When Sanofi CEO Paul Hudson took the reins back in 2019, he laid out an aggressive effort to cut billions of euros in annual costs. With 2020 in the books—and with the company's cost cutting ahead of schedule—Sanofi is boosting its savings target.
In 2020, Sanofi's cost savings amounted to €1.7 billion as it ratcheted back certain businesses, improved efficiency in its operations and focused on “smart spending," the company said. That's 85% of its stated 2022 goal of €2 billion—so Sanofi is adding €500 million to that 2022 target, execs said Friday.
Downsized businesses chipped in €500 million in savings last year, Sanofi said, and the company attributed another €564 million in savings to “operational excellence." The remaining €616 million in savings came from smarter spending, of which €230 million was related to the COVID-19 pandemic.
One of Hudson's early moves was winding down R&D in the diabetes and cardiovascular fields, where sales had flagged in recent years. The company didn't say which "deprioritized" businesses had borne the brunt of those cost cuts.
Sanofi has shed some jobs across the company, including some early retirement offers, a spokeswoman said, but she wouldn't offer specifics on numbers. Job reductions “haven’t been the driver of the cost savings,” she said, and Sanofi has “added jobs across other parts of the business” that it’s been emphasizing for future growth.
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Some of the job reductions stemmed from cost-saving initiatives “already in progress” when Hudson laid out his vision for the company back in December 2019, she added. Others are the result of deprioritized businesses under Hudson's new strategic direction for the drugmaker.
When Hudson presented his vision for Sanofi at the 2019 Capital Markets Day, he said Sanofi would be scaling back its research in struggling diabetes and cardiovascular areas. On the flip side, Sanofi would boost resources behind areas in which the company thinks it has a competitive edge, the CEO said. Some employees have been eligible for new positions within Sanofi, the company’s spokeswoman said.
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Sanofi reinvested 60% of the savings it achieved last year, and it plans to reinvest 100% of the additional savings into its pipeline, Chief Financial Officer Jean-Baptiste Chasseloup de Chatillon said on Friday’s conference call with analysts. The newly announced savings will be "derived by continued operational excellence," he added.
The cost-saving news came as Sanofi reported 2020 sales growth of 3.3% to €36 billion. Vaccines and Dupixent were key growth drivers, with the immunology blockbuster generating a whopping €3.5 billion last year. Hudson has said Sanofi can grow Dupixent into a €10 billion-per-year megablockbuster. Sales for diabetes and cardiovascular meds, where Sanofi has historically had a strong presence, again slipped.
Looking forward, Sanofi said it expects earnings per share to grow by high single digits in 2021.