#2 - Sanofi-Aventis

174 Avenue de France
75013 Paris, France
Tel: (33) 1 5377 4000
Fax: (33) 1 5377 4296
www.sanofi-aventis.com

Headcount	105,000
Year Established	2004
Pharma Revenues	$40,871	+1%/+6%
Total Revenues	$40,871	+1%/+6%
Net Income	$11,814	+12%/+18%
R&D Budget	$6,392	-5%/flat

Revenues converted at average exchange rate / based on reported currency (Euro)

2009 Top Selling Drugs
Drug	Indication	Sales	(+/-%)
Lantus	diabetes	$4,295	+19%
Lovenox	thrombosis	$4,244	+5%
Plavix	heart attack, stroke	$3,658	-5%
Taxotere	cancer	$3,036	+2%
Aprovel	hypertension	$1,724	-3%
Eloxatin	colorectal cancer	$1,335	-33%
Ambien	insomnia	$1,218	flat
Allegra	allergic rhinitis	$1,019	+1%
Copaxone	multiple sclerosis	$651	-29%
Menactra	meningitis vaccine	$621	+4%
Delix/Tritace	hypertension	$598	-21%
Amaryl	diabetes	$580	+2%

Account for 56% of total pharma sales, down from 57% in 2008.

SA earned $1.35 (+19%) billion from vaccines for polio, whooping cough and Hib and $1.48 (+37%) billion from flu vaccines. However, the company does not break out sales of individual vaccines (except Menactra), so they are not included in our list of top sellers. Total vaccine sales in 2008 were $4.8 billion (+15%), comprising 12% of total sales, up from 10% in 2008.

PROFILE

Sanofi-Aventis saw a changing of the guard in 2009, as insulin glargine injection Lantus passed Lovenox as the company’s best seller. If you look at our Top Selling Drugs chart on the previous page, the euro-to-dollar exchange rate makes the rest of SA’s products look pretty grim; not a one shows growth above 5% for the year, and most of them show a drop, with Eloxatin and Copaxone revenues plummeting. If you want to feel better, add 6% to each of those numbers for the results in local currency. It makes SA’s prospects look slightly better, although there are still far too many products trending downward.

And with Plavix — co-marketed with Bristol-Myers Squibb — facing generic competition in the U.S. next year, Sanofi could use some rose-colored lenses. Colon cancer treatment Eloxatin suffered an at-risk generic attack in 2009, and 1Q10 sales managed to drop a near-impossible 97% from 1Q09 in the U.S., and 81% overall. Sanofi reached an agreement with generic marketers to take their products off the market from June 2010 to August 2012, after which they can sell a licensed generic. Picking up the lesson of Apotex and Plavix, the generics makers presumably packed so much inventory into wholesalers pipelines that it’ll take a year for SA’s sales to recover.

Acquisition News Target: Shantha Biotechnics Price: $775 million Announced: July 2009 What they said: “Shantha provides Sanofi Pasteur with a portfolio of new vaccines in development which complement our current vaccines, positioning the company to accelerate its growth in strategically important emerging markets. The state-of-the-art manufacturing facilities allow Sanofi Pasteur to gain high quality capacity in order to enable us to provide important vaccines at affordable prices to many people around the world.” —Christopher A. Viehbacher, CEO, Sanofi-Aventis Target: Merial Ltd. Price: $4 billion Announced: July 2009 What they said: “The combination [of Merial and Intervet/Schering-Plough] would create a new leader in this USD 19 billion global animal health market, supporting our vision of a global diversified healthcare leader.” —Christopher A. Viehbacher Target: FOVEA Pharmaceuticals Price: $520 million Announced: October 2009 What they said: “Fovea and its unique technology platform represent a major opportunity for Sanofi-Aventis in the very promising and dynamically growing ophthalmic area, driven by unmet medical needs and aging population.” —Christopher A. Viehbacher Target: Chattem Price: $1.9 billion Announced: December 2009 What they said: “Chattem’s existing sales, marketing and distribution teams and infrastructure provide a tremendous platform for future conversions of prescription medicines to OTC products in the U.S.” —Christopher A. Viehbacher SA also acquired Laboratoire Oenobiol, a French provider of nutritional beauty supplements, and is bidding to acquire Nepentes, a Polish consumer healthcare company.

Like Pfizer (and many of the companies further down the ranks), SA has been hedging its bets in “straight” pharma by diversifying. SA has boosted its consumer healthcare offerings globally, is in the process of building the top animal health company in the world, has gone on a multi-year run of acquiring generics companies and other firms in emerging markets, and has kept the pedal down with its vaccines business. One look at the “Acquisitions” box will show you that Sanofi’s bolting on some significant assets as it tries to de-emphasize traditional pharma.

But if you’re on this list, the de-emphasis only goes so far. Side bets are important, but SA is still banking on developing another major pharma product or two. Before its approval in July 2009, Multaq (atrial fibrillation) was touted as SA’s next billion-dollar drug. Some analysts even projected a peak sales figure near $4 billion for Multaq, which had been bumped by the FDA in 2006, pending further trials.

