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Speaker 1: Paul Hudson, the CEO of French pharmaceutical giants son Off.

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Speaker 1: He says the company is entering a steady state despite

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Speaker 1: inflationary pressures. He spoke with Bloomberg's Caroline Conan on the

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Speaker 1: sidelines of the ex on Ponvance Economic Conference.

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Speaker 2: You just participated here in a panel in x about

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Speaker 2: industrial renaissance and sovereignty. Do you think we are still

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Speaker 2: too dependent on the US and China? And when it

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Speaker 2: comes to drugs, when it comes to medicine, should we

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Speaker 2: repatriate more of the production here in Europe?

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Speaker 3: You know, we invest a lot in manufacturing in Europe,

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Speaker 3: as most big healthcare companies did in forty percent of

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Speaker 3: our global manufacturing is done out of France in itself.

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Speaker 3: Sovereignty and investment in healthcare for me are like different questions.

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Speaker 3: Sovereignty is people worrying about shortages, worrying about not being

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Speaker 3: able to get medicines. You know, we felt that after

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Speaker 3: the pandemic. What's basically driven that, and I mentioned this

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Speaker 3: at the panel this morning, is over time, governments have

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Speaker 3: wanted to pay less and less for medicines to a

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Speaker 3: point where it's lower than.

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Speaker 4: The cost to make them. In Europe. You know, we

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Speaker 4: have high.

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Speaker 3: College standards, great labor standards, and so consequently it costs.

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Speaker 4: A little bit more.

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Speaker 3: The prices have come down so far. They're made outside

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Speaker 3: of Europe, and that's sort of okay until people want sovereignty,

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Speaker 3: and then it's not okay and you can then try

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Speaker 3: and repatriate.

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Speaker 4: It and do different things.

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Speaker 3: Really, the best way to do it is just a

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Speaker 3: price responsibly there's a good value for the health system

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Speaker 3: and the payer in the country, and then allow companies

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Speaker 3: to just stay and make them in their home markets.

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Speaker 4: It just makes more sense.

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Speaker 3: We get great supporters set at the panel from the

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Speaker 3: French government, but there's so much more that can be

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Speaker 3: done to great an environment that becomes if you're like

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Speaker 3: sovereign automatically without having to come in at the end

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Speaker 3: to try and fix something.

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Speaker 4: And we'll do our best in that journey.

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Speaker 2: Do you see your risk? Then in a few years

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Speaker 2: from now we would have forgotten the lessons about the

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Speaker 2: pandemic and move production again elsewhere. We're cuts are lower.

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Speaker 3: Well, I think we have this paradox, don't With the

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Speaker 3: post pandemic. There is a lot of budget deficits, fiscal challenges,

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Speaker 3: so people will still go for the lowest unit cost

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Speaker 3: because governments are trying to balance their books. We sort

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Speaker 3: of understand that, but in healthcare you have to take

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Speaker 3: a long term view, and healthcare perhaps has not been

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Speaker 3: a priority for the EU, at least not in terms

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Speaker 3: of what it creates in terms of population, health and

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Speaker 3: inward investment. And it's something really for everybody to think about.

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Speaker 3: So I think, yes, sadly there will be a desire

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Speaker 3: to go much lower cost again and that will lead

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Speaker 3: to having to repatriate at a later stage. However, I

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Speaker 3: think some long term thinking, some clear mindedness to try

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Speaker 3: and make sure that at least a percentage of essential

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Speaker 3: medicines is made in Europe, which means you have some flexibility.

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Speaker 3: Perhaps it's not all, maybe it's forty percent or fifty percent,

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Speaker 3: but if you can think about resiliency post pandemic, there's

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Speaker 3: sort of things.

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Speaker 4: You need to do.

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Speaker 2: The French president in Minimercon, because obviously we're here in

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Speaker 2: France actually a nons last month to relocate of fifty

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Speaker 2: drugs here to avoid some shortages of a paracit time

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Speaker 2: al antibiotics, for example. How important is this?

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Speaker 3: I think it's important that he's taking a stance. I

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Speaker 3: think he understands how essential it is to make sure

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Speaker 3: medicines are available. I think he's doing perhaps more than

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Speaker 3: any other head of state to try and bring this

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Speaker 3: to everybody's attention, to mobilize the debate and the investment

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Speaker 3: and the repatriation. So cudos to the government for that. However,

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Speaker 3: I think more thought, both in France and in Europe

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Speaker 3: to how do we avoid this happening in the first place.

