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Sanofi buys stake in Czech generics firm

Ä430m deal latest sign of pharma's growing interest in attractive CEE market

Sanofi-aventis has strengthened its foothold in the generics market by acquiring a 25 per cent stake in Zentiva, the Czech branded generics company.

The Ä430m ($516m) deal is the French firm's first purchase since last year's completion of the merger of Sanofi-SynthÈlabo and Aventis. It is a further sign of Big Pharma's increasing interest in the Central and Eastern Europe market, which has seen rapid growth of branded generics that still enjoy relatively high margins in the region.

ìThis acquisition is a strategic move in the development of sanofi-aventis in Central and Eastern Europe,î said S-A in a statement. ìIt will create relationships with a company which has successfully developed strong positions in East European countries and has recently expanded in Romania.î

S-A will buy most of the Zentiva shares from investment firm Warburg Pincus, which sold its entire stake of around 20 per cent. Zentiva managers and other employees have sold about half of their 10 per cent stake to the French firm.

Last year, Prague-based Zentiva reported a 16 per cent rise in net profits to CzK 1.88bn ($79m) and says it expects sales and profits to rise even more in 2006. It employs over 4,000 people and has production sites in the Czech Republic, Slovakia and Romania.

Zentiva chief executive, Jiri Michal, said that ìthis transaction will allow us to create a long-term relationship with sanofi-aventis, which will enable us to accelerate and support the growth of Zentiva in our core countries.î

Analysts said that S-A's purchase could not be described as a bargain, as the stake represents about four times Zentiva's yearly sales. However, analysts at brokerage Sanford Bernstein said that access to Eastern Europe and more exposure to generics and branded generics seemed a sound long-term strategy given the pricing pressures that are due to increase in the US market.

The generics market has been characterised by sweeping consolidation of late. The two biggest players, Teva and Novartis each spent more than $7bn last year on bulking up their operations. Earlier this month (March), the fast-growing Icelandic generics firm, Actavis, submitted an informal offer to buy Croatian firm, Pliva, for $1.6bn.

Meanwhile, shares in S-A have risen recently following its financial settlement with generics firm Apotex, which will delay generic competition of the French firm's top-selling blood thinning drug, Plavix, until 2011. S-A's marketing partner in the US is Bristol-Myers Squibb.

Related article:
http://www.pmlive.com/index.cfm?showArticle=1&ArticleID=4503

30th September 2008

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