Sanofi outlines cuts

By Robert Weisman, Globe Staff

SAN FRANCISCO -- French drug maker Sanofi SA plans to wring $170 million in annual cost savings out of its operations after acquiring Cambridge biotechnology company Genzyme Corp. last year, the Sanofi chief executive said today, but many of the cuts will be at legacy Sanofi sites outside the Boston area.

For instance, Sanofi is closing a New Jersey drug research lab because it has been less productive than Genzyme’s labs, which have developed treatments for rare diseases, Sanofi chief executive Christopher A. Viehbacher told investors gathered here at the 30th annual J.P. Morgan Healthcare Conference.

“Genzyme’s having a big impact on the Sanofi culture,” Viehbacher said. “Being a leader in life sciences in Cambridge, Mass., means we’re able to look at all our facilities. We decided we didn’t need a research facility in Bridgewater, N.J. So all of the cost savings are not coming out of Genzyme.”     

Thus far, while Sanofi has eliminated some jobs at Genzyme headquarters in Kendall Square, it has added research and manufacturing jobs in the Boston area, keeping its Massachusetts workforce stable at about 4,500 employees.

“One of the things Genzyme did extremely well is they could identify a (drug) target, test it on humans early on, and they knew it was going to be successful,” Viehbacher said. “That’s a skill the industry is going to need to have.”

At the same time, Sanofi has begun using its $20.1 billion Genzyme purchase to advance a “hub concept” of basing its drug discovery efforts at a small number of global research and development centers in Cambridge, France, Germany, and China, said Viehbacher.

Toward that end, Sanofi this morning said it will co-invest with Boston venture capital firm Third Rock Ventures in Warp Drive Bio, a start-up that plans to launch a genomic search engine to help biopharmaceutical companies develop more personalized therapies. Also participating in the $125 million funding round will be Greylock Partners, a venture firm with offices in Silicon Valley and Cambridge.

“Co-investing with a VC gives you a second opinion,” Viehbacher said today.

While his Paris-based company will not start its own venture capital arm, as some rival drugmakers have done, “we’re prepared to take equity positions in start-ups,” he said. “The models will vary, and a lot of it will depend on where it goes.... If you can get a 98 percent failure rate rather than a 99 percent rate, it has huge downstream benefits.”

Viehbacher said Sanofi’s cost-reduction push is part of a strategy to develop fewer drugs at its own research sites and more in collaboration with others, a strategy being seen at other companies as well. Viehbacher said its internal research will drop from 70 percent to 50 percent of its drug discovery programs.

Because several of its best-selling drugs are coming off patent this year, enabling competing low-cost generic therapies to enter the market, Sanofi is expanding into areas such as biologics, vaccines, consumer health care, and pet and animal medicines to lessen its exposure to traditional small molecule drugs, he said. Those markets are “fundamentally changing the structure of the company,” he said, and now represent two-thirds of Sanofi’s annual business.

“2012 has been one of the years that’s been circled in red at Sanofi,” said Viehbacher. “It’s the year of the infamous patent cliff. This is the third patent cliff of my career, and I’m determined to avoid a fourth.”

Sanofi’s diversification has positioned the company for renewed growth in coming years, Viehbacher said. He projected annual sales growth of 5 percent from 2012 to 2015.