|Sanofi CEO Olivier Brandicourt|
One of the episodes that got ex-Sanofi CEO Chris Viehbacher fired was his very public run-in with France's unions when he decided jobs cuts were needed in France to trim costs. Now we will see if his successor can fare any better as Olivier Brandicourt tries to cut costs and build revenue for a company that faces challenges.
The new CEO told union members Thursday that the cost of plants and operations in France is holding down the drugmaker's profit margins and that this fall, he will lay out a 5-year strategic plan about how he intends to fix that and build the company, according to Reuters. The news service, which got its reading on his remarks from an unnamed union source, said it was the CEO's first meeting with unions.
For their part, organized labor is looking to Sanofi ($SNY) for a pay boost after two years of wage freezes. Union members are obviously skittish about what Brandicourt intends to do in France about manufacturing and R&D sites given that Viehbacher in 2012 made France ground zero for cost-cutting. He had complained loudly about how unproductive Sanofi's R&D operations there were, sucking up money and failing to develop valued products.
|Former Sanofi CEO Chris Viehbacher|
But Viehbacher, who was Sanofi's first nonnative CEO, ran into a buzzsaw when he proposed cutting Sanofi's workforce by 5% to 7%, about 2,500 jobs. There were strikes, public protests and pushback from politicians, which reportedly was off-putting to Sanofi's French board members. Viehbacher had to back down, reducing the cuts to about 900 and even then they took months to be finalized.
On the other hand, investors liked Viehbacher for his open style and for keeping the company's stock solid. So they too are anxious to hear how Brandicourt intends to build revenue, particularly given weakness in the U.S. for Sanofi's lucrative diabetes franchise. They also will be looking to see how much power the board will give the French-born CEO to make moves. In Q1, pharma sales were up 2.2% at constant exchange rates, to €7.5 billion but sales of diabetes blockbuster Lantus were off 3.2%.
The company and investors are excited about Praluent, the cholesterol-lowering drug Sanofi developed with Regeneron Pharmaceuticals ($REGN). It is in a new class of drugs which is expected to be big sellers and Brandicourt will benefit from an FDA approval, which an FDA committee earlier this month recommended. On the other hand, unions will want to know what they will get from any upside. They already have ammunition if they don't think Brandicourt is treating them well. European executive pay critics howled about the €4.2 million pay, €4 million signing bonus and the pension pot worth an estimated €9 million that he was granted when he was hired in February.
- read the Reuters story