Sanofi announced Wednesday that the board of directors decided unanimously to "remove" Christopher Viehbacher as CEO, with chairman Serge Weinberg replacing him on an interim basis. The company noted that "as a consequence...Viehbacher resigned as a director." Shares in Sanofi fell as much as 6 percent on the news.
According to Weinberg, the decision was taken as a result of "numerous issues," including Viehbacher's management style, along with "problems of cooperation with the board and execution problems." Weinberg suggested that discussions surrounding Viehbacher's future began in the middle of the summer, adding that there was general dissatisfaction among Sanofi's 15 board members about what the company really needed. "Governance is not just about dealing with difficulties when they are obvious to everyone," Weinberg remarked, noting "it is about anticipating risks in the future."
Commenting on the news, Kepler Cheuvreux analyst Fabian Wenner said "I'm flabbergasted," adding "just firing him without having a replacement only makes things worse. I'd be slightly scared of how things progress from here." Sanford C. Bernstein analyst Tim Anderson noted that "the ups have generally exceeded the downs," under Viehbacher's tenure, which started in 2008. "Our perception is that Viehbacher has had the support of the investment community more often than not," Anderson remarked.
The announcement follows recent speculation surrounding Viehbacher's position, with the company on Monday saying that replacing the CEO was not on the agenda of a meeting to review quarterly results. On Tuesday, Sanofi's shares dropped as much as 9.5 percent after the drugmaker indicated alongside its third-quarter financial results that pricing pressure on its diabetes portfolio is likely to increase in the US into next year, with sales "broadly stable" versus 2014.
Weinberg also highlighted inventory mismanagement in Brazil last year, which led the company to cut its profit forecast, as being behind the decision to remove Viehbacher. In addition, Weinberg cited the fact that the executive hadn't briefed the board in advance of efforts to divest a portfolio of mature products in Europe. The chairman said the board learnt of the plan, termed Project Phoenix, in the press, noting "this is not appropriate." Weinberg stressed that the issue had nothing to do with Viehbacher's nationality, or his decision to move to Boston earlier this year.
However, Weinberg conceded that Viehbacher's relocation had made everyday dealings more difficult and had also been "an illustration" of some of the differences that had arisen in recent months. "Overall, we had the feeling that the management style in a company that is big, international and complex needs to be much more inclusive," Weinberg said, adding Viehbacher's communication with the board "didn't work."
"Going forward, the group needs to pursue its development with a management aligning the teams, harnessing talents and focusing on execution with a close and confident cooperation with the board," Sanofi said. The drugmaker added "the board confirms its commitment to continuing the strategy and the international expansion of the group based on research and innovation and its growth platforms." Weinberg would not put a timeframe on appointing a new CEO, but indicated that the position will not be filled by an internal candidate. "We will be looking outside," Weinberg said, adding "we are looking for the best CEO for this company."
Navid Malik of Cenkos Securities noted that "Viehbacher tried hard to change the DNA of the company but the board won in the end. Sanofi will become more parochial now." Meanwhile, Berenberg Bank analyst Alistair Campbell commented that the executive "was behind some very strong acquisitions," including the $20.1-billion purchase of Genzyme and the takeover of consumer health-care group Chattem for $1.9 billion. Anderson suggested that Sanofi could look to return to making acquisitions in the wake of Viehbacher's departure. "Generally speaking, in the pharmaceutical sector, larger M&A deals tend to happen when companies are in difficult straights and this is where Sanofi seems to be at the moment," Anderson said.
For related analysis, see ViewPoints: Confusion envelops Sanofi.
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