Not long ago, drug companies would break out quarterly income streams from the U.S., Europe, Japan, and something called ROW, as in rest-of-world. Investors usually didn’t care about the last numbers, because they were little more than a rounding error.
That’s not the case anymore, as these countries are often called “emerging markets.” They’ve grown enough that Chris Viehbacher, CEO of one of the world’s largest drug companies, Paris-based Sanofi-Aventis (NYSE: SNY), traveled to Seattle this week to curry favor with global health officials at the Pacific Health Summit. The head of a major drug company might have gotten a cold shoulder at a meeting like this a decade ago, but these officials welcomed Viehbacher. Sanofi made headlines at the summit, as it said it plans to donate as many as 100 million doses of flu vaccine to the World Health Organization to help poor countries cope with the swine flu pandemic.
This could all be written off as some kind of public relations exercise, but I wondered if there’s more to the story. The pharmaceutical industry is terrified by a series of patent expirations coming over the next few years, which will allow a flood of cheap generic copies to grab market share away from franchise products that generate an estimated $67 billion in annual sales. Not much has emerged in the industry’s R&D pipeline to replace all these aging blockbusters. Some analysts predict pharma companies will have to continue acquiring and partnering with innovative biotech companies to sustain themselves.
Sanofi has made a couple aggressive moves like this since Viehbacher took over Sanofi in December. Earlier this year, it acquired cancer drugmaker BiPar Sciences for $500 million (giving BiPar investor Paul Allen a big payday), and partnering with South San Francisco-based cancer drug developer Exelixis for a deal possibly worth more than $1 billion.
But Viehbacher also has his sights on making money on low profit-margin, high-volume products in parts of the world that are off the pharma industry’s beaten track. It’s part of a strategy to make Sanofi a more globally diversified company, rather than placing all its chips on the U.S. and Europe—where governments are looking for ways to trim healthcare spending.
Here are edited highlights of a wide-ranging conversation we had about industry trends, the reasons for donating flu vaccine, and how he likes to deal with biotechs.
Xconomy: Why come here to the Pacific Health Summit?
Chris Viehbacher: I laid out a strategy for the company in February, to become a global healthcare company, versus a pharmaceutical company focused on the U.S. and Europe. That means we want to be present in all countries, and therefore, you have to address all diseases in all countries. You can’t just take medicines doing well in the U.S., and try to find people rich enough in other countries to buy them. So, the company is hugely committed to these huge global health issues. We probably, I think, do more than just about anybody. We are very significant in malaria. We are the only company doing things for Sleeping Sickness. We have a new antibiotic coming for tuberculosis, which could cut the treatment time down to four months [from six months], which is huge in the area of TB. We are spending huge amounts of money developing a Dengue Fever vaccine and developing facilities for it. We have partnered with a lot of people in that room, whether it’s the Gates Foundation, GAVI[Global Alliance for Vaccines and Immunization], the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Those are all people we try to work with on a regular basis. It’s very much in line with our strategy. I take a personal interest in these global health issues, and it’s good to meet folks.
X: To what extent does the donation of flu vaccine amplify the company’s global health effort, or show that you’re serious?
CV: The pandemic flu donation is exceptional. I’d normally say donations are not the way to deal with issues of access to medicine. It’s not sustainable. If we were dealing with malaria, or tuberculosis, then I wouldn’t … Next Page »