Sanofi expects growth in China despite the challenges there

China
China

Sanofi CEO Olivier Brandicourt is looking all over for ways to gain some ground as the French drugmaker’s diabetes drugs lose steam and its top med Lantus soon loses patent protection in the U.S., its largest market. M&A is one direction where he is focused but growing sales in China, its second-largest market, is also part of the strategy.

Sanofi ($SNY) is in the midst of trying to pull off a $9.3 billion hostile takeover of Medivation ($MDVN) to get it hands on the San Francisco-based drugmakers cancer drugs. But Sanofi also will lean on its emerging market strategy to find growth as well, Peter Guenter, Sanofi's executive VP for general medicines and emerging markets, tells Reuters.

Guenter pointed out in an interview with the news service that Sanofi has historically been able to garner sales growth between 5% and 10% in emerging markets. The group's 2015 revenues in emerging markets reached €10.6 billion ($11.83 billion), up 8% at constant currency exchange rates.

“I think we will remain in this range this year, even if we should be closer to 5% than 10%," Guenter told Reuters.

While Sanofi doesn’t break out sales by each emerging market, Guenter indicated that China remains a focus for the company. "There are still a lot of unmet medical needs in China," Guenter said, pointing out that urbanization there has resulted in the spread of "western diseases" such as diabetes.

Still, China has gotten to be a tougher place to make money. The government is putting pressure on drugmakers to lower prices as it tries to slow its soaring healthcare costs.  As proof of how difficult the market has become, GlaxoSmithKline ($GSK) has seen its sales in China erode by 28% in Q1 as it reorganizes there following a bribery scandal. AstraZeneca ($AZN) reported Q1 sales in constant currency up 11% in China but that was a drop from a 15% pace in the fourth quarter.

Guenter said China is getting to be a harder place to grow but says Sanofi still sees upside potential there. "Of course, the reforms aimed at implementing better healthcare in China will put some pressure on pricing in the coming years but our hypothesis is that volumes will compensate," he said.

The thing is, the challenge of growing revenue in China for Sanofi will fall to someone else soon. That is because Guenter is taking over Sanofi’s as head of diabetes and cardiovascular, replacing Pascale Witz, who left in the second management shakeup at Sanofi since Brandicourt became CEO last year. She was running Sanofi’s diabetes and cardiovascular business since mid-2015 and in Q1 the unit’s sales slipped by 5.8%, dragged down by a big decline in Lantus sales.

- read the Reuters story

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