Fresh off the reopening of an insulin plant in Russia, Sanofi-Aventis is beefing up its Middle East manufacturing. The French drugmaker has inked a deal to build a new plant in Saudi Arabia's King Abdullah Economic City, a sprawling industrial park that the country's economic development officials have been trying to fill. The facility will initially produce diabetes remedies and cardiovascular drugs, though that product line may be expanded over time.
The move, of course, is part of Sanofi's emerging-markets growth strategy. "We are looking for all public and private partnerships across the Middle East that will open doors to new solutions for better health outcomes and strengthen our leadership position in those fast growing markets," SVP Antoine Ortoli said in a statement. Fast growth is right: Sales in emerging markets are expected to increase much faster than the rest of the world over the next several years.
But what's most interesting about Sanofi's Saudi Arabian plans is that it's yet another example of drugmakers taking manufacturing to the market. Increasingly in emerging markets, companies are setting up production either locally or regionally, rather than relying on importing from the West. Just look at Sanofi's purchase-and-reopening of that Russian insulin plant and its manufacturing expansion in China.
The impetus is partly economic: With prices in emerging markets much lower than in the developed world, costs have to be low, too. Making products locally keeps costs down, as Sanofi VP Jean-Marc Georges points out: "We are happy to launch this plant construction which will supply products that are not only innovative, but also more affordable for patients."
ALSO: Sanofi-Aventis (SNY) is in exclusive talks with U.S.-based Covance (CVD) for the sale of research facilities located in Porcheville, France and Alnwick in the U.K. Report