Sanofi (SNY.US) Suddenly Changes Leadership: Research and Development Goes From Dead End to Life Saver, Merck Executive Takes Over-Requested!

Sanofi (SNY.US) suddenly announced on February 12 that CEO Paul Hudson was stepping down, and will be succeeded by Merck Group executive Belen Garijo. The French pharmaceutical giant had significantly increased its research and development investment, but has yet to see results, leading the board of directors to exhaust their patience. As of the time of writing, the stock had dropped over 6% in pre-market trading. Paul Hudson had been in charge of Sanofi for more than six years, and had been trying to find a successor for the blockbuster drug Dupixent - a treatment for asthma and atopic dermatitis facing a patent cliff, with revenues expected to decline rapidly after reaching their peak. However, key strategies repeatedly failed: last year, results of three late-stage clinical trials were mixed and even unsuccessful, leading to a concentrated outbreak of disappointed sentiment among shareholders. "Investors have already lost patience with the repeated failures in research and development," said AlphaValue analyst Abhishek Laval. Garijo: a "parachutist" familiar with Sanofi Garijo's term at Merck is coming to an end, and this Spanish executive had worked at Sanofi for 15 years, making her familiar with the company. Sanofi stated that she will "drive Sanofi's strategic implementation with greater rigour", and added that her primary task is to improve the efficiency, governance and innovation capabilities of the research and development sector. In 2023, Paul Hudson had launched a radical new drug acceleration plan, with no substantial returns so far. Last year, the experimental multiple sclerosis drug tolebrutinib failed in a crucial Phase III trial, and its application for another indication was rejected by US regulatory authorities. Amlitelimab, a candidate for atopic dermatitis that was hoped to replace Dupixent, also had mixed results in clinical trial data. "If you had asked me in 2020 whether Sanofi needed five to seven years, I would have firmly said no," Paul Hudson admitted at an earnings call at the end of January. "We are smarter, stronger, and we can definitely be faster - unfortunately, things did not go as planned." Last year, Sanofi divested its Consumer Health business, meaning the company will rely entirely on innovative prescription drugs in the future. Analysts John Murphy and Mila Bankovskaya praised Paul Hudson for significantly reshaping the company's previously criticized "French conservative" corporate culture, improving its global positioning, and planning a profit growth path until 2030. However, due to the failure to overcome the efficiency problems in research and development and the failure to find a true successor to Dupixent, Sanofi's valuation multiples have always lagged behind its peers, and the stock price has been under pressure until 2025. Jefferies analyst Michael Lotze pointed out in a report that there may be further adjustments to the Sanofi management team. "Merck was able to poach a reliable research and development talent from Astrazeneca PLC Sponsored ADR back then, and we understand Garijo as the one in charge - once the strategy is set, there is no room for execution to fail." During her tenure at Sanofi, Garijo had managed global operations in Europe and led the integration of the acquisition of Bioverativ. She then moved to the German Merck group, leading the industrial giant with business spanning pharmaceuticals and semiconductors, and had led several key transactions, supporting the supply of raw materials for the COVID-19 vaccine. Her goal was to achieve a revenue of 25 billion euros by 2025, but the demand slowdown after the pandemic hindered it, prompting more rigorous cost control and acquisition strategies to counter the downturn. Paul Hudson's last day of work is scheduled for February 17.