EuroBusiness Media (EBM): Sanofi-Aventis, one of the world’s largest diversified healthcare companies, reports earnings for the first quarter of 2009. Chris Viehbacher, welcome. You’re the CEO of Sanofi-Aventis. What are your comments on the company's first-quarter results, and does this early set of results allow you to reconfirm your guidance for the full year?
Chris Viehbacher (CV): I think we’re off to a good start. We had 3.5% sales growth when you correct for the fact that we had Copaxone last year and we didn’t this year. I think all of our key growth drivers were delivering: Plavix and Lantus and Taxotere, all showing good growth. Lovenox actually developing very well as well, just affected by a strong comparative quarter last year, but the underlying growth is still there. Strong cost control allowed us, on a constant exchange rate basis, to achieve almost 10% EPS growth, and on a reported basis, almost 17%. So we’re very happy with the start to the year, and, in fact, we are reconfirming our guidance for the year of at least 7% EPS growth -- assuming no major adverse events.
EBM: In February, you presented your new strategy for the company. Since then, in these past few months, have you made any progress toward implementing all or parts of this new strategy?
CV: True, we’ve been pretty busy. We’ve been able, first of all, to close the Zentiva transaction, which gives us a new base of branded generics in Eastern Europe. And since then, we’ve done another three acquisitions. We acquired two generic companies in Latin America, which is very important for our strategy. We announced that emerging markets were important to us, and we wanted to diversify: both the Kendrick acquisition in Mexico and the Medley acquisition in Brazil. We achieved both objectives. We have thus become the leading generic manufacturer in Latin America. That allows us to diversify a little bit and really builds upon our emerging markets. The other acquisition I think is also very important is the acquisition of BiPar. With that, we achieve a first-in-class, new oncology medicine for people with triple-negative breast cancer -- no treatment for that today. And that underlines, if you like, the importance of innovation to the company. It’s still going to be at the heart of what we do. So yes, we are interested in diversifying, but we’re not about to lose our pharma focus. So I think the acquisitions clearly show that we’re taking our strategy and putting it into action.
EBM: You also said that you would conduct an in-depth R&D pipeline review, and present your conclusions about the R&D portfolio, in terms of outlook for the most promising products, or decisions about which products to prune from the portfolio. What are your conclusions today about the R&D portfolio and pipeline?
CV: We took all 65 projects from Phase I to Phase III in both pharma and vaccines, and we gave them our own version of the ‘stress test’. What we really wanted to do was look at them from four angles: Did they represent a level of innovation? Did they represent a true value-added for patients? Did they represent an acceptable risk in terms of both technical achievement and commercial risk? And fourth, did they actually generate -- will they generate -- a good return? So we went through all of those projects, and we announced that we were going to stop 14 of those projects: four in Phase II, four in Phase III, and six in Phase I. Now, the ones in Phase I: no big deal, because you have an awful lot of turnover in Phase I anyway. Phase II and Phase III: there, we clearly made some decisions on the basis of either the product didn’t have sufficient efficacy, there were some safety issues, or they really didn’t deliver what we were looking for in terms of added-value to patients. Now, that has given us confidence to reallocate our resources behind those projects that we think have the most promise. And I think what we’ve also learnt through this process – we’ve now got the whole organization behind those projects, and we can accelerate and concentrate on those projects. And, of course, we’re going to be looking outside now to supplement that portfolio. But I think we’ve got a very strong basis on which to build on our R&D, and we’ve identified processes that will help to ensure that, as we move projects from one stage to another, we’ve got a robust and rigorous process for doing so.
EBM: Multaq just had a positive FDA Advisory Committee. What are your hopes and outlook for Multaq in the short-, medium- and long-term?
CV: Of course, we are very pleased to see the strong sign of support from the FDA Advisory Committee. This is now in the hands of the FDA, and so far things are progressing well, and we would hope to have an approval very shortly. I think what’s important is that this would be the first new anti-arrhythmic that would be approved in 10 years. This is also the first anti-arrhythmic that has a long-term outcome study that shows a real benefit to patients, demonstrating in fact a 25% reduction in cardiovascular hospitalizations for patients with atrial fibrillation. So when you look at the strong benefit to patients, I think that this will be a very strong product for us going forward.
