Sanofi to Cut €2 Billion in Costs, Reduce Support Staff by 8%

Like the “revival plans” of many pharmaceutical companies, Sanofi CEO Paul Hudson’s “blueprint” for the company also includes significant cost-cutting measures. At a recent investor event, company executives stated that their goal is to achieve €2 billion in cost savings by 2022, with an estimated €600 million in savings expected this year.

The details of cost-cutting measures have not been fully disclosed, but in brief, they include reducing positions in support functions, cutting manufacturing budgets, and tightening procurement.

Sanofi Announces Major Move to Simplify Antibody Collaboration with Regeneron, Restructuring It into a Royalty-Based AgreementRecently, Sanofi announced a significant initiative to streamline its antibody collaboration with Regeneron by restructuring it into a royalty-based agreement. Under the proposed restructuring, Sanofi will secure exclusive global rights to Kevzara, an antibody drug for rheumatoid arthritis, as well as exclusive rights to Praluent, a PCSK9 inhibitor cholesterol-lowering medication, in markets outside the United States. Each party will bear full responsibility for development and commercialization costs within their respective territories. Following the restructuring, the collaboration between the two companies regarding the anti-inflammatory drug Dupixent will remain unchanged.

This agreement restructuring highlights Sanofi’s increased focus on its rapidly growing product, Dupixent, and the “de-prioritization” of Praluent and Kevzara. The reorganization will result in cost savings from the commercial teams for these two drugs, although Sanofi has not disclosed how many sales and marketing staff face layoffs.

Meanwhile, Sanofi also announced that it would halt R&D activities in the fields of diabetes and cardiovascular diseases, with these cuts expected to save €500 million by 2022. When asked whether “de-prioritization” would lead to layoffs of R&D staff, Paul Hudson stated that it was “too early” to address such details.

Sanofi’s other objective is to achieve greater savings in procurement through “smart spending”—by negotiating more favorable prices and better managing demand—targeting €1 billion in savings by 2022. In addition to these two goals, Sanofi also plans to save €500 million through “operational excellence—enhancing production efficiency and employee productivity.”

Sanofi CFO Jean-Baptiste de Chatillon stated that the company expects to cut 8% of its support staff this year and plans to reduce the proportion of such personnel to 20%. Sanofi CEO Paul Hudson remarked that the reduction in support staff was already underway before he assumed his role at the pharmaceutical company.

As of the end of 2018, Sanofi employed more than 21,000 people globally in its marketing and support functions, although it remains unclear how many of these positions will be affected.

Sanofi executives stated that operating costs decreased by 0.7% in 2019 as of September, compared to an average annual increase of 4.8% in recent years. Sanofi expects to achieve cost savings of €600 million in 2019.

Furthermore, Sanofi plans to streamline its mature pharmaceutical portfolio, which currently comprises approximately 300 products. As some of these drugs generate limited sales revenue, with maintenance costs even exceeding their income, Sanofi intends to reduce the number of products in its mature portfolio to around 100 by 2025.

Some of the savings may be allocated to Sanofi’s expanding initiatives in rare diseases and oncology. Regarding the company’s overall headcount plan, Paul Hudson stated that positions will be added in business units with strong potential for success, while reduced in others. He further noted that Sanofi has not yet determined how to strike this balance and will examine the details in the coming weeks and months.

Reference source: How will Sanofi save €2B? Chopping support staff and 'smart' purchasing, for 2

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