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Speaker 3: How do we build a viable long term approach. Rather

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Speaker 3: than we're going to protect these fifty medicines, how about

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Speaker 3: we make sure that we are balancing our medicines are

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Speaker 3: made from the very beginning of the life of that

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Speaker 3: medicine and pricing appropriately so that there's always supply. And

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Speaker 3: you know, I think it's a deeper challenge to solve

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Speaker 3: it can be solved.

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Speaker 4: I think France is ahead of the pack in trying

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Speaker 4: to solve it.

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Speaker 2: Recently we talked to Earth about AI, artificial intelligence, how

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Speaker 2: it's going to change the way we do business. Hi

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Speaker 2: is Senafie using AI in the production of medicines in

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Speaker 2: the art look for health?

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Speaker 3: I mean, look, I'm privileged to live and work in France.

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Speaker 3: France are some of the best mathematicians in the world,

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Speaker 3: some of the best universities biology, chemistry engineers, and that

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Speaker 3: all together in a generative AI world means that France

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Speaker 3: has the best raw materials to be at the forefront

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Speaker 3: of everything. We have amazing collaborations with companies, local companies

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Speaker 3: that oak in you know, will leaders in what they

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Speaker 3: do in drug development. Give you an example, working with

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Speaker 3: them to make sure that when we research a new medicine,

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Speaker 3: we make sure that we look for patients that will

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Speaker 3: get the maximum benefit, not everybody the max because patients

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Speaker 3: react differently. Imagine what an efficient use of healthcare spend

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Speaker 3: is if medicines are given to patients that will get

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Speaker 3: the maximum benefit to their life, only working with them

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Speaker 3: to help do that work in drug discovery, to help

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Speaker 3: find the drugs for diseases that are undrug because we

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Speaker 3: just didn't have the capacity to think about how to

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Speaker 3: solve it. And then here's the thing. While they're all

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Speaker 3: very expert areas in its central areas, there's also this

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Speaker 3: generation of what are called snackable AI.

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Speaker 4: How do we make our lambs easy on a daily basis?

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Speaker 3: How do we make better decision intelligence and our ambition

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Speaker 3: at Sonfi is to be the world's leading company, perhaps

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Speaker 3: outside of tech, to use AI at scale so that

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Speaker 3: everybody every day gets a nudge to help them look

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Speaker 3: at something or gain an insight that can make them

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Speaker 3: more efficient. We have twenty two thousand employees have access

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Speaker 3: to AI in the company, nine thousand using it on

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Speaker 3: a daily basis. You know, I think we're pretty much

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Speaker 3: one of the leading organizations of AI at scale and

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Speaker 3: in this country. With the mathematicians and the data scientists,

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Speaker 3: it's such a great opportunity.

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Speaker 2: Obviously, so if you looks very different from when you

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Speaker 2: joined in twenty nineteen, you have three major drunk launches

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Speaker 2: this year. Yet it seems like this does not exactly

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Speaker 2: reflect in your share price. Do you know why?

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Speaker 3: God, Look, we've had twenty and thirty years of the company,

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Speaker 3: fifty years since it was born, and more recent performances.

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Speaker 3: But for me, the last four years we said we

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Speaker 3: were going to do things that never been done before.

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Speaker 3: First in class, best in class medicines, change people's lives,

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Speaker 3: three launches of medicines hemophilia for example, this year, to

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Speaker 3: do something never been done before.

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Speaker 4: We're now entering a steady state for the company.

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Speaker 3: It's taken four years and a lot of hard work

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Speaker 3: to get us to a point where we have twenty

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Speaker 3: seven major chlinical readouts, three launches, three vaccines on top

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Speaker 3: of that going into late stage development, five major readouts

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Speaker 3: and transformational medicines in this year alone. I think the

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Speaker 3: market is now waking up to the fact that with

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Speaker 3: the real deal, and it's not a temporary thing. It's

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Speaker 3: a deep rooted commitment to doing things that have never

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Speaker 3: been done before. And whilst we think our value will

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Speaker 3: grow and grow, we're much more excited about being able

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Speaker 3: to treat diseases that we're never treated before.

