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Sanofi Outlines New Objectives

Pharmaceuticals: Company plans further cost cutting as it nears a 2012 patent cliff

by Ann M. Thayer
September 12, 2011 | A version of this story appeared in Volume 89, Issue 37

Credit: Sanofi
Credit: Sanofi

this year, two years ahead of schedule, Sanofi will meet a $2.8 billion cost-cutting goal that it set for itself in 2009. Now, as 2012—the year it will lose patent protection for the anticoagulant Plavix and the blood pressure drug Avapro—approaches, the French company is launching new plans for cutting costs and expanding sales.

“When you have these big blockbusters, which generate cash and profits, you have amazing economies of scale that hide an awful lot of things that are not so efficient,” Sanofi CEO Christopher A. Viehbacher told analysts during a conference call last week. “When they go away, it’s extremely important to become much more efficient.”

Sanofi managers hope that new initiatives—combined with $700 million in savings from the integration of Genzyme, which Sanofi acquired for $20 billion in April—will yield another $2.8 billion in savings by 2015. They told the analysts that they will continue to trim manufacturing, increase productivity, leverage shared services, and reduce purchasing costs.

At the same time, R&D expenditures, which are on track to total about $6.9 billion this year, are expected to be flat or decline slightly through 2015. And although no specific job cuts were mentioned, managers did point out that some of the savings already achieved between 2008 and 2011 have come from a 22% reduction in employees and the closure of 12 out of 26 R&D sites.

Sanofi will continue to reduce its reliance on big products such as Plavix, which is the world’s second-best-selling drug, with first-half 2011 sales of $5.1 billion. To offset eventual lost sales and foster growth of at least 5% per year through 2015, the firm is ramping up its business in emerging markets, vaccines, consumer health, and biopharmaceuticals. It also expects to file for six new drug approvals by early 2012.

Although stock analysts see 2012 as a “trough year,” in which Sanofi’s earnings will decline by nearly $2 billion, many are upbeat about the longer term. According to Leerink Swann analyst Seamus Fernandez, Sanofi’s post-patent-cliff growth target “seems optimistic but not unachievable.”



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