Acquisitions Made By Pharmaceutical Company, Sanofi, In the United States In The Past 10 Years

Acquisitions Made By Pharmaceutical Company, Sanofi, In the United States In The Past 10 Years

Introduction

Sanofi-Aventis (SNY) is preparing a major acquisition in the U.S. worth $20 billion or more, according to Bloomberg, which cited five people with knowledge of the situation. Like many pharmaceutical firms, Sanofi is facing a looming patent cliff -- when major drugs lose their patent protection and cheaper generics flood the market. And, like many pharmaceuticals, Sanofi doesn't have a large enough pipeline of new drugs to make up for the lost sales. According to Bloomberg's sources, CEO Chris Viehbacher briefed the board on the transaction at a special meeting this week, but added that the process is in very early stages. As for the target, Reuters reports that analysts cite Allergan (AGN) and Biogen Idec (BIIB) as possibles. Those companies have market values of $17 billion and $12.7 billion respectively. After a Sanofi spokesperson declined to comment on "market rumors or speculation," the company's share price fell in Europe by 2.4%.

Discussion

The French pharmaceutical giant Sanofi-Aventis recorded prescription pharmaceutical sales of $38.8 billion in 2009, positioning the company as the industry's second-largest player. However, Sanofi-Aventis faces a sustained period of negative sales growth driven by patent expiration across key brands in its blockbuster portfolio and the subsequent exposure of these products to generic competition. With new launch products unable to compensate, Datamonitor currently forecasts Sanofi-Aventis's prescription pharmaceutical revenues to decline to $36.9 billion by 2015, equal to a compound annual growth rate (CAGR) of -1.0%. The impact of the company's expiry portfolio in driving this sales growth rate is illustrated by Figure 1.

The exposure of blockbuster franchises to generic competition has had a profound impact on Big Pharma in recent years, with erosion rates set to intensify further in the short term. From a strategic perspective, the increased threat of generic competition has driven a number of common initiatives including more focused investment on disease areas of high unmet need such as oncology, cost rationalization programs designed to drive profit growth, an expanded footprint in global emerging markets and a continued love affair with large-scale M&A (best exemplified by Pfizer's acquisition of Wyeth and Merck & Co.'s acquisition of Schering-Plough, both of which were completed in 2009). Underpinning many of these strategies is the objective of diversification, which has become an integral Big Pharma corporate mantra in recent years. The company that has moved most aggressively to diversify its business model and portfolio offering is arguably Sanofi-Aventis. Its proposed acquisition of Genzyme can therefore be viewed as a major acceleration of its diversification strategy. Furthermore, interest in acquiring the US biotech does not come as a surprise, given that Sanofi-Aventis has completed 11 acquisitions since the arrival of CEO Christopher Viehbacher in 2008.

These acquisitions have primarily acted to enhance Sanofi-Aventis's presence in the vaccines, generics, consumer healthcare and animal healthcare markets, reducing overall reliance on its prescription pharmaceuticals ...