Sanofi's CEO Chris Viehbacher in a Reuters interview said he believes that the pharma market is in a period where it will be re-rated. He believes that will happen when investors take fully into account the effects felt by the industry when big drugs - like Plavix or Lipitor -- go off patent.
His goal, and he believes his counterparts at other Big Pharma's goals, will be to raise his company's PE from its current 7.5 to a value in low double-digits -- much more along historic lines. He plans to do this in part by raising Sanofi's dividend from 35% payout rate to more like 50% by 2014. Viehbacher says companies paying more dividends "do better versus the broader market than those who do buybacks, in terms of share price."
Viehbacher says he is relying on vaccines, animal health and consumer health products -- and emerging markets -- for sustained profit growth. The Genzyme acquisition will also contribute with its MS drug Lemtrada and a new GLP-1 class drug for diabetes. Sanofi will also spend about 1 to 2 billion euros per year on acquisitions. See Chicago Tribune.
All this talk of creating value makes sense only if Sanofi keeps providing more value in the form of new products for its patients.
Posted by Bruce Lehr Sep 20th 2011.
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