EBM: By mid-year you plan to announce your transformation program for the company. What are the next important milestones along the path toward the transformation and reorganization of sanofi-aventis?
CW: So we’re about midway in that process. We’ve got quite a number of people in the company working on this. This has been important, as we pursue this vision of being a global healthcare company. This immediately throws up real management questions. For example, when we bring in generic companies, are we going to operate this as a separate generic division, or are we going to leave this within countries? If you look at it from a production angle, they’ve gone from roughly 10 to 15 SKU launches -- so new packages or new formulations -- per year, to over 100. So as we pursue this strategy of diversification and growth in emerging markets, we have to make sure that our resources and our people are actually accompanying that. So that’s why we launched these transformation projects. Now we’ll be able to give the outside world, as well as our own employees, a better sense of what the recommendations are by mid-year. And when we announce Q2 results, we’ll be telling a little bit more about what we’ve come up with.
EBM: The pharma sector seems to be bubbling with M&A activity lately. What is your strategy and vision today regarding M&A, in particular what are your views when it comes to mega-mergers?
CW: We’ve been very upfront about the fact that, although we have some very strong opportunities in our pipeline -- and we just talked about Multaq, we can talk about our vaccine products -- I’ve also been very clear that we don’t have enough new products in our pipeline to really compensate for the products that we will lose when products like Plavix go off-patent in 2012. Therefore, we need to be pushing organic growth, which we’re doing, but it also means that we’ll be looking to acquire companies that can build the platforms of growth that we have identified: vaccines, OTCs, generics, as well as of course our own pharma business. So for us, the most important thing is what businesses we can acquire that we think we can do better with, that we think that we can create value with. And we’ve created a team under Laurence Debroux, a dedicated team, under the Chief Strategic Officer, that is looking at any number of deals. I think we’ve looked at something like 75 or 76 things this quarter alone. So that’s the process that we’re going to pursue.
EBM: Sanofi-aventis has a strong footprint in emerging markets, which have higher rates of out-of-pocket spending, and which are being hit strongly by the global economic slowdown. How is your business holding up in emerging markets today, and what trends are you seeing?
CW: You know, it’s holding up well. I’m actually very happy to see that. There are a couple of markets, notably in Latin America, where business is a little softer. But for the most part I think the fact that in a lot of markets there are still not that many patients who have had a chance to get access to care, that we’re certainly able to achieve more volume growth. And although those economies have sometimes slowed, they haven’t gone to zero or even declined. So actually, our business in emerging markets is holding up well, and I’m very happy with it.
EBM: Investors are at a loss about what to make of the projected healthcare reforms in the US ushered in by the new Obama administration. As the CEO of a major healthcare company, do you see the current climate in the US as one of risk or one of opportunity for the pharma industry?
CW: I think there will be some change in the United States, but I think the market reaction to that is overdone. It takes an awful lot to have change happen in the United States. We are going to try to play an active role in that. It’s not all threat. There is certainly more of a government intervention likely to come in the United States, but I think we also saw that, where patients start to get better healthcare coverage, there’s often a volume effect. So I think there’s a focus by investors on the price effect. And if I go back to the early 90’s, when managed care was coming in, most people saw that as a threat because of the issue of rebates. When you look at what happened, yes we paid rebates, but the volume outstripped the rebates, simply because people suddenly had access to care. So I think that there may be a silver lining in all this. There’s no question that if people can’t afford medicine, it’s not good for us either. So there will be change, we’ll be proactive with it, but I don’t think it’s all negative for our industry.
EBM: Given that European regulators now require clinical trials for generics of low molecular weight heparins such as Lovenox, do you believe that US regulators could be tempted to take this into consideration, and what is this likely to change regarding the calendar for a Lovenox generic in the US?
CW: I think US regulators are going to be very cautious to make sure that patient safety is ensured here. If you look at the European guidelines, it’s very clear that the European regulators have been very concerned about patient safety, and have put in place a number of guidelines to protect patient safety. They want to actually see clinical results. We know that the manufacturing process makes the product. And therefore if someone else makes it, it’s not necessarily the same product. And I believe at the end of the day, the FDA is going to put patient safety first.
EBM: Chris Viehbacher, CEO of Sanofi-Aventis, thank you very much indeed.
CW: Thank you very much Adrian.
