Sanofi's Management Presents At Cowen Group Health Care Conference (Transcript)

Sanofi ( SNY)

Cowen Group Health Care Conference Call

March 6, 2012 06:00 am ET

Executives

Elias Zerhouni - President, Global R&D

Analysts

Steve Scala - Cowen and Company

Presentation

Steve Scal a - Cowen and Company

Good morning and I'd like welcome Sanofi to the Cowen Conference. Representing the company is Elias Zerhouni, who is the President of the Global R&D effort. I'd like to point out that in the Cowen pipeline work, Sanofi has one of the top five most expansive pipelines in the industry and perhaps the most unique, with such a wonderful blend of small and large molecules and vaccines.

So, to here to tell us all about that phenomenal pipeline is Dr. Zerhouni, thank you.

Elias Zerhouni

Steve, thank you. Thank you, Steve. What I'd like to do is really give you first an overview about R&D within the context of the entire group story and what is really happening at Sanofi. I think before you can understand what we're trying to do in R&D, you have to place it in the context of the Viehbacher Sanofi strategy of what has been put together since 2009, which was, fundamentally, how do you lean a company that was really a blockbuster dependent with patented products from a patent cliff that is in front of you and the idea was very simple, I'm not going to go over it again, try to focus on growth platforms where you can have predictable growth, that you can manage in some ways by executing properly, focusing on the emerging markets, on diabetes and you know that story. I'm not going to go into that, that's not my place to do that, but frankly the idea was, let's make sure that we have reliable ability to sustain the company through the patent cliffs, at the same time give leading room for R&D to restructure itself and basically kick the engines of R&D again.

And I think when you look at the sales, obviously what you're seeing is that the growth platforms have performed and when you look at the incremental sales they have gone up, even when we look at Genzyme at a 5.3% constant exchange rates. Genzyme contributes 40% of the $10 billion growth since 2008 due to growth platform. So when we you look at that, you will realize that our dependency on patented products have come down. If you look at the composite contribution of growth platforms, they went for 42% in 2008 to 65% in 2011 and conversely our dependency on the key [generic] side products has gone down from €7.5 million to €3.15 million and you know in 2012 we are seeing the end of the patent cliff with Plavix and Avapro coming off patent as well.

So I think the strategy has functioned and if you look at the earning per share, it did not collapse as many people predicted because the strategy worked. On the other hand, sustainability of the strategy is going to depend on continuous investment in the growth platforms, but R&D performance as well. So when you look at our strategy, it is very, very clear that the one of the pillar is going to be increase in innovation and R&D, pursuing the external growth opportunities as we have done over the past three years including, for example Genzyme, the Genzyme acquisition, but many others, in other markets especially the emerging markets where we have had a significant success and we passed €10 billion sales last year. We are the first company to do that.

So it's still necessary for us to continue the strategy and adapt the structure for future challenges and opportunities. So how do you deliver sustainable growth and have a consistent performance is really the strategy, part of it is the increase in innovation and R&D. So what have we done there?

Well the first thing that was quite obvious to me when I started advising Chris before I became President of Global R&D is that when you maybe look at R&D organizations what you see is what was decided 10 years ago before, seven years before, five years before. And when you look at the portfolio at Sanofi, it was very clear that it wouldn’t make it on its own.

So clearly we decided to look at the portfolio as it was and define our strategy in three buckets. One is what I call the short term. You have that you have, you need to absolutely sustain what you need to do. You need to execute and you need to really make sure that what gaps you have you need to fill. And that was really what we did the first year when we pruned the development portfolio, focused on opportunities, looked at alliances, looked at things that we knew had a prospect to basically hit if you will the pipeline in 2011, 2012, all the way to 2015.

The clear mid term requirement is that you really have to have a strategy that you can execute and therefore you need to have an engine of R&D that you can count on and we realized that an efficient R&D organization needed to have synergies way beyond what was done before. And that's why the last year I took the decision to close sites, consolidate for example research and early development in Boston and exploit the economies of scale across the company and improve the R&D cost structure.

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