Sanofi board ousts CEO Viehbacher
Thursday, October 30, 2014
Paris-based biopharmaceutical company Sanofi ousted CEO Chris Viehbacher Wednesday, just two days after reporting disappointing quarterly earnings.
Viehbacher reportedly also had a falling out with Sanofi’s chairman Serge Weinberg over his management style and a difficult relationship with the board of directors.
Viehbacher became known in the U.S. in 2011 when he engineered Sanofi’s $20 billion acquisition of Genzyme, the Cambridge, Mass., biotech specializing in rare disease medications. The deal gave Sanofi an American biotech research base, and also led Viehbacher, in June of this year, to relocate his residence from Paris to the Boston area. That decision reportedly exacerbated simmering tensions with company directors but was not the root of the dispute.
Weinberg told reporters during a conference call Wednesday relations between Viehbacher and the board were not close enough and he had failed to sufficiently execute the company’s strategy. Weinberg said he is searching for a new CEO and will consider mainly external candidates. Rumors have circulated that he has reached out AstraZeneca CEO Pascal Soriot to gauge his interest.
The board’s unanimous decision to fire him—which Viehbacher said he knew was under consideration from what he called “rumors”—prompted him to write a three-page letter to the board Sept. 4 stating that replacing him was a bad idea. First reported by Los Echoes, a French newspaper, on Monday, Viehbacher’s letter said changing CEOs now would be detrimental to the interests of shareholders and other stakeholders. He said Sanofi’s stock price was at a “historic high” and cited recent clinical trial results for various medicines, along with the “value” of the company’s product pipeline. Removing him, he warned, would destabilize senior management and disrupt alliances with other companies such as Regeneron Pharmaceuticals, and would alter relationships with regulatory and industry trade groups.
“I have worked hard and traveled long distances over the past five years to rebuild a Sanofi that is financially successful, provided new hope to patients through innovative, new medicines and built a strong leadership team,” the 54-year-old Viehbacher wrote. “I ask you not to put this development at risk, and that we have a dialogue about what the board would like to see going forward.”
Viehbacher, hired by Sanofi in December 2008 as the first non-French CEO after a stint at GlaxoSmithKline (where he was under consideration to become its CEO), said Sanofi has been transformed over the past six years, adding “I’m proud of that track record. … We’re pushing ahead on all fronts.”
That track record included expanding its existing collaboration with Regeneron, a Tarrytown, N.Y.-based biotech that now includes two potential drugs in late stage testing: a medication to treat high cholesterol and one for rheumatoid arthritis. Sanofi also has developed, within its own labs, a vaccine for dengue fever.
As CEO, Viehbacher brought in new R&D leadership, hiring Elias Zerhouni, former head of the U.S. National Institutes of Health (NIH) to run the R&D division and Andrew Plump, a rising star from Merck, to run basic research.
However, amid his success were some failures and problems, starting with hefty spending of hundreds of millions of dollars on BiPar Sciences, whose promising drug for ovarian cancer failed. That failure prompted Sanofi to get back to developing its own oncology therapies. Viehbacher also overpriced a colon cancer treatment developed by Regeneron, generating a public uproar that led to a price cut.
Sanofi ran into problems this quarter with its best-selling drug Lantus, the popular long-acting insulin, which had $8 billion in annual sale. The company said Lantus, a 10-year-old injectable drug, is facing new competitors and won’t grow as expected next year due to price pressures in the U.S.
Some Wall Street analysts said while Viehbacher won praise from investors for making the company more international, his rather direct, tell-it-like-it-is style and recent clashes with board members led to his ouster.
“While Sanofi had its ups and downs since Viehbacher was brought in from the outside world (GSK specifically), the ups have generally exceeded the downs, and our perception is that Viehbacher has had the support of the investment community more often than not,” Tim Anderson, a pharmaceutical industry analyst at Sanford C. Bernstein, wrote in a Wednesday morning note to investors. “If the company were to bring in a well-respected outsider as his replacement—like AstraZeneca did when it picked up Pascal Soriot from Roche—this would be positive. By contrast, if it is a promotion from within, it might be difficult to view this favorably.”
Viehbacher’s dismissal also prompted Forbes to bluntly state the decision “was a wrongheaded resistance to change. It looks like a huge mistake.”
The Wall Street Journal reported Weinberg ousted Viehbacher because of his management style and difficult relationship with the French-dominated board of directors. Weinberg said he would temporarily take over as CEO, and the company has no plans to change its strategy.
Sanofi shares, which were trading at $25.62 when Viehbacher became CEO six years ago, have—until recently—doubled, peaking at $56.43 on the Paris Stock Exchange. Following the announcement, shares closed Wednesday down 6% to $45.22.