NEWSMAKER-Viehbacher applies Glaxo lessons at Sanofi

LONDON, Feb 15 (Reuters) - Chris Viehbacher, the new chief executive of French drugmaker Sanofi-Aventis SA SASY.PA, could hardly have hoped for a better start.

Sanofi stock leapt 8 percent, or $6 billion, after he set out his strategy for the first time on Feb. 11 alongside 2008 results that met market expectations.

But the former GlaxoSmithKline Plc GSK.L executive, in the Sanofi job just 11 weeks, knows he has his work cut out to rebuild investor confidence in the world's third-largest seller of pharmaceuticals, following a string of high-profile setbacks.

His answer is diversification via small and mid-sized acquisitions in vaccines, generics and over-the-counter drugs, and an overhaul of research to shift the focus away from chasing “blockbusters” and put greater emphasis on outside alliances.

The aim is to make Sanofi a low-risk healthcare business with a global footprint.

It is a very similar strategy to that adopted by Glaxo’s new boss Andrew Witty, who beat Viehbacher to the top job at the British-based group in 2007.

James Knight, an industry analyst at stockbroker Collins Stewart, says it is none the worse for that.

“He’s got a good chance because he comes from a business in GlaxoSmithKline that has some of the answers to some of the challenges that Sanofi is facing,” Knight said.

“The ideas on R&D strategy, cost cutting and making the portfolio more rounded from a products and geographic point of view are important steps in repositioning Sanofi in investors’ minds.”

Certainly, Viehbacher could do worse than emulate the stock market rating of Glaxo, which has many of the same problems of generic competition and unproven new drugs but whose shares trade on 10.5 times forecast 2009 earnings versus Sanofi’s 7.9.

In the past, Sanofi has stressed scientific innovation and boasted of its large portfolio of experimental drugs as evidence it can overcome the potential loss of more than a fifth of its current drug sales to generic rivals by 2012.

But investor confidence in the commercial potential of the pipeline has been weak -- especially after the failure of weight loss drug Acomplia, which was finally pulled from development last year after being linked to psychiatric problems.

Viehbacher is taking a tougher line on research by terminating poor quality projects. That will cut R&D spending over the next year and should trigger widespread earnings upgrades, according to Morgan Stanley analyst Andrew Baum.


In addition to changing operations, Viehbacher also brings a change of culture, as a non-French outsider parachuted into a pillar of France’s corporate establishment.

In contrast to predecessor Gerard Le Fur, who was ousted last September after less than two years in the job, Viehbacher, has widespread international experience from his 20 years at Glaxo, most recently as head of its U.S. business.

The 48-year-old is a dual citizen of Canada and Germany, who also speaks French.

A key priority for him is improving communications with investors -- an area where Sanofi has been perceived as weak.

For now, shareholders are clearly on his side. But execution on strategy will be critical and Viehbacher still has to navigate the ups and downs of news flow in 2009.

On the positive side, Sanofi has a chance next month to prove its research laboratories can still deliver when heart drug Multaq goes before a U.S. Food and Drug Administration committee, a step that could pave the way for 2009 approval.

But there is also the danger of a generic competitor to top-selling anticoagulant drug Lovenox emerging this year.

Other risks include any move by Total SA TOTF.PA to sell down its 13 percent stake and the possibility that Sanofi follows Pfizer Inc PFE.N in acquiring a large-cap drugmaker, according to Citigroup analyst Mark Dainty.

Viehbacher said last week he was not considering such a mega-deal, but he did not rule out any strategic option. (Editing by Dan Lalor)