Sanofi Revival Depends on Outsider With a Nose for Big Drugs

(Bloomberg) -- French pharma giant Sanofi is counting on Paul Hudson, a British citizen with a background in sales, rather than science, to revive its slumping stock price and a pipeline that’s been slow to deliver.

Hudson, whose almost 30-year career in the industry includes senior positions in Spain, Japan and Switzerland, relishes the outsider role. When he takes over from Olivier Brandicourt in Paris this week, he will be among the few non-French executives at the helm of a major corporation in the country.

“I fear nothing about culture,” Hudson told Bloomberg News. “I have a simple approach: immerse yourself in where you go.”

Investors will judge him not on his accent, but his ability to fire up the drugmaker’s research engine, expand in the lucrative but competitive cancer market and tack through pricing headwinds. Defining Sanofi’s ambitions in the cutting-edge field of gene therapies and figuring out whether to hold on to consumer health brands are among other priorities.

Hunt for Blockbusters

The former pharma head at Novartis AG is credited with rolling out drugs such as Cosentyx for psoriasis, set to become the Swiss company’s top seller. In his new role, he’ll need to deliver more blockbusters to reduce Sanofi’s reliance on Dupixent, its standout medicine for severe eczema and asthma.

“What you really need is a nose for good products, and he has that,” said Bruno Strigini, who worked with Hudson at Novartis before stepping down as the CEO of the Basel-based company’s cancer division two years ago.

When he joined Novartis in 2016, Hudson spent his first hours focusing heavily on a heart drug called Entresto that got off to a sluggish start. After he ramped up marketing, the therapy hit its stride and is forecast to rack up $1.7 billion in sales this year.

“I saw enough in my first day to know it had changed patients’ lives,” he said. “By the time I got to headquarters in Basel, I knew we had a medicine; the question was how we were going to get to that potential.”

Deep Dive

Now, the new CEO points to Sanofi treatments for multiple myeloma, breast cancer and rare blood disorders, along with a vaccine for RSV, the respiratory virus, as some of the most promising opportunities. He’s signaling bolder ambitions in China, partly through tech partnerships. In the coming months, he’ll carry out a “deep dive” of the pipeline and closely examine how each unit, including consumer health, fits within the company.

“We should be looking critically across the portfolio,” he said. “The green shoots of a return to growth are there. My job is to pick that up and run fast.”

Sanofi is one of the biggest makers of diabetes medicines. But with prices for those drugs under mounting pressure, it’s prioritizing a faster-growing side of the industry that includes cancer therapies that are extending lives while fattening bottom lines at Merck & Co., AstraZeneca Plc, and Roche Holding AG.

Outgoing CEO Brandicourt and new research head John Reed had already begun sifting through drugs under development to accelerate the company’s best prospects. Still, Sanofi is behind in cancer, a specialized treatment area, and may further winnow the pipeline as its rivals have.

Stock Slip

“I suspect they will double down on specialty care because that’s where the growth is most likely going to come from,” said Ed Corbett, a consultant at Novasecta Ltd. in London. “That requires making some tough calls, probably doing some M&A and continuing to streamline R&D.”

During the Brandicourt era, Sanofi’s track record with acquisitions was mixed and failed to spur the shares. The stock had slipped 12% over the past four years through Friday, compared with a 78% gain for Astra, but rose as much as 1.2% on Monday. In July, the French company took a 1.8 billion-euro ($2 billion) charge and reduced sales estimates for Eloctate, the hemophilia drug gained in the takeover of Bioverativ.

Despite that disappointment, more deals would be the fastest way to build up Sanofi’s stable of medicines and profile in cancer, analysts at HSBC wrote in an Aug. 2 note. There may also be temptation to follow companies like GlaxoSmithKline Plc that have distanced themselves from lower-margin consumer health businesses to focus on discovering new drugs. Novartis also spun off its Alcon eye-care operation and exited consumer health during Hudson’s tenure, and similar products may be in the spotlight at Sanofi, too.

Consumer Division

“The external environment is changing quite quickly so we have to decide who the best owner is,” Hudson said, adding that he plans to provide more detail about company strategy at a meeting in December. The company routinely evaluates areas like consumer health, vaccines and rare diseases to look at how best to participate in them, and hasn’t made any decisions about changes, Hudson said.

Unloading its consumer division, which sells products for coughs, colds, pain and other ailments and generated more than $5 billion in 2018 sales, could make sense for Sanofi.

“There’s a greater chance they will do something,” said Markus Manns, a fund manager for Union Investment, a Sanofi shareholder. “New management likes to show they’re taking action, and investors at the moment tend to reward companies for splitting up.”

Unlike Brandicourt, who studied medicine and science, Hudson specialized in economics. Born in 1967, he graduated from Manchester Metropolitan University in 1990. He received job offers from oil and retail companies but was drawn to health care, and his first assignment was a 13-week training course on asthma.

Early experience in sales has been valuable for Hudson, said Richard Francis, the former chief of Novartis’s generics unit who has known him since their days at the English university. “That helped him stay very close to the customer.”

Hudson isn’t Sanofi’s first non-French CEO, but Canadian-German Chris Viehbacher, who led the drugmaker before Brandicourt, spoke the language and once managed the country’s operations for Glaxo.

International Mindset

Yet he’s a rarity in France. When Canadian Ben Smith was appointed Air France-KLM CEO in 2018, unions said the choice was inconceivable.

Like Takeda Pharmaceutical Co.’s move in 2015 to make Christophe Weber its first foreign CEO, Sanofi’s decision may carry a message. “It’s clearly going to be a challenge,” said Fouzia Laghrissi-Thode, who worked with Hudson at Astra before becoming CEO of DalCor Pharmaceuticals. “But it’s a good opportunity for Sanofi to project a more international mindset.”

In earlier roles, Hudson said, he learned enough Spanish to run meetings and delivered speeches in Japanese. Now he’s tackling French, and preparing once again for the pros and cons of being the newcomer.

“If I lack respect, and I’m just fresh eyes with a playbook pre-formed, I’ll get what I deserve,” he said. “If I come with a dispassionate, critical but constructive viewpoint that will allow people’s work to get to places they never thought was possible, then it’s an advantage.”

To contact the reporter on this story: James Paton in London at jpaton4@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman

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