Sanofi Global Operations President Hanspeter Spek On Building A Diversified Strategy In Emerging Markets: An Interview With PharmAsia News (Part 1 of 2)

In an interview in Shanghai, the senior Sanofi exec talks about the company’s diversified strategy in emerging markets, affordability issues and the French pharma’s partnering aspirations in China.

SHANGHAI – As a diversified company, Sanofi has risen to become the top pharma company in emerging markets with 2011 sales for the first time exceeding €10 billion, backed by its top position in Brazil and number two position in China and Russia.

Despite facing one of the steepest patent cliffs in the industry, Sanofi is looking to the future by focusing on a world where sustainable growth will be fueled by products that have additional “barriers to entry that are not just dependent on patents,” according to CEO Chris Viehbacher (Also see "Sanofi’s Message On Emerging Markets? Catch Us If You Can" - Scrip, 19 Dec, 2011.).

Sanofi calls these products its “growth platforms,” and it includes vaccines, diabetes solutions, consumer health, animal health and, of course, emerging markets. (The company also includes new prescription products like prostate cancer therapy Jevtana (cabazitaxel) and the anti-arrhythmic Multaq (dronedarone) in its definition of growth platforms, as well as Genzyme’s orphan drug business.)

Those businesses will see a CAGR of more than 5% between 2012-2015, with the largest growth, in the double digits, coming from emerging markets and Genzyme, Sanofi says. In fact, by 2015, Sanofi expects 40% of its sales to come from emerging markets.

In China, Sanofi operates six manufacturing plants and has staffed up to 7,000 employees, including more than 4,000 sales reps. China sales rose to €981 million in 2011, up from €699 million in 2010, and over the last five years the company has a CAGR of 38% in China, faster than the market and most of its peers. Its leading products in China include Plavix – the top prescription drug in China – Aprovel, and Lantus, as well as a broad portfolio of vaccines, consumer health products – including the popular pediatric cough/cold brand Hao Wawa (Good Baby) – and animal health products (Also see "Sanofi China GM Fabrice Baschiera On Winning The Insulin Battle In China: An Interview With PharmAsia News (Part 2 of 2)" - Scrip, 11 Aug, 2011.).

By December 2011, Sanofi had risen to become the second largest pharma in China, leapfrogging AstraZeneca PLC and trailing only Pfizer Inc., according to Sanofi Global Operations President Hanspeter Spek, citing data from IMS Health Inc.

Spek was in Shanghai March 14 to give a keynote address during the annual China Healthcare Investment Conference and to speak on a panel about pharmaceutical growth strategies in China.

Since joining Sanofi in 1985 as a marketing director for Sanofi’s German subsidiary, Spek has risen through the ranks, taking on bigger roles as the French pharma itself grew bigger via acquisitions and mergers.

In 1999, Spek became senior VP for Europe following Sanofi’s merger with Synthelabo, and eventually moved up to head of worldwide operations for Sanofi-Synthelabo. He was appointed executive VP in August 2004 after Sanofi acquired Aventis, itself the product of a series of mergers, most notably between Rhone-Poulenc and Hoescht Marion Roussel.

Most recently, Spek became president of Sanofi’s global operations in November 2009; he is also a member of the company’s nine-person executive board, chaired by Viehbacher. Spek sat down with PharmAsia News on the sidelines of the China Healthcare Investment Conference to discuss Sanofi’s strategy in emerging markets, and the secrets to its success.

Sanofi President of Global Operations Hanspeter Spek

PharmAsia News: Your CEO Chris Viehbacher has talked about how emerging markets are a key differentiator for Sanofi, and also has said that it might be difficult for other pharma companies to catch up, given some of Sanofi’s competitive advantages in emerging markets. Could you talk about Sanofi’s emerging markets strategy, and where you see your competitive advantage?

Hanspeter Spek: What Chris Viehbacher is alluding to is the historical background of our presence.

Sanofi is a company founded in the early ‘70s, but at that point in time, our predecessor companies, like Hoechst, had already been present – let’s say, in India and Japan since the ‘50s. And similar situations also for the other predecessor company Roussel, which was definitely the most international of all French pharmaceutical companies.

So what we are building on is really something which is 50 years of age, and in this respect it will be not easy for the others to catch up. But nevertheless, we have to continue to make efforts to defend our cutting edge, which for the time being, we’ve done well, if you look to performance in 2011, which was over-proportional to those markets.

