Sanofi Moving Into Generics

Posted by: Kerry Capell on June 18, 2008

On June 18, Sanofi-Aventis became the latest pharmaceutical giant to announce plans to move into the more lucrative business of generic medicines. The French drug company said it intends to bid $2.6 billion for Czech generic-drug maker Zentiva, in which it already has a 24.9% stake. The bid tops an earlier offer from Zentiva’s other main shareholder Czech financial group PPF and analysts say it could trigger a bidding war.

Sanofi’s move follows that of Daiichi Sankyo, Japan’s third-largest drugmaker, which announced a $4.6 billion bid for a controlling stake in India’s leading generics maker, Ranbaxy Laboratories Ltd. a week earlier.

It’s a sign of just how tough things have become in the prescription drugs business, where industry heavyweights have struggled to fill gaping pipelines despite spending billions on research and development. At the same time, following a number of product safety scares regulatory agencies worldwide are scrutinizing the approval of new medicines more closely.

It was Switzerland’s Novartis that made this kind of new breed pharma company fashionable with its acquisition of German generic-drug maker Hexal AG and Eon Labs Inc. of the U.S in 2005. Back then, few in the industry believed combining generics with prescription drugs made sense. Now it’s Novartis that’s having the last laugh, as sales of generics are growing at twice the rate of branded prescription drugs.

Sanofi’s aim is to find new sources of cash to offset the patent expirations of its two best-selling drugs, blood-thinner Plavix and anti-thrombotic Lovenox. As the move into generics becomes more popular, Sanofi may find itself in the middle of a bidding war.