehbacher had been fired after the company missed three targets in 2013 and ran into problems in several overseas operations including inventory problems in Brazil.
The Sanofi board was also furious that Mr. Viehbacher had been secretly planning to dispose of some of its generic drugs. Most of these drugs are made in France, and his moves infuriated Sanofi’s workforce and management. “The board learned about these plans from newspapers and not from the chief executive. That was unacceptable,” Mr. Weinberg said.
Mr. Weinberg insists the company now had no plans to sell off these sectors. “This business provides a strong cash flow which we use to bankroll many innovations. It also gives us a strong market presence in many countries, which we can now leverage to launch our new products,” he said.
He said he has still not ruled out job cuts in France, and is currently overhauling the research and development plant in Toulouse. He added that jobs at the Frankfurt facility, where the company's insulin is made, are safe.
"Job cuts are out of the question at this time. On the contrary: We are expanding the site. We will create more than 500 new jobs here with the construction of the plant for Toujeo and other projects."
Mr. Weinberg said the company will continue with its current strategy of carrying out pharmaceutical research while also keeping its steady growth in consumer healthcare, veterinary medicines and vaccines businesses.
Siegfried Hofmann and Maike Telgheder cover pharmaceuticals and markets for Handelsblatt. Meera Selva is an editor with Handelsblatt Global Edition. To contact the authors: [email protected], [email protected], [email protected]