An eye for the deal

Sanofi-aventis marches south of the border and beyond

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PARIS, France—Keeping with its strategy to form lucrative partnerships in the global generic market and extend its pharmaceutical presence in emerging countries, sanofi-aventis, Europe's third-largest drugmaker, has crafted collaborative agreements with two generic pharmas south of the border—and secured a stronger foothold in China.

On April 2, the French drugmaker's subsidiary, sanofi-aventis Mexico, acquired Laboratorios Kendrick, and on April 9, sanofi-aventis signed an agreement for the acquisition of Medley, the third-largest pharmaceutical firm and top generic company in Brazil.

"The Kendrick acquisition represents an exceptional opportunity to accelerate our growth in the generic market in Mexico," says Jean-Marc Podin, vice president of media relations. "This will allow sanofi-aventis to accelerate sales growth and further extend its pharmaceutical portfolio in emerging markets. The deal (with Kendrick) has been signed and hence, benefits both parties. Sanofi-aventis proves once again its leadership and its commitment to offering quality medicines that satisfy the patients needs with one of the most comprehensive portfolios in the industry."

Mexico City-based generic drugmaker Laboratories Kendrick reported approximately $38 million in 2008 sales. Kendrick's portfolio incorporates more than 50 active ingredients in the areas of analgesics, antihistamines, anti-infectives, antirheumatics and cardiovascular and central nervous system drugs.

As a market leader in Mexico, sanofi-aventis Mexico has 2,500 employees and sales of approximately $784 million in 2008 in diabetes, oncology, thrombosis, pain and vaccines. In 2007, sanofi-aventis launched its own generic division in Mexico and has agreed to build a $131 million facility in Mexico to manufacture pandemic influenza vaccine.

Christopher Viehbacher, CEO of sanofi-aventis, caught the industry's attention last year when he made no secret about his intention to acquire generic pharmaceutical companies in the emerging markets. Shortly after being named in December to head up sanofi-aventis, Viehbacher said he planned to target small and mid-sized acquisitions to build up the company's global position in emerging markets, vaccines and biotechnology. However, the industry has speculated that sanofi-aventis is targeting acquisitions in emerging markets to help overcome generic competition to drugs that make up one-fifth of sanofi's revenue.

"As an industry, we've been too focused on rich countries," Viehbacher told Bloomberg in March. "If you are going to be a healthcare company, you have to be able to deal with healthcare concerns of patients around the world."

He then walked the walk last month when sanofi-aventis acquired Kendrick, then, one week later, Campinas, Brazil-based generic drugmaker Medley in a deal that values the company at $659 million. Medley has a generic drug portfolio of 127 products that accounted for 68 percent of its total revenues in 2008, and employs 1,550 collaborators, of which approximately 500 are in the sales force, reported.

The deal represents sanofi-aventis' strategy to grow in the generics area as patent expirations pressure growth, according to Edward Jones equities analyst Linda Bannister who speculated to that it is possible sanofi-aventis paid cash for Medley. The privately negotiated deal is expected to close in the second quarter.

The move reinforces sanofi-aventis' firm toehold as a top pharma in Brazil, with a total 12 percent market share, making sanofi-aventis the leading player in the field of generics in Brazil and Latin America.

Viehbacher also spoke of needing a presence in China, India and Africa since sanofi-aventis is currently "only treating a small fraction of patients in most of those countries. There is a huge opportunity there."

Sanofi-aventis is investing $90 million in China in order to produce its diabetes treatment, Lantus. The company also plans to expand its manufacturing facility in Beijing and build pre-filled production lines for Lantus SoloStar.

Said Viehbacher, "We remain convinced of the strategic importance of the Chinese market." The production of Lantus SoloStar, scheduled to start at the site in 2012, "will bring great benefits to the diabetes patients in China."

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