Sanofi’s New CEO Inherits a Sparse Cupboard and Tough Turnaround

(Bloomberg Opinion) -- In his four years as chief executive officer of Sanofi, the French pharma giant, Olivier Brandicourt has been unable to convince investors that he can overcome the company’s challenges, and its stock has declined 17.9%. Come September, it will be Paul Hudson’s turn. The Novartis Holding AG pharma head seems like a solid choice for a tough turnaround job. 

Investors have already received Hudson positively, sending shares up 5% in Europe. There’s reason for optimism. While Sanofi’s issues aren’t entirely of Brandicourt’s making, it’s past time for new blood.

Sanofi’s biggest problem is pricing pressure and competition for its diabetes franchise. Sales of its flagship insulin Lantus have been almost halved during Brandicourt’s tenure. 

Brandicourt’s efforts to counter these long-brewing pressures have had mixed success. He’s struggled to follow through on ideas — he lost out in bidding wars for both Medivation Inc. and Actelion Ltd. — and the deals he did instead are questionable. He paid a premium $11.6 billion price in 2018 for hemophilia drugmaker Bioverativ Inc. and a set of medicines that face significant competitive threats. His $4.8 billion deal for Ablynx NV is a long-term bet on camel antibodies and a rare disease drug that most likely won’t be a blockbuster. 

The firm’s only source of significant near-term growth might be the inflammation medicine Dupixent. It’s a product of an agreement with U.S. biotech Regeneron Pharmaceuticals Inc. that Brandicourt didn’t make and did not renew, instead focusing on an internal R&D revamping that will take years to pay off. Dupixent proceeds are split, and the medicine faces a new crop of competitors as its use expands. The overall result of Brandicourt’s tenure is a growth profile and product pipeline that lags behind those of many of its peers. 

As for whether Hudson can turn things around, it’s tough to apportion credit in an organization as huge as Novartis and in a business with decade-long development times. But the Swiss drugmaker’s pharma unit has done well in the three years he’s led it.

Novartis both weathered generic competition for its largest product, Gleevec, and introduced a blockbuster in Cosentyx. Hudson also played a role in shepherding a pipeline that looks particularly robust next to Sanofi’s fairly sparse cupboards. Novartis CEO Vas Narasimhan said recently that the company has 25 potential blockbusters in development.  

Hudson has experience running a sizable organization; the Novartis pharma unit generates about as much revenue as Sanofi overall. He’s also been part of the leadership team at a business that has changed rapidly. Novartis has been reshaped in the last year around Hudson’s former unit as it shed its eye-care and consumer-health businesses. Sanofi could benefit  from some slimming. 

Hudson won’t be working with the same sort of financial firepower at Sanofi, and the board will have to be patient if it wants results. That’s not a given. Brandicourt’s predecessor, Chris Viehbacher, expanded the firm’s partnership with Regeneron and got Sanofi into the lucrative rare-disease business. But he was controversially and suddenly ousted in large part because his efforts at significant change grated against the board and French politicians. That’s not a recipe for success. 

The fact that Hudson is a well-pedigreed external hire and not a Frenchman should give investors some hope that the company may have finally learned from its mistakes and embraced the need for a significant shift. 

Includes both new products and line extensions.

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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