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Sanofi head sees cures for what ails Canada’s pharma sector

‘You can’t say research and innovation are your absolute priorities and then not protect ideas,’ says Christopher Viehbacher, CEO of pharma giant Sanofi.

Christinne Muschi/The Globe and Mail

Montreal's pharmaceutical industry has been hit hard by lab closings and layoffs, but the Canadian CEO of French drug giant Sanofi sees a possible cure.

Israel and Denmark have proved that innovation can come out of smaller countries. However, Canada and Quebec need to play their cards right to accomplish similar feats, Christopher Viehbacher argues.

The country needs to better protect intellectual property, chiefly with longer patent protection, so Canada is on par with Europe and the United States, he said. Mr. Viehbacher hopes this long-standing grievance of the research-based pharmaceutical industry will be resolved through a free-trade deal between Canada and Europe – which still eludes negotiators despite drawn-out discussions.

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"You can't say research and innovation are your absolute priorities and then not protect ideas," Mr. Viehbacher, now based in Paris, said in an interview in Montreal last week while at the International Economic Forum of the Americas.

Canada and Quebec, where the country's pharmaceutical R&D is concentrated, must also adapt quickly to the downsizing of in-house research.

"The business model has changed not only for financial considerations, but because the science has shifted," he said. "It has become so complex that no single organization has all the disciplines to be successful."

The collaborative approach that Mr. Viehbacher has tried to instill at Sanofi since he took over the company in late 2008 relies on creating an ecosystem like the one found in Boston, where the company acquired rare-disease specialist Genzyme Corp. for $20.1-billion (U.S.) in 2011.

In Boston, researchers from universities, biotech firms and pharmaceutical companies often work together from the get-go, in a public-private partnership, or PPP, culture. Big pharma doesn't wait around to pick the biotech fruits when they are ripe. "We can accelerate the development or, in certain cases, kill a project earlier, so that resources can go elsewhere," Mr. Viehbacher explained.

Over the years, Quebec has attracted a number of pharmaceutical labs thanks to its universities and its generous drug reimbursement policy. But multinationals have closed labs and laid off scientists by the hundreds as they grapple with disappointing findings and rising costs. Sanofi itself, which employs 1,700 people in Canada, cut 100 research jobs in Montreal in 2012.

Quebec has only recently shifted its industrial strategy in response, with the creation of NéoMed, a PPP institute and research lab with an initial $71.5-million (Canadian) investment, whose goal is to bridge the gap between academic research and life science companies. But more needs to be done, such as supporting the emergence of biotech firms through what Mr. Viehbacher describes as "massive investments."

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The 53-year-old accountant, who graduated from Queen's University, orchestrated such a turnaround at Sanofi. The global corporation born out of a series of mergers was the undisputed industry laggard when the long-time GlaxoSmithKline executive was chosen to lead it as its first non-French CEO.

Mr. Viehbacher weaned Sanofi off its dependency on patents, by focusing on sustainable business lines such as vaccines or consumer health care products like the Rolaids antacid medicine. Revenues on so-called blockbuster drugs such as the blood thinner Plavix now represent less than 3 per cent of the company's sales, which reached €34.9-billion ($47-billion) in 2012.

Mr. Viehbacher also reorganized the company's R&D through acquisitions and partnerships with innovative research institutes. In parallel, he shut down underperforming projects. The layoffs made him known in European labour circles as the "smiling killer."

Sanofi's stock, which trades in Paris and in New York, has practically doubled since Mr. Viehbacher took the helm of the company close to five years ago. But Sanofi predicts its earnings might dip by 5 per cent this year, as the company invests heavily in product launches to rejuvenate its portfolio.

Mr. Viehbacher wants to pursue Sanofi's push in emerging markets such as China, Brazil and Russia, but also in non-BRIC countries such as Vietnam and Nigeria, where Sanofi recently made acquisitions. Emerging markers represent a third of the company's sales.

He would also like to increase Sanofi's presence in diagnostics. However, there are no transformative deals in the making. Besides, he added, values of biotech companies have "shot up" to a point where acquisitions are less palatable. "Even the BRIC countries have become expensive," Mr. Viehbacher said.

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