New Leaders at Sanofi and Bayer: What Lies Ahead?By
Sanofi has named Olivier Brandicourt, current chairman of the board of management of Bayer Healthcare, as the company’s new CEO. What is in store for Sanofi and Bayer? DCAT Value Chain Insights (VCI) examines the companies’ strategies, challenges, and opportunities.
Olivier Brandicourt, now chairman of the board of management of Bayer HealthCare AG and member of the Executive Council of Bayer AG, will take on the role of CEO of Sanofi, effective April 2, 2015. Brandicourt takes over from Serge Weinberg, chairman of Sanofi, who has been serving as interim CEO since former Sanofi CEO Christopher A. Viehbacher was replaced in October 2014. Werner Baumann, member of the Board of Management of Bayer AG, will take over the function of chairman at Bayer HealthCare. So what is in store for the new executives?
The road ahead for Sanofi
In taking over the helm at Sanofi, Brandicourt will be inheriting a company that performed moderately well in 2014, particularly in emerging markets, which represent the company’s top geographic segment, slightly ahead of the US. In 2014, Sanofi reported overall revenues of EUR 33.770 billion ($38.214 billion) in 2014, up 4.9% at constant exchange rates (CER) compared to 2013. Pharmaceutical sales were up 4.4% (CER) to $27.720 billion ($31.373 billion). Revenues from the company’s growth platforms increased 10.7% (CER) to EUR 25.802 billion ($29.207 billion). The company’s growth platform includes its diabetes franchise, vaccines, consumer healthcare, Genyzme, animal health, and other innovative products and accounted for 76.4% of the company’s total sales in 2014. Its top-selling product overall and in its diabetes franchise, Lantus (insulin glargine), saw sales gains of 12.1% (CER) in 2014 compared to 2013 to EUR 6.344 billion ($7.180 billion).
On a geographic basis, emerging markets represent the company’s largest segment, surpassing sales in either the US or Western Europe. Sanofi’s sales in emerging markets in 2014 were EUR 11.347 billion ($12.843 billion), up 9.3% (CER) compared to 2013. Sales in China, its largest national market in emerging markets, increased 8.8% (CER) to EUR 1.603 billion ($1.814 billion). Sales in Brazil were EUR 1.382 billion ($1.564 billion), up 6.9% (CER), and sales in Russia were up 7.1% (CER) to EUR 813 million ($920 million). US revenues were up 8.2% (CER) to EUR 11.339 billion ($12.834 billion), and sales in Western Europe were flat at EUR 7.865 billion ($8.900 billion).
Over the last six months, Sanofi has had three new product approvals, two pharmaceuticals and one vaccine, and improving new product growth is key for the company. Overall, between 2014 and 2020, Sanofi expects to have 18 new product launches with potential cumulative first-five year sales of approximately EUR 30 billion ($34 billion). This would be a large improvement over its prior years performance from 2007 to 2013 when the company had 10 new product launches amounting to potential first five-year sales of only EUR 7.5 billion ($8.5 billion). The company estimates that it has the potential to launch up to six new medicines in 2015 and approximately one new medicine every six months between 2016 and 2018.
In terms of new product approvals, in 2014, Sanofi and its subsidiary Genzyme received marketing authorization for Cerdelga (eliglustat) capsules, a first-line oral therapy for certain adults living with Gaucher disease Type 1, in the European Union in January 2015 and in the US in August 2014. Cerdelga is a potent, highly specific ceramide analogue inhibitor of glucosylceramide synthase with broad tissue distribution including to bone marrow. It reduces the production of glucosylceramide, the substance that builds up in the cells and tissues of people with Gaucher disease Type 1. The new oral drug was developed by Sanofi’s Genzyme subsidiary, which also developed Cerezyme (imiglucerase for injection), which is indicated for long-term enzyme replacement therapy for pediatric and adult patients with a confirmed diagnosis of Type 1 Gaucher disease. Cerezyme posted 2014 sales of EUR 715 million ($811 million) and is one of several enzyme-replacement therapies by Sanofi to treat rare diseases. Others are: Myozyme/Lumizyme (alglucosidase alfa) to treat Pompe disease; Fabrazyme (agalsidase beta) to treat Fabry disease; and Aldurazyme (laronidase) to treat mucopolysaccharidosis Type I.
