And so it begins

And so it begins

The question is will April 2, 2015 be a landmark date for that soap opera turned three ring circus formerly global pharmaceutical company Sanofi (NYSE:SNY). Or will this go down as the beginning of the end? While we have no idea what type of reception he’ll receive, today marks the beginning of Olivier Brandicourt as CEO. A tenure that comes with tremendous challenges as well as exciting opportunities.

Brandicourt takes the helm just as the company is in the midst of launching two new diabetes drugs, Afrezza and Toujeo. He knows that the goose that laid the golden eggs, Lantus, is about to get cooked with its patent expiring. He comes in at time when the diabetes drug market is transforming into a full blown commodity market where price trumps performance. As he walks the halls he must also be aware that he has big shoes to fill plus the rank and file isn’t quite sure he’s up to the task ahead.

Like or hate him the one thing that can be said about Viehbacher is he knew where he wanted to take the company and he created a tremendous amount of value for Sanofi stakeholders. While we wouldn’t put him in the CEO Hall of Fame, he’s worthy of consideration. The simple fact is he did his best to transform Sanofi and wasn’t allowed to finish what he began.

Casting a shadow over Brandicourt is Chairman of the Board that mouth that roars Serge Weinberg. Frankly Diabetic Investor is a little shocked that Serge did not become CEO as he hasn’t been shy telling anyone who will listen what the company should be doing and how they should be doing it. He’s made it abundantly clear that he has a vision for where the company should go in the future. Given how Viehbacher was beheaded it’s also clear what will happen to Brandicourt should he not follow the boards directives.

So where does this leave Brandicourt, who by all accounts was not the company’s first, second or even third choice to succeed Viehbacher. Will he be allowed the freedom to implement the changes the company needs? Can he overcome the skepticism of the rank and file? What strategies will he employ to successfully navigate the rough waters that lie ahead? Perhaps most importantly how will he manage his relationship with Serge and the board?

Lost in this transition is the fact that even had Viehbacher not been beheaded these changes would still need to be made. It was not as if Viehbacher himself did not see this and quite frankly the fact that he did see it likely contributed to his dismissal. To his credit Viehbacher put the interest of Sanofi stakeholders ahead of the French government, unions or media. His goal was to transform Sanofi into a global not European or French pharmaceutical company. Considering how Serge and the board reacted to the changes he was making is it any wonder why communications were strained.

This is why Diabetic Investor is unsure what if anything Brandicourt can do. Based on the many public statements made by Serge it would appear that Brandicourt does not have much wiggle room. It would seem improbable for him to do something as dramatic as selling the diabetes franchise, a move which while dramatic just might be in the best interest for Sanofi stakeholders over the long term. Given the scale of the issues facing the company, particularly with their diabetes franchise, we’re not sure incremental or small steps will reverse or stop the franchises continued decline.

Taking a realistic view can Brandicourt afford to cut ties with MannKind (NASDAQ:MNKD) and we’re not just saying that because we believe Afrezza is a niche not blockbuster product. We say this more because it would be admission by the company that they had made a mistake that this deal should have never been done in the first place. As we have noted before what makes this even possible, remote as it may be, is the fact that Brandicourt and the board can blame this on Viehbacher. As the fact is he proceeded with this deal even though his own team advised against it.

Another possibility would be to dramatically reduce resources currently allocated to Afrezza and reallocate them towards Toujeo. The fact is Toujeo stands a much better chance at being profitable and this profitability will come much quicker.

Unfortunately what Brandicourt doesn’t have is time. He cannot sit back, take a wait and see approach before making changes. To gain the trust and respect of the rank and file and stakeholders he must act and act quickly. He doesn’t have to be over the top however if he fails to act decisively he will be viewed as a mere puppet for Serge and the board. His authority will be undermined and his tenure as CEO will be a short one.

The way we see this he has a choice to make; does he continue to push Sanofi towards beginning a true global company or does he retrench and regionalize the company? Simply put he can either go big or go home, there is no middle ground. Should he go big he must make it clear to Serge and the board that the concerns of Sanofi stakeholders come before those of the French government, unions or media. That being a global pharmaceutical company means acting like one taking ownership of the decisions made, being held accountable. This is not just talking the talk but actually walking the walk.

That being said Diabetic Investor just doesn’t believe that Serge will allow him the latitude he needs to make this happen. That under his leadership the company will go backwards rather than complete the transformation that Viehbacher began. The simple truth is when you’re a global pharmaceutical company tough choices need to be made and by beheading Viehbacher what Serge and the board basically stated was they aren’t willing to make these tough choices. That they are more concerned with pleasing constituencies who aren’t Sanofi stakeholders.

For the sake of Sanofi stakeholders we hope we’re wrong. And so it begins…….