|Sanofi CEO Chris Viehbacher|
CEO Chris Viehbacher's future may not have been on the Sanofi board's agenda Monday. But it was on Wednesday. The directors issued a statement after an 8 a.m. meeting, the gist of which is this: At Sanofi ($SNY), he has none.
After a few tense days, with talk of a potential ouster swirling, the board "decided unanimously to remove Christopher A. Viehbacher as Chief Executive Officer of Sanofi," the brief statement says.
As is typical in these cases, the statement thanked Viehbacher for his work at the company. It wasn't so typical for the board to simply state that they'd fired him. CEOs usually resign to pursue other opportunities. Also atypically, someone close to the situation leaked a defensive letter from the now ex-CEO to the board, just as Q3 earnings were set to be announced. According to that missive, Chairman Serge Weinberg had been scouting potential successors since early September.
The big question now, as pointed out by Bernstein analyst Tim Anderson, is whether Sanofi's board will turn inward for a replacement--either within the company or elsewhere in France--or recruit a Big Pharma player without a French heritage. As Anderson wrote in an investor note Wednesday, if Sanofi brings in "a well-respected outsider" as AstraZeneca did with Pascal Soriot, "this would be a positive." If not, "it might be more difficult to view this favorably."
As Sanofi's first non-French CEO, Viehbacher wasn't wedded to its French operations--in fact, he openly criticized domestic R&D--and that ruffled feathers with labor unions, politicians and, obviously, the Sanofi board. But Viehbacher's choice to plow resources into a research hub in Cambridge, MA, while cutting back in France, along with moves to build up operations and sales internationally, were popular with investors.
There's no doubt that Sanofi will be looking for a more friendly alternative. During a call with reporters Wednesday, Weinberg said Viehbacher worked too independently, and the board's statement made clear that they want harmony: Sanofi "needs to pursue its development with a management aligning the teams, harnessing talents and focusing on execution with a close and confident cooperation with the Board."
Weinberg cited "numerous issues" on today's call, including "management problems, problems of cooperation with the board and execution problems." The board felt left out of one particular decision, he said--Viehbacher's move to consider selling off a portfolio of older products. It may have been expected as part of a trend within the industry, but the directors were apparently blindsided when a labor union leaked the news to French media.
Rather than elevating a lower-level executive to stand in as CEO while a search proceeds, the directors decided to put Weinberg in charge. There's no chance that the arrangement will become permanent, the statement said: "As soon as a new chief executive officer will be appointed, the Group's governance will return to a chairman and a separate chief executive officer."
Navid Malik, head of life sciences research at Cenkos Securities, predicts that Sanofi will take a back-to-the-future approach. "Viehbacher tried hard to change the DNA of the company but the board won in the end," Malik told Reuters. "Sanofi will become more parochial now."
Not a good thing, Anderson wrote. "Being more global has been a good thing in our view," his note stated. "Prior to Viehbacher, it sometimes almost felt as if Sanofi were a privately-run company, and investors could either choose to come along for the ride or not."
Whatever Sanofi chooses to do from here, the company's image--not to mention its shares--have taken a big hit. The company had lost some $15 billion in market value since the news of Viehbacher's potential exit surfaced, partly prompted by yesterday's bad news about its diabetes franchise. The sudden ouster sent the stock into another skid. "Just firing him without having a replacement only makes things worse," Kepler Cheuvreux analyst Fabian Wenner told Bloomberg. "I'd be slightly scared of how things progress from here."