* Sanofi has restructured R&D, has strong pipeline-Zerhouni
Toujeo, alirocumab, dengue vaccine likely blockbusters
* Prefers partnerships to takeovers as sector "overheating"
By Natalie Huet and Noëlle Mennella
PARIS, May 15 (Reuters) - France's Sanofi has strengthened its drug pipeline and has enough future blockbusters lined up for it to steer clear of the M&A frenzy "overheating" the industry, the drugmaker's R&D chief told Reuters.
Elias Zerhouni, former director of the U.S. National Institutes of Health, has restructured Sanofi's R&D since he took on the job in 2011. He slimmed down in-house research he said was not productive enough while multiplying external partnerships with biotechnology firms and institutes.
Zerhouni said in an interview the metamorphosis was "80 percent complete" and would bear fruit in the coming years. He argued that the strength of the group's drug pipeline was undervalued by analysts and investors.
Noting Sanofi had 12 products in clinical development set to come to market in the next five years, he foresaw one launch for every four to six months by 2018.
"Today Sanofi's pipeline is among the best in the industry," Zerhouni said. "It's being poorly appreciated right now, because for a long time Sanofi did not launch any products, but that will change very quickly."
Sanofi shares trade at around 14 times forecast earnings, at a discount to peers whose average price-earnings (PE) ratio is closer to 17, according to Reuters data.
Analysts say Sanofi needs to rebuild investor confidence after a string of disappointing results last year, while some also say its pipeline appears weaker than rivals'.
But Zerhouni said all of Sanofi's drugs in late-stage development had the potential to be blockbusters, i.e. generate over $1 billion of annual sales, in particular diabetes drug Toujeo - the follow-on to its top-selling Lantus - cholesterol drug alirocumab and its experimental dengue vaccine.
Seeking to offset the loss of patents on big drugs like its blood thinner Plavix, Sanofi, like other drugmakers, has moved away from in-house development of chemical drugs to teaming up with biotechs and academics on biologic drugs - which are derived from living cells, more targeted and harder to copy.
Zerhouni said 80 percent of drugs in clinical development at Sanofi were biologic. These drugs now account for 45 percent of group revenue but he aims to bring this to 80 percent by 2020.
Discovering these drugs is costly, and healthcare companies, under pressure from governments eager to shrink public spending, are shaking up their drug portfolios to weed out or beef up businesses that have not reached critical mass.
Several multi-billion dollar deals and bids over the past few weeks have made 2014 the busiest year for healthcare acquisitions, according to Thomson Reuters data.
Some companies are becoming full takeover targets, such as Britain's AstraZeneca, which is fighting off a $106 billion bid from U.S. giant Pfizer.
Sanofi is among French companies that could be shielded from foreign takeovers by a new government decree but the company has lately been cited by bankers and analysts mainly as a potential buyer due to its cash pile and acquisitive history.
Amid the current M&A frenzy, Zerhouni said the price tags of potential targets had doubled or tripled compared to what they were three years ago, when Sanofi struck its $20 billion deal for rare disease specialist Genzyme.
"We're now already diversified," Zerhouni said. "We have growth platforms that are performing well. There's no fundamental reason for us to jump into a market that's overheating."
He said Sanofi had bought Genzyme at the right time and was now confident Sanofi could be "a top five" player in the multiple sclerosis market, despite hurdles for its injectable drug Lemtrada. The treatment has been approved in Europe and other countries but is due to be resubmitted to U.S. regulators after the Food and Drug Administration first rejected it last year and voiced concern over its safety.
Zerhouni said Sanofi was constantly looking to strengthen its core businesses - which include rare diseases, diabetes, vaccines and emerging markets - via limited and targeted acquisitions, as CEO Chris Viehbacher has said.
But Zerhouni said he tended to find partnerships a more flexible and productive option as they are less disruptive to the innovative culture Sanofi is trying to get hold of.
"Clearly when you do an acquisition there is a lot of talent and momentum that gets lost," Zerhouni said.
"Sanofi's philosophy is to pick leaders in a field and take a bet on co-development, cooperation and synergies," he added, citing the company's fruitful partnerships with U.S. biotechs Regeneron and Alnylam.
Half of Sanofi's new products now come from such partnerships, while the other half comes from in-house research, which Zerhouni called an ideal balance.
On Sanofi's new cholesterol drug alirocumab, for which key Phase III clinical data is expected next month and a filing at the end of the year, Zerhouni said he hoped to beat Amgen , with which Sanofi is currently neck-and-neck in bringing to market this promising new class of injectable drugs.
He said Sanofi also aimed to grow in the increasingly crowded field of immunotherapy - harnessing the body's immune system to fight diseases such as cancers - and was able to capitalize on its experience in vaccines and immune disorders such as multiple sclerosis and rheumatoid arthritis.
"We have a very strong experience in this field that can be used in oncology, and in fact already is," he said, highlighting that Sanofi had four antibody drug conjugates in its pipeline and was also working on immuno-oncology projects with Regeneron.
He declined to say whether a reshaped Sanofi was looking to shed a multi-billion-dollar portfolio of older drugs, as reported by Reuters citing sources familiar with the matter . "Talk to me about the future, not the past! I'm not interested in old drugs," he said.
(Editing by Philippa Fletcher)