PharmAsia News: Another thing we’ve heard Sanofi talk about is that you need a diversified strategy in emerging markets, and in particular, you want to ensure that you don’t have too much of your product mix reimbursed by governments due to cost-cutting risks. Can you talk more about your strategy for diversification in emerging markets?

Spek: I wouldn’t say “you need” – I believe “we need.” A smaller-sized company can very well go along with a specialized strategy, whether its specialized in oncology or whether its specialized in highly innovative products, or whether its specialized in orphan drugs, as for example Genzyme.

Genzyme has a place in each and every market because there are the same diseases in most of those markets. Now where Genzyme is benefiting, is from our larger geographical footprint in terms of organization, in terms of support function, and in terms of synergies with our other activities, being it vaccines or whatever.

So I believe that for a company of our size in effect a diversified strategy in emerging markets is beneficial because it gives us more weight and because we have several legs you can build on.

PharmAsia News: You’ve had several key acquisitions in emerging markets, BMP Sunstone Corp. here in China, Medley Pharmaceuticals in Brazil, the nutraceutical business of Universal Medicare Pvt. Ltd. in India (Also see "Sanofi Expands China Footprint In OTC And Rx Markets With BMP Sunstone Acquisition" - Scrip, 29 Oct, 2010.). Can you talk about your acquisition strategy in emerging markets and where you might look in the future as far as markets or product mix? Also, given that many of your peers are also looking for acquisitions in emerging markets, have the valuations gotten too high in some markets?

Spek: Any acquisition, and this even more as it is part of our diversification strategy, has to be in line with our overall strategy, and we have to be successful to integrate.

When looking to the acquisitions you just mentioned in Brazil and China, I think we have done this very carefully, and meanwhile we can also say successfully. Whether its BMP Sunstone, which really gave us a second strong leg in consumer healthcare in China, besides our joint venture with Hangzhou Minsheng Pharmaceutical Group Co. Ltd., or being it Medley in Brazil, which was targeted to make an offer to a new middle class in the population, both are nicely fitting with our overall strategy, and are in line with our geographical ambitions.

So the conformity with our strategy is a major criteria for us to make acquisitions. And I’d add that over the years, I believe that this company has created a certain knowhow – how to make acquisitions and how to successfully integrate.

PharmAsia News: One issue we hear discussed on your quarterly calls, and on the calls of some of your peers, is that in emerging markets there is a lot of volatility (Also see "Sanofi Sees Strength In Regional Volatility, GSK Lowers Revenue Target After Price Cuts – Emerging Market Earnings Roundup (Part 4)" - Scrip, 14 Feb, 2012.). Today on your panel there was talk about price cuts in China, same thing in Turkey where they’ve had several rounds of cuts, you have the Arab Spring and so forth – a lot of instability that must be difficult to manage. Looking at it from a global perspective, given that Sanofi is number one in emerging markets, how do you plan and manage for such volatility?

Spek: I don’t call it “a lot of volatility.” I would say the important aspect of being strong in emerging markets is that emerging markets are a conglomerate of very different markets. If you just take the so called BRIC markets, and you compare the Brazilian healthcare system with the Russian, and the Indian with the Chinese markets, you see that the healthcare systems are totally different.

So I’m a little bit sensitive that now some are raising the question, “how long will it last?” Part of my answer to it is, it is highly unlikely that everything goes wrong at the same point of time in four or five markets which are so different as the BRIC + EM markets are.

So I believe it is not enough to be strong in one emerging market, because there you really have the strong exposures, for example, that something can go wrong in Russia.

So it is the variety of the markets which makes them together so attractive. If you are depending on only one or two, then in fact, you have a high-risk exposure.

PharmAsia News: So Sanofi is looking to be diversified across both markets and products?

Spek: Diversified across markets and being diversified in each market. That’s probably the best situation, and in fact, I believe that we are getting closer and closer.

We always have been diversified from a geographical point of view, but now we are also getting diversified inside the markets. We have today, for example, a strong consumer healthcare position in all of the BRIC + EM markets. We have a strong vaccine position in all of those markets and we have a very strong position in prescription [drugs].

[Editor’s note: This is part one of a two-part interview; look for part two in an upcoming issue of PharmAsia News.]

Want to know more about how China is changing the global pharma landscape? Participate in our anonymous survey and receive a 15% discount on the PharmAsia Summit-Shanghai (Sept. 24-26, 2012). To start the survey, click here.