Sanofi also received US approval for Lemtrada (alemtuzumab) for treating relapsing forms of multiple sclerosis (MS) in November 2014. First approved in September 2013 in the European Union, Lemtrada is approved in more than 40 countries. Additional marketing applications for Lemtrada are under review by other regulatory agencies. The FDA approval of Lemtrada marked Sanofi’s second MS treatment approval in the United States. Genzyme, a subsidiary of Sanofi, received FDA approval of its once-daily, oral drug, Aubagio (teriflunomide) for the treatment of relapsing forms of MS in September 2012. Aubagio is approved in more than 50 countries and is under review by additional regulatory agencies.
On the vaccine side, Sanofi received FDA approval in December 2014 for Fluzone (intradermal quadrivalent influenza vaccine), which provides protection against four strains of influenza virus. Sanofi received FDA approval for a supplemental biologics license application for Fluzone for the quadrivalent formulation. Fluzone Intradermal vaccine, has been available in trivalent formulation for three years. Fluzone Intradermal Quadrivalent vaccine is indicated for adults 18 through 64 years of age for active immunization for the prevention of influenza caused by influenza A subtype viruses and type B viruses contained in the vaccine.
Sanofi is also looking to reap the benefits of the launch of its new inhaled insulin product, Afrezza, which was introduced in the US in February 2015. Afrezza was approved by the FDA to control high blood sugar in adults with Type 1 and Type 2 diabetes. Afrezza is a drug-device combination product that consists of a dry formulation of human insulin delivered from a small and portable inhaler. In 2014, Sanofi and MannKind Corporation entered into a worldwide exclusive licensing agreement, worth up to $925 million ($150 million upfront and $775 million in potential milestone payments), to develop and commercialize Afrezza. Sanofi is responsible for global commercial, regulatory, and development activities. Under a separate supply agreement, MannKind is manufacturing Afrezza at its manufacturing facility in Danbury, Connecticut. In addition, the companies are planning to collaborate to expand manufacturing capacity to meet global demand as necessary.
Examining Sanofi’s pipeline
Generating improved growth from new products will be key for Sanofi and its new CEO. Sanofi has 43 new molecular entities (NMEs) and vaccines in its pipeline, according to a February 2015 investor presentation by the company, which includes 32 NMEs and 11 vaccines. Among the 14 products in late-stage development, it has nine products in Phase III development and five products in registration under regulatory review. It has 12 products in Phase II development and 17 products in Phase 1. On a therapeutic basis, its overall pipeline includes eight oncology drug candidates four diabetes investigational products, two products to treat cardiovascular or renal disease, seven products for immune-mediated diseases, one product for treating infectious disease, three ophthalmology products, five products for treating rare diseases, and two products for treating age-related degenerative diseases.
So what are some key products in its late-stage pipeline? In the area of cardiovascular drugs, the company submitted regulatory filings in the US and EU for Praluent (alirocumab), an investigational monoclonal antibody targeting PCSK9 (proprotein convertase subtilisin/kexin type 9), an anti-cholesterol drug, for which Sanofi is partnered with Regeneron Pharmaceuticals. In January 2015, the FDA accepted for priority review the biologics license application (BLA) for the drug with a target action date of July 24, 2015. Also, the European Medicines Agency (EMA) accepted for review the marketing authorization application for Praluent in the European Union.
In the company’s diabetes franchise, the most important therapeutic area for the company, a key near-term asset is Toujeo (insulin glargine [rDNA origin] injection, 300 U/mL), a new investigational basal insulin currently under review by the US and EU regulatory agencies. The company is also developing Lixilan, an investigational fixed-ratio combination of insulin glargine, the active ingredient in the company’s top-selling product, Lantus, a basal insulin, with lixisenatide, a GLP-1 receptor agonist, in a single daily injection for the treatment of adults with Type 2 diabetes.
In the area of immunology & Inflammation, a key investigational product is sarilumab, a fully human monoclonal antibody targeting the IL-6 receptor (IL-6R) that was developed in collaboration with Regeneron for treating rheumatoid arthritis. The company is also developing dupilumab, an investigational fully human monoclonal antibody that blocks IL-4 and IL-13 signaling. Also developed in collaboration with Regeneron, dupilumab is in Phase III development for treating adults with moderate-to-severe atopic dermatitis. Positive results were also recently announced with dupilumab in Phase IIb in adult patients with uncontrolled, moderate-to-severe asthma and in Phase IIa in chronic sinusitis with nasal polyps.
On the vaccine side, Sanofi Pasteur, the company’s vaccine arm, is developing a dengue vaccine candidate, now in Phase III development. Regulatory submissions are planned in 2015.
