Sanofi's board ousted its chief executive of six years at a special meeting on Wednesday, two days after it emerged he had fallen out with the French drugmaker's chairman, wiping more billions off its market value.
The board said Sanofi would continue the strategy of international expansion pursued under Chris Viehbacher, blaming his dismissal on poor relations between the CEO and the board.
But investors fear Sanofi may become more insular.
"Viehbacher tried hard to change the DNA of the company but the board won in the end. Sanofi will become more parochial now," said Navid Malik, head of life sciences research at Cenkos Securities in London.
Sanofi said Chairman Serge Weinberg would take on the CEO role until a replacement for the ousted German-Canadian Viehbacher was found. Weinberg said on a conference call that there had already been contacts with potential candidates.
"The board of directors held a meeting Wednesday, October 29 at 8 a.m. and decided unanimously to remove Christopher A. Viehbacher as chief executive officer of Sanofi," the board said in a statement.
"As a consequence, Christopher A. Viehbacher resigned as a director of Sanofi."
Weinberg said the decision stemmed from a disagreement over Viehbacher's management style and poor cooperation with the board, without elaborating.
Viehbacher had been unable to say on Tuesday during a quarterly results conference call whether he had the support of his board after the chairman declined to clarify his future during a meeting the previous day.
In the results, the company warned its key diabetes business would probably not grow next year.
Shares in Sanofi were down more than 4 percent in early trading on Wednesday, contributing to a three-day drop of close to 16 percent. The stock is down 20 percent this month.
Sanofi's shares fell more than 10 percent on Tuesday alone, their biggest drop in 17 years and wiping off 13 billion euros of market value in two days.
Uncertainty over Viehbacher's role first surfaced on Monday with the publication of a September 4 letter he sent to the board asking for clarity about his position.
Several sources close to Sanofi's board told Reuters this week of an increasingly frosty relationship between Viehbacher and Weinberg, Sanofi's chairman since 2010.
French cosmetics group L'Oreal is Sanofi's largest shareholder, with a stake of 9 percent. Officials at the company were not immediately available to comment.
Viehbacher was Sanofi's first non-French boss, taking the job in late 2008.
He transformed a very French business by making it more international, winning the praise of many analysts and investors, but raising some hackles in Paris and directly butting heads with some board members over the past several months.
The fact Viehbacher moved to Boston in June did not help relations improve, but his change of residence was not the root of the dispute, the sources said.
His departure leaves Sanofi in a tight spot as it hunts for a successor while also grappling with a price war in its all-important diabetes business, which threatens sales of its top-selling Lantus medicine.
Some investors were disappointed that Sanofi did not set out a program to offset the diabetes hit with a plan to cut costs, but Citi analyst Peter Verdult said scope for significant cuts were limited given the need to invest in the new drug pipeline.
It is also difficult for Sanofi to cut its domestic cost base in France, due to French labor laws.
One lever Sanofi could pull would be to make further acquisitions, according to Tim Anderson of Bernstein.
"Generally speaking, in the pharmaceutical sector, larger M&A deals tend to happen when companies are in difficult straights and this is where Sanofi seems to be at the moment," he said.
On Tuesday, Patrick Pouyanne, the new CEO of French supermajor Total, resigned from the board of Sanofi.