Asked about investing in internal R&D versus smaller biotechs, Viehbacher quickly acknowledged the philosophy behind recent moves to cut R&D costs, which are being slashed by 12 percent from 2008 levels to about $1.1 billion, excluding Genzyme, which Sanofi purchased last year. Those leafy R&D enclaves, though, are prime targets.
"What Sanofi is doing is reducing its own internal research capacity," he said. "The days when we locked all of our scientists up in a building and put them on a nice tree-lined campus are done. We will do less of our own research. We’re not going to get out of research. We believe we do certain things well in research but we want to work with more outside companies, startup biotechs, with universities."
He was asked if this is cheaper? Yes, he said. "But research and development is either a huge waste of money or too, too valuable. It’s not really anything in between. You don’t really do things because it’s cheaper. The reality is the best people who have great ideas in science don’t want to work for a big company. They want to create their own company. So, in other words, if you want to work with the best people, you’re going to have go outside your own company and work with those people...
"And, you want to work with them, why do they want to work with you? The reality over the last 10 years is, (a small biotech) wouldn’t get caught dead working with one of these big cumbersome pharma companies. Once you have a funding gap, suddenly there’s a much greater willingness of earlier-stage companies to work with Big Pharma. We’re looking earlier and people who are early need help," Viehbacher declared.
So the best people in science do not work for large drugmakers? If so, this means that Viehbacher is saying his scientists are not the best, which justifies the cuts? We wonder how this will boost morale among Sanofi scientists. Probably not by much. But those who are truly insightful will find a way to start their own operation or sign on with a biotech somewhere, proving his point, yes?
Why work with venture capital firms, though? "There’s two reasons," he said. "One is, they can sometimes bring competencies we don’t have, like for instance in how to help a startup company. The second thing is to give you a second opinion. Somebody in your company is going to love the science and be championing this internally. But you want to have a second opinion. If you have a venture capital company that’s willing to put money in, that kind of gives a little validation of that."
So Viehbacher presumes that venture capitalists are always correct. If his own staffers determine an outside investment may not be a good idea, their opinions will be downplayed because they lack sufficient competency? Not every deal with a biotech and venture capital firm will work out, though. But with fewer scientists on hand, he may have no choice but to seek those second opinions.
"The new model, where we’re trying to go, we believe that Big Pharma has competencies in validation. So, if a Big Pharma company does a deal with a smaller company, the smaller company’s share price goes up because people believe that Big Pharma has depth of competencies to judge whether this science is any good or not," Viehbacher went on to explain.
"Now, big companies, and not just Big Pharma, big companies I believe, are not any good at doing innovation. There has to be some element of disruptive thinking to have innovation and I can tell you that big companies do everything to avoid any disruptive thinking in their companies. So, you want to work with companies that are a little bit more disruptive in thinking, but bring those competencies together."
In other words, Sanofi scientists who have not yet begun looking for a job should do so? Well, if they can't innovate and their opinions don't count, they may as well, yes?
Hat tip to In The Pipeline