By Elena Berton
PARIS (Reuters) - When Sanofi boss Chris Viehbacher first met staff at Genzyme, the U.S. biotech he had just acquired after a long takeover battle, he told them he did not want "planeloads of people coming from Paris over here to kind of Sanofize Genzyme".
More than one year later, the German-Canadian, who is Sanofi's first non-French boss, has kept his promise: it is Genzyme's free-spirited culture and innovative edge that is holding sway at the French drug giant.
Genzyme executives now run the company's U.S. headquarters near Boston, one of its international research hubs which Viehbacher is betting on to revive Sanofi's lacklustre drug research results.
Highlighting Genzyme's dominance, Sanofi's newly-appointed deputy head of research and development operations, virologist Gary Nabel, will be based at Genzyme's head office in Cambridge, Massachusetts.
Nabel, a highly respected scientist at the U.S. National Institute of Allergy and Infectious Diseases since 1999, is a notable catch for Sanofi.
Even the group's new headquarters in central Paris has a biotech feel, with open-plan offices and multiple meeting rooms designed to encourage staff to share ideas.
"It's an approach Sanofi is adopting at a global level," one analyst said on condition of anonymity. "It's a different approach and it will take a bit more time to implement in France, but the decisions that have been taken are being put into practice anyway."
The Genzyming of Sanofi provides another example of how mainstream pharmaceutical companies are increasingly turning to the nimble, risk-hungry biotech sector - not only for new drugs but also for new ways of doing business.
Pharmaceutical giants may have deep pockets to support research, but their hierarchical and bureaucratic style is often considered a hurdle to the innovation they badly need when many of their existing drugs face competition from cheaper copies.
Sanofi's Genzyme deal followed Swiss rival Roche's, takeover of Genentech, the San Francisco-based biotech now driving the drug pipeline of the 116-year old Basel-based drug giant.
The French company's track record on drug development has been disappointing. Sanofi has tended to spend more than its peers on drug research and get fewer products to the market, according to Boston Consulting Group.
Sanofi's performance in research is partly a side effect of the multiple acquisitions that have catapulted the company, once a fledgling unit of oil group Elf Aquitaine, into the world's top-five drugmakers.
These deals saddled Sanofi with a cluster of unconnected research centers that relied on the Paris headquarters for decision making, instead of sharing information with each other.
"The decision-making structure and strategy were centralized in Paris," said Matt Gurin, who heads the life sciences team at consulting firm Hay Group and advised on the integration of Franco-German drugmaker Aventis into Sanofi in 2004.
"All of Sanofi's blockbusters were acquired through acquisitions, not innovation," he said.
Now the French company is betting on Genzyme's market-leading line-up of drugs for rare diseases and its multiple sclerosis drug Lemtrada to help restore its pipeline after losing several aging blockbusters to generic rivals.
In addition, to speed up the discovery of promising treatments, Sanofi has strengthened cooperation with universities, merged research centers and stepped up scouting for new drugs outside the company.
Sanofi has also been cutting costs, wielding the axe to boost productivity in research labs in the United States and parts of Europe.
This year Viehbacher caused a stir when his cost-cutting drive targeted France, where he said researchers had not come up with a new product in 20 years.
This got a frosty reception from research staff and the French government which eventually stepped in to force the company to rein in its extensive layoff plan that unions had predicted could affect 2,500 posts.
The company ended up scaling back its country-wide reshuffle to around 900 voluntary layoffs.
Terry Hisey, head of the life sciences team at consultancy Deloitte, said there was too much at stake for Sanofi to ignore the government's requests.
France's national health service generates the majority of Sanofi's 3.1 billion euros ($3.9 billion) in sales in the country, while the group is one of the main beneficiaries of government tax breaks on research costs, saving around 130 million every year.
"In these cases, you can't say one size fits all. Something may make sense on a rational level, but it may be costly once you deal with the practical point of view of labour laws and regulation," he said.
Sanofi's cost-cutting strategy seems to have been vindicated by a 20 percent hike in its share price this year, allowing it to overtake former shareholder, oil major Total, as France's biggest company by market capitalization.
($1 = 0.7867 euros)
(Additional reporting by Noelle Mennella. Editing by Jane Merriman)