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S-A takeover strategy aims to fight generic threats

According to Bloomberg, French pharmaceutical company sanofi-aventis is on the look-out to buy new medicines from smaller firms to shore up its flagging pipeline of drugs.

According to Bloomberg, French pharmaceutical company sanofi-aventis (S-A) is on the look-out to buy new medicines from smaller firms to shore up its flagging pipeline of drugs.

Nearly 50 per cent of FY06 sales at S-A were derived from its anti-coagulant Lovenox (enoxaparin), while other medicines are set to lose patent protection by the end of 2012.

Another third of the company's revenue, says Bloomberg, is generated from slow growth branded drugs. Sales have been further impacted by the company's failure to get its obesity treatment Acomplia (rimonabant) approved in the US over safety concerns.

In an interview with Bloomberg, Marc Cluzel, head of R&D at S-A, said that adding products from outside was a change in the way the company approached R&D, as it normally relied on its internal processes to develop new drugs.

Shares in S-A have dropped 15 per cent on the Paris stockmarket so far in 2007, as investors are concerned that the company cannot replace the current top-selling products in time for the anticipated patent expiries.

Cluzel was quoted in French media reports as saying that S-A's major problem was to survive after 2012. He added that the company needed to reinforce its upstream portfolio.

Market performance and analyst comment
On 19 October, shares in S-A dropped by 1.3 per cent to rest at EUR 59.29 on the Paris stockmarket. In total, shares in the company have fallen 15 per cent in 2007.

The share performance, says Bloomberg, makes S-A the second-worse performer on its 13-member Bloomberg Europe Pharmaceutical Index, which is down 10 per cent.

UBS analysts also say they are increasingly pessimistic about what might happen in S-A's 2012 and 2013 consensus forecasts. In a note to clients after a September 2007 meeting, they questioned to what extent the market would believe the guidance given the lack of execution on the previous guidance.

The industry as a whole is in the same boat as S-A. Pfizer, the world's largest pharmaceutical company, is set to lose market exclusivity in the next four years on drugs which added to approximately 50 per cent of FY06 sales.  The company has already reported a 77 per cent drop in Q3 FY07 profits.

When S-A failed to secure FDA approval for Acomplia, the company lost over USD 7bn in market value, thus increasing the pressure to get newer drugs on the market.

Acomplia can still make it
All is not lost, however, as Acomplia can still gain FDA approval. S-A is conducting new clinical trials to prove the pill's benefit in diabetes, with plans to resubmit the medicine to the FDA in 2009 for this indication.

Cluzel said that its depression medications, Multaq and saredutant, could win approval in tH1 2009, with insomnia treatment Eplivanserin following later. In total, S-A has 123 products in development.

To flesh out the pipeline, S-A is looking to China and Japan to spur new growth. It is repatriating products licensed out to partners in Japan which should infuse sales with approximately EUR 500m (USD 714m) by 2008. However, Cluzel said that the company was now less interested in making a mid-sized acquisition in Japan, as Roche did with Chugai.


30th September 2008


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