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 The management turmoil comes at a particularly awkward time for
France's second-biggest listed company, after it warned on Tuesday
that growth in its key diabetes business would likely stall next
year.
The board said on Wednesday Sanofi would continue the strategy of
international expansion pursued under Chris Viehbacher, blaming his
dismissal on his management style and poor relations with the board.
But some analysts fear the company may become more insular.
"Viehbacher tried hard to change the DNA of the company but the
board won in the end. Sanofi will become more parochial now," said
Navid Malik, head of life sciences research at Cenkos Securities in
London.
Shares in Sanofi were down more than 4 percent in morning trade.
That takes their decline over the past three days to more than 15
percent, wiping almost 17 billion euros ($22 billion) from the
company's market value -- or more than the entire market
capitalization of French carmaker Renault <RENA.PA>.
Sanofi said Chairman Serge Weinberg would take on the CEO role until
a replacement for the ousted German-Canadian Viehbacher was found.
Weinberg said on a conference call there had already been contacts
with potential candidates in the pharmaceutical industry and
nationality would not be a factor.
"We want to choose the best possible boss for Sanofi, so we'll take
the time that's needed," Weinberg said, adding the board would
strive to go "as fast as possible".
UNANIMOUS DECISION
Sanofi's first non-French boss, Viehbacher transformed a national
champion into a global business, largely due to the $20 billion
acquisition of U.S. biotech and rare diseases company Genzyme in
2011, which tipped the enlarged group's center of gravity away from
Paris and towards Boston.
But his straight-talking and sometimes brusque management style
raised the hackles of trade unions, and a source close to the board
told Reuters this week that it was unhappy at the lack of
communication from an "authoritarian, solitary, secret" CEO.
Viehbacher did not inform the board when he recently oversaw a
review of what to do with an $8 billion portfolio of off-patent
drugs in Europe, most of which are produced in France. The options
studied leaked to the press and fired up tensions.
Weinberg said the unanimous decision from the board's 15 members to
remove Viehbacher stemmed mainly from his management style and poor
cooperation. He also cited problems with Viehbacher's execution of
group strategy, pointing to inventory problems in Brazil last year,
a slowdown in sales in China and Tuesday's warning on its diabetes
business.
The fact Viehbacher moved to Boston in June did not help relations
improve, but his change of residence was not the root of the
dispute, one source close to the board said.
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Uncertainty over Viehbacher's role first surfaced on Monday with the
publication of a Sept. 4 letter he sent to the board asking for
clarity about his position.
A source close to the matter said Wednesday's board meeting lasted
only 30 minutes and was relaxed. "Chris Viehbacher thanked everybody
and said he respected the board's decision. He seemed prepared," the
source said.
French cosmetics group L'Oreal <OREP.PA> is Sanofi's largest
shareholder, with a stake of 9 percent. Officials at the company
were not immediately available to comment.
M&A?
Some investors were disappointed Sanofi did not set out a plan on
Tuesday to offset problems at its diabetes unit with cost cuts.
However, Citi analyst Peter Verdult said scope for significant cuts
were limited by the need to invest in the new drug pipeline. It is
also difficult for Sanofi to cut its domestic cost base in France,
due to strict French labor laws.
One lever Sanofi could pull would be to make further acquisitions,
according to Bernstein analyst Tim Anderson.
"Generally speaking, in the pharmaceutical sector, larger M&A deals
tend to happen when companies are in difficult straits and this is
where Sanofi seems to be at the moment," he said.
Sanofi has stayed somewhat on the sidelines of a global tide of
mergers and acquisitions in the industry over the past year.
Weinberg ruled out mega-deals, saying these rarely created value,
but said the group would keep looking at targeted acquisitions to
strengthen its existing businesses.
"It's not because we haven't acted lately on this front that we
won't do so tomorrow, but we are not interested in big operations,
in what we call mega-mergers," he said.
(1 US dollar = 0.7853 euro)
(Additional reporting by Ben Hirschler in London and Alexandre
Boksenbaum-Granier in Paris; Editing by James Regan, Andrew Callus
and Mark Potter)
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