Sanofi commits more than $210M to Brazil distribution operation

DHL is operating Sanofi's new distribution center in Brazil, to which the drugmaker has committed more than $210 million.

Sanofi, which had inventory issues in Brazil several years ago, has a new distribution center there which it said has streamlined its operations and cut its costs.

As part of the process, Sanofi has redesigned its distribution networks and the 36,000-square-meter (387,500-square-foot) facilty is handling the products from all three of its drug portfolios—branded, vaccines and products from Medley, the generics company that Sanofi owns there.

The 36,000-square meter (387,500-square-foot) logistics center in Guarulhos, near São Paulo, is being operated by contract logistics specialist DHL Supply Chain. Sanofi said it has committed €200 million (about $212 million ) to the project from 2015 and 2020. Relying on the DHL’s expertise, the facility has reduced operating expenses by 30%, DHL said.

The operations process allows Sanofi to get drugs to points of sale—and thus to patients—more efficiently, according to Rodrigo Alponti, Sanofi Brazil's supply chain director. "Previously, Sanofi and Medley had independent logistics operations even though they shared about 70% of their customers," he said in a statement.

The company said new packaging lines and order software protect product and adjusts and distributes the orders in closed boxes to their end customers.

Sanofi in its last quarter saw aggregate sales in Brazil grow by 4.4% to €302 million. That is a big change from Q2 2013 when former CEO Christopher Viehbacher had to explain to analysts about what he termed the "Brazil generics issue," a screw-up so deep that it trimmed €0.17 a share off of earnings, nearly as much as was lost that quarter from generic competition to two of its biggest drugs.

Viehbacher explained at the time that with a value-added tax set to kick in, Sanofi Brazil management discounted prices and began selling forward to offset an expected fall-off in demand. But the amounts that its Medley unit sold overwhelmed demand and resulted in a bunch of drugs being returned because they couldn't be sold ahead of their expiration dates. It also ignited a press war that further depressed prices. Several top execs in the country were replaced as a result.