Overall, approximately 72% of Sanofi’s research and development projects are in biologics, nearly half of which are monoclonal antibodies, according to the company. In January 2014, Sanofi entered into a strategic agreement with Boehringer Ingelheim for the manufacture of therapeutic monoclonal antibodies ( to reinforce Sanofi’s manufacturing capacity to support upcoming product launches. Under the agreement, Sanofi will have access to Boehringer Ingelheim’s capabilities in Biberach an der Riss, Germany to transfer and manufacture therapeutic monoclonal antibody for global market supply.
Bayer’s focus on life sciences
For Baumann, who will be taking on the role of chairman of Bayer HealthCare with the departure of Brandicourt to Sanofi, will be taking on business to which he has previous experience. He already held leading positions at Bayer HealthCare from 2002 to 2009: initially as Head of Central Administration & Organization and later as a member of the board of management and as the subgroup’s labor director. Between 2006 and 2009, he participated in the integration of Schering AG, Berlin, Germany. Baumann has been a member of the board of management of Bayer AG since January 1, 2010. Effective October 1, 2014, he was appointed chief strategy and portfolio officer with responsibility for corporate development and mergers & acquisitions. He is also responsible for the Europe region. Prior to October 1, 2014, he served as Bayer AG’s chief financial officer.
Bayer has identified life sciences as a key strategic growth area for the company. In 2014, the company announced plans to focus entirely on its life-sciences businesses, HealthCare and CropScience, and float its material science business on the stock market as a separate company. Bayer HealthCare’, which consists of pharmaceuticals, consumer care, medical care, and animal health businesses, is coming off relatively slow revenue growth in 2013 (the company will be reporting its 2014 results on February 26, 2015). In 2013, Bayer Healthcare posted sales of EUR 18.924 billion ($23.970 billion), a 1.7% increase over 2012, with an operating profit of EUR 3.260 billion ($4.129 billion). On a divisional basis, the Pharmaceutical Division is the company’s largest piece of Bayer HealthCare, representing 59.1% of Bayer Healthcare’s 2013 revenues. In 2013, the Pharmaceutical Division had sales of EUR 11.188 billion ($14.167 billion), a 3.6% increase over 2012. The Pharmaceuticals Division consists of two business units focusing on prescription products: general medicine, primarily consisting of women’s healthcare and cardiovascular health products; and specialty medicines, consisting of medicines that are mainly prescribed by specialist physicians.
Consumer Care is Bayer HealthCare’s second largest division, accounting for 20.6% of Bayer HealthCare’s revenues in 2013 with sales of EUR 3.904 billion ($4.944 billion), an increase of 1.3% over 2012. The main focus of the Consumer Care Division is on non-prescription medicines, dietary supplements, and dermatology products. Bayer made two important moves in its OTC business in 2014: the $14.2 billion acquisition of Merck & Co.’s consumer care business and on a much smaller scale, the acquisition of Dihon Pharmaceuticals in China.
The Medical Care Division represented 13.3% of Bayer HealthCare’s revenues in 2013 with sales of EUR 2.526 billion ($3.198 billion). Sales in the Medical Care Division declined by 4.7% in 2013.The Medical Care Division consists of the businesses with blood glucose meters, contrast-enhanced diagnostic imaging equipment with the necessary contrast agents, and mechanical systems for treating constricted or blocked blood vessels. The final piece of Bayer HealthCare is the company’s Animal Health Division, which provides medical products for livestock and companion animals. The Animal Health Division accounted for 6.9% of Bayer HealthCare’s 2013 sales with sales of EUR 1.306 billion ($1.653 billion), a 0.2% increase over 2012.
Consistent with that revenue distribution, among Bayer HealthCare’s 20 top-selling products in 2013, 12 were prescription pharmaceuticals. Four were OTC products, three products were from the Medical Care Division, and one product line was from the Animal Health Division. Its four top-selling prescription drugs each exceeded $1 billion sales (based on exchange to US dollars). These drugs included the company’s number one and number two top-selling drugs: Kogenate (factor VIII or antihemophilic factor) for treating hemophilia A and Betaferon/Betaseron (interferon beta-1b) for treat relapsing forms of multiple sclerosis. Bayer expects several products, the anticoagulant Xarelto (rivaroxaban), the eye medicine Eylea (aflibercept), the cancer drugs Stivarga (regorafenib) and Xofigo (radium 223 dichloride), and the pulmonary hypertension drug Adempas (riociguat) to have a combined peak annual sales potential of at least EUR 7.5 billion ($9.6 billion).
