Pipeline of comfort for Waterford

FRIDAY INTERVIEW: CHRIS VIEHBACHER, CHIEF EXECUTIVE, SANOFI:WHEN FRENCH pharmaceuticals giant Sanofi completed the €20.1 billion hostile takeover of US biotech group Genzyme earlier this year, a shiver went through the Irish workforce.

The arrival of the highly regarded developer of biotech treatments for niche therapy areas had been regarded as a coup in Waterford where its Irish operations are located. The county has seen more than its share of job losses in recent years and Genzyme was considered a solid bet for future growth. By the time of the takeover, it employed over 500 people.

But Sanofi had little physical presence in the State and, over the previous decade, Sanofi’s Aventis business had closed two businesses in Cork and Waterford with the loss of more than 400 jobs.

But Chris Viehbacher sees no prospect of a repeat. On his first visit to Ireland, the global chief executive of Sanofi hailed the workforce and technology at the Genzyme plant as he opened a new €150 million extension to its operations.

“Personally, I’ll say this as as CEO, I don’t think anyone needs to worry about the Waterford facility. It’s producing strategically important products, it has some of the most sophisticated technology that we have anywhere and we’ve just invested half a billion euro here.

“We are extremely happy with how the facility is performing.”

Already, the Waterford plant is playing a central role in Sanofi’s efforts to turn around Genzyme, which has been plagued with manufacturing issues in recent years. Before the takeover, the company had to close down a major manufacturing plant in Boston, with much of the work being transferred to Waterford.

Viehbacher stresses the importance of discipline and quality when it comes to manufacturing biologics.

“I can take you to any plant and show you that, pretty much, it is all the same people who manufacture the equipment. There are people who are specialised in building these facilities who could build this facility anywhere in the world. To make biologicals work though is down to ‘know how’ and people.

“Because of the sophistication, you are going to need a very disciplined culture in terms of quality. So the quality of people is probably the number one decision in where to invest. I look at this facility, we have roughly 500 people here. Half of them – and this is a manufacturing facility – have a university degree and the other half all have at least some technical background so you are talking about some pretty well-educated people.”

He praised the “accommodation” of the Government in allowing the group “to get this facility up and running as quickly as it has”.

“Local government support is very important in deciding where to invest. There is an extremely strong culture [here] about productivity and quality. None of the issues that have affected Genzyme production are anywhere in evidence here.

“There is some interesting innovation going on, new ways of scientifically working with agencies to facilitate tech transfer which is how new volumes have been able to come into this facility. I think you look at the sophistication of this; this is clearly going to be a facility that is going to be strategic for the group for a long time.”

Sanofi has spent €23 billion in the past three years since Viehbacher took the helm.

“Sanofi was facing one of the deepest and most concentrated patent cliffs in the industry. It was about to lose a third of its sales and half of its profits in a two-year period.

“One of the most interesting things in this industry is that you see disaster coming from a distance, so you did have some time to react but not a lot because developing new drugs is a 10-year timeframe.”

Viehbacher set about restructuring the company. First he tackled its unwieldy research and development organisation, taking the axe to 40 per cent of the development pipeline “because I just did not believe in those projects”.

He also set about transforming the business from one oriented around 10 big blockbusters and to six new growth platforms.

The cash flow generated by the still productive blockbusters gave him the financial muscle to do so, allowing him to buy or build new businesses.

Genzyme is by far the biggest bet the company has taken with the €20.1 billion price tag accounting for the lion’s share of acquisition costs over the period.

“Genzyme was important for us for a couple of reasons. One is we were lagging behind in biologics. We clearly know biologicals through vaccines and through our insulin business but not in therapeutics, so we needed to catch up,” Viehbacher says.

A second incentive was to get back into the United States. The US is still the most important country for RD. Sanofi is proud of its history in emerging markets, with Viehbacher noting that it is the only big pharma company with higher sales in those markets than in either Europe or the US.

The flip side was a realisation that the group did not really have a strong enough RD presence in the US. “Even with Genzyme, as we look out to 2015, 40 per cent of our sales are in emerging markets.”

So how are things now?

“We are in mid-cliff. We’re kind of halfway down if you like. In 2008, those blockbusters added up to €7.3 to €7.4 billion [in sales] out of a total of €28 billion. At the end of this year, we will have about €3 billion left. But the growth platforms, which started off being €11 billion in 2008 and have grown to €22 billion” are more than offsetting the decline of the blockbusters.

And Genzyme. Aside from the manufacturing issues that Waterford’s expanded capacity is helping to address, Viehbacher is content. The deal has given Sanofi a pipeline of new products and a strong core of scientists familiar with tackling “orphan” diseases, serious but less widespread conditions for which there are few, if any, treatments. This is the space of personalised medicine which is widely expected to be one of the major drivers of growth across the industry in the years ahead.

And his advice for the Government? He admires the steady approach to addressing the ills of the bubble.

“Even throughout its negotiations with the EU, it was very important for Ireland to maintain its competitiveness. There were a lot of people in the rest of Europe who said you need to raise your corporation tax rates because you need to pay off your debts but I think Ireland recognised that this is one thing that Ireland could offer. An awful lot of people have invested in good faith here and I think it has been reassuring to see the Government stick to that line.

“I’m impressed with the spirit of people in continuing to focus on trying to rebuild and go forward. You cannot put a monetary value on that but that’s extremely important when you are thinking about where you invest in.”

ON THE RECORD

Name: Chris Viehbacher

Age: 51

Position: Chief executive of global pharmaceuticals group Sanofi

Family: Married with three children

Why is he in the news: Viehbacher was in Waterford recently to open the new €150 million extension to Sanofi's recently acquired Genzyme plant, good news for a part of the State that has seen significant job losses of late.

Something you would expect: Like many in his sector, Viehbacher is focused on moving away from the "blockbuster drug" culture and towards more diversified growth paths, focusing on emerging markets, animal health and personalised medicine.

Something that might surprise: The multilingual Viehbacher, who was born in Canada but has spent extended periods in Germany and France, was made a knight of the French Légion d'Honneur in 2003