Sanofi-aventis video Q&A : CEO Chris Viehbacher comments on earnings for Q2 2009
EuroBusiness Media (EBM) : Sanofi-aventis, one of the world’s largest diversified healthcare companies, reports earnings for its second-quarter. Chris Viehbacher, welcome. As the CEO of sanofi-aventis, what were your comments on the Group’s overall performance in Q2 ’09 ?
Chris Viehbacher (CV) : Well, we had a great quarter. Sales up 6.5% at constant exchange rate, which led to EPS growth of 17%. That was largely driven by our core products, Plavix and Lantus, and Taxotere. So we had very good growth with our core brands, but also very good growth in our core markets : clearly, the United States up, almost 5%. But we’ve talked an awful lot about emerging markets, and here we saw growth of close to 20%, in emerging markets. So, sales performance very strong, very tight control over costs, so we saw an increase in our margins, and that’s what allowed us to leverage the bottom line with a 17.5% increase. We had a very strong quarter in terms of performance, but we also made a lot of progress on transforming our company and building that vision for sustainable growth in 2013. The launch of Multaq and a number of acquisitions — so a very satisfactory quarter.
EBM : At this point in time, you’ve now been on the job for eight months as CEO. Can you summarize the progress you’ve made in implementing your strategic vision over this amount of time ?
CV : You know, when I started, most people thought about sanofi-aventis as, well, there’s Plavix, and there’s Acomplia… Plavix is going to go away, and Acomplia never came, and so, where’s the future of the company ? The real objective, if you like, has been to say : the company is more than Plavix, the company is more than Acomplia, and we’ve got strong growth perspectives for 2013. Yes, we will lose major products like Plavix and Taxotere when generics arrive. But we also have a number of very core fundamental businesses that can double over the next five years : vaccines, our OTC business, Lantus, our emerging markets business, and of course, some new products, like Multaq which we’ve just launched in the United States. When we look at those businesses doubling over five years, we actually arrive at the same level of sales in 2013 as we achieved this year. So, if you like, we’ve been able to show that organic growth already is very powerful within the company. If you then take into account that we have €4 billion of free cash flow after dividends, we clearly have the means then to bolt on value-adding acquisitions that can lead to more growth. Now of course, the company is not managed in that way today, everybody is driving towards maximizing Plavix sales, and Taxotere sales, and that’s as it should be, and that’s why we had a great quarter. But we have to actually shift our focus, our competencies, our resources, to these new platforms of growth. And that’s why we launched a program in Transforming, that’s why we believe we’ve got confidence for the future. We could take some costs out of the business, so I think sanofi-aventis has got a very bright future.
EBM : The market has been eagerly awaiting for you to unveil today more details about your Transforming Program precisely. What can you now reveal to us ? What will be the measurable contribution to earnings from the Transforming Program by 2013 ?
CV : There are a number of things that we could talk about in Transforming, in terms of metrics. Clearly, one is going to be the growth in our growth platforms. It’s obviously important to have an objective of doubling those businesses, but we clearly have to make that happen. A lot of the objectives that we’ve had are trying to really put the resources behind that. To give you an example of that, we’ve talked about our over-the-counter medicines business. Well, right now, that business is actually split up into a number of different countries. Yes, it’s €1.5 billion, but I don’t have anybody really looking at that business today. It’s not a division in its own right. Nobody’s looking at how I can take those products and launch them in other markets. Nobody’s looking at what other acquisitions I could do. Nobody’s really looking at lifecycle management. So we are starting to ‘divisionalize’ our business. We’ve made acquisitions in generics. Well, suddenly we go from a few launches per year to a hundred launches per year, because of course we are now in the entire pharmaceutical market. That requires us to be much quicker, much more responsive, have different regulatory affairs, different capacity and flexibility in our manufacturing processes. It’s one thing to say, hey, you’re going to be diversified in generics, but you actually have to make that happen, and that’s part of what we’ve been doing. Now, there are obviously some quantitative measures. As we try to change the model in research and development, which is obviously a key objective for us — because innovation will always be at the heart of this company — and as we look at moving our businesses, we are going to have some cost savings and we announced that we would be able to achieve at least €2 billion of cost savings between now and 2013.
EBM : The recent Lantus scare has created uncertainty in the market about its future sales. Are you still sticking to your initial target and guidance of doubling Lantus sales in the next 5 years ? By the way, the CHMP (Committee for Human Medicinal Products) concluded last week that the available data does not provide a cause for concern and that changes to the prescribing advice are therefore not necessary. They also asked sanofi-aventis to develop a strategy for generation of further research in this area. What are the initiatives that you’re developing ?
CV : You know, any time something comes along with one of your medicines, our first priority is to think about how do we reassure patients, how do we make sure that we are confident in the safety of our product. So, immediately after these articles were published, we gathered a group of some of the world’s experts in diabetes and oncology and epidemiology together, to really understand what these studies were suggesting. And very quickly we realized that these were studies of poor quality and that really were making assertions around links of Lantus and cancer that were not at all justified. And then we had something extraordinary, where these experts decided that they would publish a declaration saying that these studies did not show any link. I’ve never seen that in my 20 years in the pharmaceutical industry. We also found it extremely important to work with regulatory agencies. We immediately had contact with regulatory agencies in Europe and the United States, informed them about the studies, informed them about the consultations we were having with the medical community. You saw an editorial published in The Lancet by an independent epidemiologist calling into question the methodology of the studies. That means that, actually, our assertion that we stand absolutely behind the safety of Lantus was not just our declaration, this was a declaration on the part of the medical community and on the part of the regulatory agencies. But we want to go that extra mile. We want to take the scientific high road. We are now working with the medical community in both Europe and the United States, to think about what good studies we could do. You know, there’s been a long hist