|Sanofi CEO Chris Viehbacher|
Sanofi ($SNY) CEO Chris Viehbacher has made some big moves since he took the helm in 2008. Now, he may have made one too many. According to a report from the French newspaper Les Echos, Viehbacher's future at Sanofi is in danger, with the French drugmaker's board increasingly unhappy with his decision-making.
According to Les Echos, Viehbacher himself wrote to the board to confront them about his status at the company, after hearing rumors that the chairman is hunting for a replacement CEO.
In the letter, posted on the newspaper's website, Viehbacher sets out his case for keeping the job: Stock price is at a historic high. Pipeline drugs, including a new dengue vaccine, are promising. Relations with key partners such as Regeneron ($REGN)--source of a cholesterol drug with blockbuster potential--would be thrown into disarray. Ditto with key shareholders, and top executives Viehbacher recruited.
Plus, it would just look bad. "Changing the CEO would be against a backdrop of a company and a leader perceived to be succeeding strongly," the letter states. "Such a change would be difficult to understand."
Les Echos sources say the board had been set to discuss a potential successor at a Monday meeting, previously scheduled to discuss Tuesday's Q3 earnings report. In a statement, Sanofi called the confab an "ordinary board meeting" focused on reviewing those financials. "[T]here is no agenda item regarding the succession of Chris Viehbacher," the statement says.
Agenda item or no, the tension between Viehbacher and some unhappy directors is obviously ratcheting upward. Bloomberg sources say Viehbacher wasn't invited to the usual premeeting luncheon, an obvious snub. Those sources also say the board members take issue with three key things. All three raise one question: Is Sanofi still French enough? Viehbacher's purported letter also refers to some provincial restlessness. Saying that senior leaders at Sanofi would be "destabilized" by a change at the top, the letter goes on to state, "Given the international mix of senior leaders, this will be particularly true if the reason for a change of CEO is that the company is too international."
One strike, at least in the eyes of the unhappy directors: French job cuts announced by Sanofi in mid-2012, which touched off street protests--including a flash mob featuring scientists in their lab coats--and prompted pushback from politicians. It didn't help that government officials were good at sound bites, either. "Sanofi is turning its back on its home country," a regional economic official, Jean-Louis Chazy, said at the time. "We cannot accept this pillage."
The company tempered its job-cutting plans in response, scaling back to 800 from a rumored 2,300. Sanofi also agreed to revamp its R&D site in Toulouse rather than shut it down. But Viehbacher minced no words when explaining why French R&D was up for cuts to begin with: The labs in France were lagging way behind Sanofi's U.S. operations in Cambridge, MA, which include Genzyme, the biotech acquired in a $20 billion deal in 2011.
Another: Viehbacher's "strategic review" of older drugs, which apparently surprised the board when the news emerged in July. Given the trend toward those deals in Big Pharma these days, the very idea shouldn't have been unexpected. But a product sell-off would allow Sanofi to whittle away at its European manufacturing network, Bloomberg notes, citing sources. Naturally, that could include cuts in France.
And another: Viehbacher's personal move to Boston. His son is attending college in the city, so Viehbacher decided to move the family along with him. At the time, Sanofi told FierceBiotech that the "personal family decision" would have "no effect on the operation of the company." He spends a good chunk of time in France, and still has a home in Paris, Bloomberg says.
Sanofi has been very protective of its French heritage. And according to one Sanofi investor, the French prefer their executives to be circumspect in public. "The belief is you should never say publicly everything you think when you are the CEO of a company," Jerome Forneris of Banque Martin Maurel in Marseille told Bloomberg.
Obviously, Viehbacher speaks his mind, about the good and the bad. A few of the bad developments have also helped put him in the hot seat with directors. Trouble at Sanofi's Brazilian unit, which resulted in a charge against earnings last year, for one. For another, some disappointing financial results for 2013.
Meanwhile, board members may be dissatisfied with Sanofi's focus shifting away from France, but investors tell Bloomberg they approve. Investors "love him," Forneris told the news service. And as Mark Clark of Deutsche Bank says, "He's made Sanofi an investable stock, which it wasn't before, because it was very Franco-centric management, very un-shareholder friendly."
Apparently, Viehbacher had met with the chairman and two other board members before the letter was sent Sept. 4. In it, he asks the board to sit down to talk out any disagreements. "I am concerned about the impact of rumors and would hope to have the situation clarified as soon as possible," the letter states. With the rumors now translated into news, and earnings due Tuesday, at least some clarity should follow.
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Editor's note: This story was updated with comments from a letter, said to be from CEO Chris Viehbacher, that was posted on the Les Echos website.