Sanofi(SNY.US) Sudden Leadership Change: R&D "Failure" Becomes a "Death Sentence," Merck Executive Steps In

Sanofi (SNY.US) unexpectedly announced on February 12th that CEO Paul Hudson has stepped down, with Merck (MRK.US) executive Belen Garilho taking over. The French pharmaceutical giant had previously increased R&D investments significantly but has yet to see results, and the board’s patience has run out. As of press time, the stock was down over 6% in pre-market trading.

Paul Hudson led Sanofi for over six years, during which he consistently sought a successor for the blockbuster drug Dupixent—an asthma and atopic dermatitis medication facing patent cliffs, with sales peaking and revenue expected to decline sharply. However, key strategic efforts repeatedly failed: last year, three late-stage clinical trials yielded mixed or failed results, disappointing shareholders and triggering a wave of frustration.

“Investors have long lost patience with repeated R&D failures,” said AlphaValue analyst Abhishek Rawal.

Garilho: The ‘Parachute’ Familiar with Sanofi

Garilho’s tenure at Merck is coming to an end. The Spanish executive previously spent 15 years at Sanofi and is well-acquainted with the company. Sanofi stated that she will “drive the implementation of Sanofi’s strategy with even greater rigor,” adding that her primary focus will be to improve R&D productivity, governance, and innovation capabilities.

In 2023, Paul Hudson launched an aggressive new drug acceleration plan, which has yet to produce tangible results. Last year, the experimental multiple sclerosis drug Tolebrutinib failed in key Phase III trials, and the FDA rejected an application for another indication. The highly anticipated atopic dermatitis candidate amlitelimab, expected to succeed Dupixent, showed mixed clinical trial results.

“If you had asked me in 2020 whether Sanofi needed five to seven years, I would have said no,” Hudson admitted at the end of January during the earnings call. “We are smarter, stronger, and can do it faster—unfortunately, things haven’t gone as planned.”

Last year, Sanofi divested its consumer health business, signaling that the company will rely entirely on innovative prescription drugs moving forward. Analysts John Murphy and Mira Bankovskaya commented that Hudson has significantly reshaped the company’s traditionally “French conservative” culture, enhanced its global standing, and outlined a profit growth path through 2030. However, due to ongoing R&D efficiency issues and the failure to find a true successor for Dupixent, Sanofi’s valuation multiples have consistently lagged behind peers, and the stock remains under pressure into 2025.

Jefferies analyst Michael Loewyten noted in a report that further management adjustments at Sanofi are likely. “Merck was able to attract reliable R&D talent from AstraZeneca, and from what we know about Garilho—her strategy is set, and she executes without leaving room for doubt.”

During her time at Sanofi, Garilho managed European global operations and led the integration after acquiring Genzyme. She later moved to Merck Germany, overseeing a conglomerate spanning pharmaceuticals and semiconductors, leading key deals and supporting COVID-19 vaccine raw material supply. Her goal was to reach €25 billion in revenue by 2025, but this was hindered by post-pandemic demand slowdown, prompting her to adopt stricter cost controls and M&A strategies to counteract the downturn.

Paul Hudson’s final day is scheduled for February 17th.