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Speaker 4: And importantly, you know, even this year alone.

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Speaker 3: Our performance into a relative value to our peers has

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Speaker 3: really started to stand out. So, no, we're doing the

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Speaker 3: right things and we'll be appreciated as we go, but

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Speaker 3: I'm really thrilled with what we're doing.

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Speaker 2: One thing we've seen is a JSK and jos and

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Speaker 2: Johnson's peeling up the consumer health unit. Is that something

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Speaker 2: that if you would consider.

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Speaker 3: You know, we've said from the very beginning that helping

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Speaker 3: people's lives comes in many different ways, and our consumer

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Speaker 3: brands touch so many lives and so many different ways.

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Speaker 3: You're here in France, dollopran perhaps is part of the

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Speaker 3: family at your home. It is in terms of most

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Speaker 3: French households. There's so many great things we do in consumer.

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Speaker 3: We said back in nineteen let's try and get our

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Speaker 3: consumer business growing faster than the rest of Sofie, faster

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Speaker 3: than the market. And they've done an incredible job to

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Speaker 3: turn that business into a really fast moving consumer health company,

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Speaker 3: a new category almost so now we're thrilled with what

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Speaker 3: they're doing. We'd like to do more. Of course, you know,

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Speaker 3: we watch what other companies do. It's sort of our

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Speaker 3: responsibility as management. But right now we're doing great work

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Speaker 3: between consumer farmer vaccines and we're really on the move.

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Speaker 2: Finally, we're seeing a lot of concerns macro economically, obviously

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Speaker 2: due to the geopolitical uncertainties, but also a higher rates.

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Speaker 2: Do you fear a deep recession in Europe going forward?

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Speaker 2: Are we misunderstanding the fact that there is a delay

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Speaker 2: between monetary policy and transmission to the real economy and

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Speaker 2: perhaps we're not out of the woods yet when it

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Speaker 2: comes to recession.

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Speaker 4: I think you said it beautifully.

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Speaker 3: The delay between policy and sort of impact outcome is

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Speaker 3: therefore all to see. I think we perhaps have to

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Speaker 3: hold our nerve a little bit. One of the reasons

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Speaker 3: I come to forums like this is is to really

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Speaker 3: listen to experts and to add to our own knowledge

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Speaker 3: and to try and decide where do we think we're going.

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Speaker 4: What it can say to you really clearly is that we're.

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Speaker 3: Perhaps one of the few, if not the only industry

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Speaker 3: that will never increase its prices in markets such as

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Speaker 3: France and Europe. And so when there is challenges in

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Speaker 3: the economy and inflationary pricing pressures on things we need

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Speaker 3: to make our medicines, we don't put our prices up.

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Speaker 4: And I think people fail to understand that.

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Speaker 3: Many of our suppliers say, oh, inflation, wage inflation, component inflation, but.

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Speaker 2: That means of pust reducing your margins as well.

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Speaker 3: It does, which means you have to work really hard

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Speaker 3: to be more productive to cover that gap internally. Now,

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Speaker 3: so if you were doing that, we're just making that

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Speaker 3: so you know, but I think people most of society

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Speaker 3: has just passed inflation right onto. Consumer doesn't happen in healthcare,

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Speaker 3: will never happen in healthcare, So we've had to be

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Speaker 3: more and more efficient to absorb that, and we hope

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Speaker 3: like everybody else, that that will pass. And in some

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Speaker 3: countries inflation has started subsidey of course not everywhere, so

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Speaker 3: we'll see. But no, I'm here like everybody else to

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Speaker 3: try and triangulate where we think we are overlaid that

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Speaker 3: on our own interpretation, and you think about informing our decisions.

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Speaker 3: But ultimately we have to run a more efficient company

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Speaker 3: to cover those increases, and we'll do our best because

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Speaker 3: paces need access to medicines and that's what we do

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Speaker 3: for well.

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Speaker 1: That's Paul Hudson's CEO of Son Offie, speaking with Bloomberg's

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Speaker 1: Caroline Conan at the x en pon Van's Economic Conference.

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Speaker 1: For more interviews like this, subscribe to the Bloomberg Talks podcast,

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