It’s early days, but Multaq’s early numbers haven’t been pretty. Sales in its first two quarters were microscopic, and other “some analysts” have dropped their peak sales estimates to $250 million, noting that the entire market of anti-arrhythmia drugs — Multaq’s class — is smaller than $1 billion globally and rife with much cheaper, nearly-as-effective treatments.

Like I said, it’s early. Multaq posted $33 million in 1Q10 sales, equal to the sales of 3Q09 and 4Q09 combined, but its earlier rejection means that its patent life is likely only going to run through 2014 or ‘15, so it needs to make hay.

Elsewhere in this issue, we’ll see that other presumed blockbusters (Effient and Onglyza, to name two) have start slowly out of the gate, reflecting a new matrix of concerns focused on gatekeepers, reimbursement, safety profiles and other elements that may not have been in play when an investigational drug was green-lighted. Good thing the H1N1 vaccine kicked in an extra $500 million in 1Q10 sales, after accounting for an extra $400 million in FY09. SA has made significant investments in vaccine R&D and production, further extending its footprint with its Shantha acquisition (and don’t be surprised if it acquires Abbott’s vax-unit by the time this issue’s in print).

In addition to vaccines, SA is also spending on diabetes R&D and new products to complement Lantus. In June 2010, Sanofi licensed an oral type 2 diabetes treatment from Metabolex in a deal with a potential value of $375 million, plus royalties. The compound is just beginning Phase II trials. Another deal with CureDM in April 2010 had a potential value of $335 million plus royalties for an insulin-stimulating peptide that has yet to begin Phase I trials.

Another (possible) $350 million is going to Wellstat Therapeutics for an insulin sensitizer in Phase II, as per an October 2009 agreement. SA also committed $50 million in June 2009 to buy an insulin production facility in Frankfurt, Germany. In its announcement, the company referred to the plant as “one of the largest state-of-the-art insulin manufacturing plants in the world.”

Inside-Out

The Lowe Down Sanofi-Aventis reminds me of someone recovering from a hangover, or maybe some sort of debilitating illness. In their case, the problem was the merger that created the company itself, coupled with the no-not-really lost potential of their CB1 compound, rimonabant. Now their CEO is giving interviews about how big mergers really aren’t the answer, and how their vaccine business will be the thing paying a lot of the bills. He’s certainly right about the first part, which sounds like it comes from bitter experience. And he may well be right about the second. They were doing vaccines when vaccines weren’t cool, and know an awful lot about the field that newcomers will have to learn for themselves. Does this mean that the company has given up on their dreams of a gigantic small-molecule blockbuster? Well, everyone tries to swear off that one, until another promising candidate comes along. Then the violins start playing, the special-effect smoke starts swirling, and everyone’s off again . . . but for now, Sanofi-Aventis is talking like a company that’s learned some painful lessons. —Derek Lowe

In June 2009, just after press time for last year’s report, SA revealed plans for its new R&D model. The company contends that it’ll have “the most effective R&D organization in the pharmaceutical industry by 2013.” Apparently, this will be achieved by consolidating some sites and working a lot more with outside parties, including public and private research groups, academic institutions and biotech companies. Also, SA will build up its “exploratory structures” and “entrepreneurial units” (quotes theirs) to work in external collaborations. Sanofi established more than 30 external collaborations in 2009, and the items I mentioned above show that it’s not slowing down in 2010.

What does all this external R&D mean for the internal staff? SA’s announcement said that it will not engage in layoffs, but was “considering” a “plan” for “voluntary departures” mainly in the discovery and preclinical areas, as well as “central Group functions in the Paris area.” You don’t need to be in a Dilbert strip to imagine what voluntary departures are like.

Meanwhile, SA’s legacy R&D pipeline made some news in the past 12 months. In December 2009, SA cancelled development of a pair of products: eplivanserin for insomnia, after the FDA sent a Complete Response Letter, and idrabiotaparinux for prevention of thromboembolic events in patients with atrial fibrillation, after it didn’t do much. SA also got a positive recommendation for DuoPlavin, a combo of Plavix and, um, aspirin, for people who were taking both of them and found that too complicated.

The company had better news in 2010. In June, SA received approval for Jetvana, a treatment for late-stage prostate cancer patients, in short order after completing its rolling submission in April. The company also got “stunning” individual patient results in a breast cancer trial of BSI-201, a compound it picked up with the acquisition of BiPar in April 2009.

In his annual report’s letter to shareholders, SA chief exec Christopher A. Viehbacher noted that the company cut 25% of its R&D portfolio over the course of 2009, eliminating “low-value compounds.” The report broke down the pipeline of 49 NMEs and vaccines by class, with vaccines (18) and oncology (11) leading the R&D efforts (CNS was a distant third with six compounds in development).

Sanofi-Aventis’ head start in vaccines and its commanding presence in diabetes give it two significant pillars in the modern pharma environment. It still has a way to go to show it can handle the inevitable loss of its top sellers, but I doubt it’ll resort to another mega-merger just to keep up with the Joneses.

 

Return to Top Pharma Report homepage.