The company’s pharmaceuticals pipeline contains 57 projects, of which 20 are in Phase I clinical testing, 19 in Phase II, and 18 in Phase III, based on a 2014 analysis. Among these projects are five, new, active ingredient candidates, which should be ready by 2015 for a decision on advancement to Phase III. Three of these projects are in the fields of cardiology and hematology, specifically treatment options for renal anemia and heart disease. Another project is oncology for treating non-Hodgkin’s lymphoma, and another project is in gynecology as a new treatment option for treating symptomatic uterine fibroids.
New in Phase III is an active ingredient for treating patients with prostate cancer. Bayer entered into an agreement with Orion Corporation, a pharmaceuticals company in Espoo, Finland, concerning the global development and marketing of ODM-201, an androgen receptor modulator in tablet form.
Bayer is also advancing development of two products (BAY 81-8973 and BAY 94-9027) that contain recombinant factor VIII (rFVIII) for treating hemophilia and is investing more than EUR 500 million ($618 million) in expanded production capacities at its sites in Wuppertal and Leverkusen, Germany for these products. The company submitted an application for marketing authorization to the European Medicines Agency for BAY 81-8973 for treating hemophilia A in children and adults. Bayer plans to file BAY 81-8973 for approval in other countries. Its other long-acting rFVIII, BAY 94-9027, is in Phase III clinical testing.
The investigational plasma protein-free product BAY 81-8973 is an upgrade of the currently marketed Kogenate FS/Kogenate Bayer product and will be produced without the addition of any components of animal or human origin. Bayer’s approved hemophilia A therapy product Kogenate FS/Kogenate is manufactured exclusively in Berkeley, California. Establishing an additional supply source in Germany will help the company prepare for production of the anticipated new therapy options and address the growing demand in this therapeutic area, according to the company.
Also, in 2014, Bayer HealthCare announced it will invest around EUR 100 million ($138 million) to increase the production capacity of its plant in Beijing, China, in preparation for further demand of its products in the country. The planned capacity expansion is designed to ensure a reliable supply of products to meet the domestic demand for Bayer HealthCare’s products, including the company’s cardiovascular and anti-diabetes products. The expansion will include logistics areas for fully automated material handling, analytical laboratories, and high-speed packaging lines.
In addition to striking a deal with Merck & Co. for its consumer care business of Merck, Bayer also formed a collaboration with Merck in prescription drugs in the field of soluble guanylate cyclase (sGC) modulators to strengthen its position in its cardiology business with the global co-development and co-commercialization agreement, which has already been approved by the relevant antitrust authorities. Merck & Co., Inc. will make payments of up to $ 2.1 billion to Bayer. These include an up-front payment of $1 billion as well as revenue-based milestone payments of up to $1.1 billion for future combined sales of certain jointly developed substances, including the pulmonary hypertension treatment Adempas (riociguat).
One key issue for Bauman will be the integration of Merck’s OTC business. The acquisition of Merck’s OTC business enhances Bayer’s OTC business across multiple therapeutic categories and geographies. The move places Bayer in the global number two position in non-prescription medications, behind the combined OTC businesses of Novartis and GlaxoSmithKline, following the completion of their announced joint venture in 2015, and ahead of the world’s previous industry leader Johnson & Johnson, according to Bayer. With the acquisition, Bayer says it is the OTC leader in North and Latin America and the leader in dermatology and gastrointestinal treatments, two of the five most important non-prescription health care product categories. The company has advanced to the number two position in the cold, allergy, sinus, and flu category and remains the number two position in nutritionals and number three in analgesics, according to information from Bayer. The consumer care business acquired from Merck & Co., Inc. is primarily comprised of products in the cold, allergy, sinus & flu; dermatology (including sun care); foot health; and gastrointestinal categories. The most important brands are Claritin (allergy), Copperton (sun care), MiraLAX (gastrointestinals), Afrin (cold), and in North and Latin America, Dr. Scholl’s (foot care). These brands complement Bayer’s existing OTC portfolio, which includes brands such as: Aspirin and Aleve in the analgesics category; dermatology products, including Canesten, and Bepanthen/Bepantho; nutritional brands such as Supradyn, One A Day, Berocca, Elevit, and Redoxon; antacids such as Rennie and Talcid; and cough-and-cold products such as Alka-Seltzer Plus and White & Black. The purchase price of $14.2 billion includes a payment associated with sales of Claritin and Afrin in certain countries where these products are still prescription-only.