The Plot Thickens

The Plot Thickens

According to a story posted yesterday on the CNBC website; “A new lawsuit claims the recently ousted CEO of Sanofi and other executives at the huge drug maker conducted a scheme in violation of federal law to funnel tens of millions of dollars in kickbacks and other incentives to get the company’s diabetes drugs prescribed and sold.” (The full story can be read at http://www.cnbc.com/id/102235774?__source=yahoo|finance|headline|headline|story&par=yahoo&doc=102235774#.)

Although the company is not commenting on the lawsuit, the presence of the suit brings up several interesting questions.  The most obvious being, is this the real reason Viehbacher got canned. Which brings up an even more interesting set of questions; just what did the Board know and when did they know it?

Diabetic Investor suspects the company will follow the standard protocol while dealing with this issue, that is, first state publicly that the company does not condone any illegal activity and will conduct their own internal investigation into these shocking allegations. At the same time they will likely assemble an army of lawyers to defend the company and an equally large army of public relations specialists to deal with the fallout. As the story on CNBC notes this is not the first time the company has been accused of wrong doing.

Yet this story has even broader implications as the company is still looking for a new CEO, a position which no one seems to want and just got harder to fill. Not only will the new CEO have to deal with Lantus going off patent, a less than robust diabetes pipeline and the lowest employee moral ever, the new person whoever it is must know deal with these very serious allegations.  This is like looking for a new captain after the Titanic has hit the iceberg.

Prior to these allegations Diabetic Investor believed that while the new CEO would face several daunting issues, none were insurmountable, that the company could be fixed. We knew this wasn’t going to be an easy job, but it was not an impossible job either.  Today however, we’re not so sure. Even if these allegations turn out to be false the company must defend itself which will divert attention away from other issues they are facing in diabetes. Issues like getting Toujeo® through the FDA, bringing Afrezza to market and repairing relations with the sales force who is supposed to be selling these new products, that same sales force that was thrown under the bus by the acting CEO.

Diabetic Investor suspected that the this situation would disintegrate into a soap opera from the moment the Board canned Viehbacher, a decision which in hindsight looks like a good one albeit not for the reasons the Board originally stated. However, it is concerning that the Board knew so little of what was really going on at the company something that cannot be entirely blamed on Viehbacher. One has to wonder if this Board has what it takes to find someone capable of righting the ship, someone who has the stature to turn things around. At the moment we’re not sure as the Board seems to be preoccupied with whether the new person is “French” enough.

Finally Diabetic Investor has to admit that we are somewhat saddened to see how far Sanofi has fallen for at one time it truly seemed that they had a real grasp of what needed to be done in diabetes. They seem to understand not only where the market was but just as important where the market was going. Yet time and time again they failed to capitalize on this vision as they just couldn’t execute. Resources were wasted and no one was held accountable, it was truly a situation where the inmates were running the asylum.

Whether these shocking and very serious allegations turn out to be true or not is almost immaterial as the damage is done and quite frankly we’re not sure it can be repaired.  Not when the Board seems out of touch with reality and clueless as to just how important the CEO position has become. To Diabetic Investor their actions or more accurately their aloofness is an old French tradition reminding us of those famous words uttered by an equally out of touch French monarch, Queen Marie Antoinette who when learning that the peasants had no bread stated; “Let them eat cake.”

The onus is clearly on the Board to get it right with the CEO selection for if they fail the French should follow another of their traditions and it should be off with their heads. Viva La France!!!!!!!