R&D slowdown compounded by Trump variable, Sanofi (SNY.US) new CEO Gary Ho faces dual challenges

French pharmaceutical giant Sanofi (SNY.US) is about to appoint its new CEO, 65-year-old Belén Garijo, who faces a major task: winning investor support, accelerating the company’s stagnant drug development process, and addressing vaccine skepticism during President Donald Trump’s administration.

It is understood that Sanofi unexpectedly announced on February 12 that CEO Paul Hudson would step down this month, with Merck Group executive Belén Garijo taking over in April. 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. The company’s stock price has fallen 25% over the past year, closing down 4.51% on Thursday.

According to investors, analysts, and others close to Garijo, she is decisive, detail-oriented, and highly capable of execution, but her R&D results have been mixed, and the company’s stock has experienced a notable decline during her tenure. Notably, Garijo has served as CEO of Germany’s Merck Group since 2021.

“Sanofi’s leadership change indicates that the R&D transformation has failed or is progressing too slowly,” said Markus Manns, portfolio manager at Union Investment. “Belén’s primary task at Sanofi will be to improve R&D productivity.”

Manns highly praises Garijo for successfully managing Merck Group’s operations across health and technology sectors and specifically commends her for a key pricing agreement reached last year with President Donald Trump. However, he also points out that after several R&D setbacks at Merck, this CEO needs to accelerate innovation to meet challenges.

“She needs to improve her track record in R&D performance.”

Replacing a blockbuster asthma drug is a major challenge

Developing new drugs has always been Sanofi’s biggest challenge. Dupixent accounts for over 30% of the company’s revenue, and Sanofi has yet to find a drug to replace it after patent expiration in the early 2030s, putting pressure on its stock.

“Replacing Dupixent is a critical strategic challenge for Sanofi,” said Nicolas Dumas, partner at Roland Berger Consulting, who worked at Sanofi until 2018.

The vaccine business, which accounts for nearly one-fifth of revenue, is another major issue, as sales have declined in recent years. Hudson previously pointed out that this segment has been weak, partly due to the U.S. health authorities’ less favorable attitude toward vaccines.

Sanofi stated that Garijo worked at the company for many years until leaving in 2011 and will bring “greater rigor” to the implementation of the company’s strategy. Garijo did not immediately respond to requests for comment.

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She will become Sanofi’s first female CEO

Garijo will be Sanofi’s first female CEO and the only woman CEO among large global pharmaceutical companies after Emma Walmsley at GSK.US steps down this year. She was also the first woman to lead a German DAX-listed company, serving as CEO of Merck Group.

During her tenure leading Merck’s pharmaceutical division, Garijo guided the group’s supply chain through the COVID-19 pandemic. She oversaw multiple deals, including last year’s $3.9 billion acquisition of SpringWorks Therapeutics.

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However, during her tenure, Merck faced setbacks in drug development, with only three new drugs successfully launched. An investor who worked with Garijo but requested anonymity said that visible results—R&D and business expansion—were underwhelming, but she improved Merck’s internal structure and protected profit margins.

Roel Bulthuis, managing partner at London-based life sciences investment firm Syncona Limited, said Garijo transformed a “rule-bound and hierarchical” company into a more decisive and efficient entity. Bulthuis previously managed Merck’s corporate venture fund, M-Ventures, during her tenure.

“She… encouraged executives to have the courage to stand behind their decisions and really get things done,” Bulthuis said.

Another anonymous former colleague noted that she is energetic, vibrant, and adaptable, with a deep understanding of Sanofi. “She knows the ins and outs of this company; don’t underestimate how important that is,” the person said.

Background in clinical science, but how long can her tenure last?

Garijo is a clinical pharmacologist who began her career as an internist at Madrid’s La Paz Hospital, known for her strong operational execution and attention to detail.

“Garijo has more operational experience than scientific background, so it will be interesting to see how she can revitalize Sanofi’s R&D,” said Claus Henrik Johansen, CEO of Denmark’s Global Health Invest, which holds Sanofi shares.

Some analysts and investors noted that Garijo was not on many people’s radar before, which was somewhat surprising, and they are also curious about how long she will stay in the new role.

“I think she is a transitional CEO. Her strength lies in applying pressure to push for change,” said consultant Dumas. “She won’t stay in this position forever.”