Sanofi

2012 Generics Revenue: $2.4 billion

When Chris Viehbacher took over as CEO, he had a vision of what the future would look like after then-big sellers Lovenox and Plavix lost their patents, and it wasn't pretty. So, he decided to diversify. Generics were to be a significant part of that. But generics yield low profit margins, and so to make a lot of money, you have to sell a lot of them. And what better way to sell a lot of them than to become a force in the world's fastest-growing markets? At least, that's how Sanofi ($SNY) sees it. Emerging markets kick in nearly one-third of its worldwide sales, and generics are an important piece of that.

Viehbacher has focused on small, strategic deals to build up Sanofi's generics presence in rapidly expanding markets. Just before he took the helm, Sanofi had picked up Czech generics company Zentiva for $2.6 billion. Viehbacher followed that up with a string of acquisitions largely focused on Latin America. In April 2009, Sanofi picked up Mexico's Laboratorios Kendrick, which controlled 15% of its home country's market. A week later, it announced a $660 million deal with Brazil's Medley that vaulted Sanofi to the status of biggest generics manufacturer in Latin America. Medley's 127 generic products helped secure a 12% market share in Brazil. Just  over a year ago, Sanofi continued its push in the region with a buyout of Colombia's Genfar, the country's second-largest generics maker with business in 13 countries.

But the rapid expansion has not been without its pitfalls. An episode the company called the "Brazil generics issue" last quarter hurt earnings nearly as much as patent losses on two of its biggest drugs. Anticipating an increase in Brazil's value-added tax, managers at the Medley unit began discounting prices and selling forward to offset the expected falloff in sales. But the unit got a little overzealous and overwhelmed demand. Medley's drugs weren't all sold before their expiration dates, and customers returned the expired products. All of this resulted in a €212 million charge against second-quarter earnings that shaved off €0.17 a share. It also cost some managers their jobs.

But despite such challenges, Viehbacher last month said he continues to believe in the importance of emerging markets. Overall, Sanofi has succeeded there, using a version of the "second brand" strategy to cut prices and boost sales volume in poorer countries--it sells both Plavix and its generic, clopidogrel, in Indonesia, for example.

And Sanofi's generics outside emerging markets aren't doing so badly, either. Last quarter, the company saw a drop in U.S. generics sales, in part because others joined the party with copies of Avapro, drawing business from Sanofi's authorized generic. But efforts by the French government to develop its generics segment propelled Western European sales up 22% for the quarter. Overall, excluding the Brazil snafu, first-half 2013 sales of generics swelled 8.2% to €723 million.

For more:
Special Reports: Top 10 Drugmakers in Emerging Markets - Sanofi | Top Pharma Companies by 2012 Revenues - Sanofi

'Brazil generics issue' costs Sanofi nearly as much as patent losses
Sanofi buying Genfar as it rolls across Latin America
Sanofi to amp up generics push, cut R&D
Sanofi makes $2 billion generics move

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