Remixed Sanofi plans further $2.8B in cost cuts

Call it the Sanofi ($SNY) remix. At a strategy conference today, the French drugmaker unveiled its latest sales-and-earnings projections, and they're all predicated on Sanofi's new amalgamation of businesses and markets. From a blockbuster-focused, U.S.-and-Euro-centric drugmaker, Sanofi has become a more diversified, more global organization.

The result is less risk and higher sales, at least once the company navigates the next 18 months. And now, Sanofi is projecting earnings growth of more than 5%, on average, over the next four years, on the back of another $2.8 billion in cost cuts.

Sanofi-watchers know what's been going on since 2008, when CEO Christopher Viehbacher (photo) took over. The drugmaker has been on an acquisition quest, snapping up companies to grow in animal health, generics, consumer healthcare and emerging markets. It bought the U.S. rare disease specialist Genzyme, aiming to build a stable of expensive, hard-to-copy meds. The company is hoping to make up the difference, revenue-wise, when blockbuster drugs such as Plavix go off patent.

Meanwhile, Sanofi has been shutting down facilities, laying off sales reps and otherwise slashing into its cost base. Now that it's bringing Genzyme into the fold, more cost-cutting is in store. Genzyme will account for $700 million of the planned $2.8 billion in cuts, thanks to the integration of its oncology unit with Sanofi's, combining R&D in Boston, and shared support functions. Most of the savings--some 60%--will come from the latter.

Other cost-cutting measures planned for now through 2015 include increasing capacity utilization worldwide, sharing support functions and concentrating on "synergies" at its Merial animal-health unit. Then there's "increased headcount productivity," which may or may not mean job cuts; Viehbacher declined to elaborate on the cost-cutting plans during a media conference call. "We need to continue to exercise cost discipline," Dow Jones quotes him as saying.

Analysts welcomed the cost-cutting news, along with most of the rest of Sanofi's presentation. Increased dividends, especially. "The key announcements are all pretty positive," Aurel BCG analyst Pierre Corby told Bloomberg. "Tight cost control will allow for savings and better shareholder payout."

- get the Sanofi presentation
- read the Sanofi release
- see the Bloomberg story
- check out the Reuters news
- find the Dow Jones coverage