TRENTON, N.J. -- After 20 months running drug maker Sanofi-Aventis SA, Chris Viehbacher wants to end the roller coaster of revenue caused by blockbuster drug sales that plummet when generic competitors hit.
With two of the French company's top blockbusters now hurt by generic rivals - the latest one so unexpectedly last week, the company was forced to cut its 2010 profit forecast - Viehbacher is seeking growth by diversifying.
His strategy as CEO is to make deals for dozens of drugs aimed at smaller patient groups, and he wants to boost revenue from emerging markets, consumer health products and generic medicines. The Paris-based company, the world's fourth-largest drug maker by revenue, already was a leader in veterinary medicines and in vaccines. Those rarely face generic competition.
"Above all, what I'm looking for is businesses that are not dependent on patents," Viehbacher said last week. "This is my fourth patent cliff in my career, and I'm looking to avoid a fifth."
Viehbacher's moves
Since Viehbacher defected from rival GlaxoSmithKline - he was its top executive in Research Triangle Park - and took the top spot at Sanofi in December 2008, Sanofi has completed about 50 generally small- to mid-sized acquisitions and partnerships.
A key deal was its $1.9 billion March purchase of Chattem of Chattanooga, Tenn., the maker of over-the-counter mainstays like Gold Bond skin products, Icy Hot pain-relieving balms and patches, and Selsun Blue shampoo. That vaulted Sanofi to the No. 5 spot in consumer health, with more than $1 billion in sales in the first half of 2010, Viehbacher said. He aims to move Sanofi into the No. 3 spot.
The deal brought Sanofi-Aventis a distribution base for its popular allergy drug Allegra, which is awaiting approval to switch from prescription-only to an over-the-counter version.
On Thursday, Sanofi reported that second-quarter net income jumped 61 percent to $2.2 billion. But it warned its 2010 income, excluding one-time items, will be flat or down as much as 4 percent.
Surprise for Lovenox
The company blamed a U.S. Food and Drug Administration ruling July 23 allowing Momenta Pharmaceuticals to sell enoxaparin, a generic version of Sanofi's anti-clotting medicine Lovenox. The complex injected drug, a purified version of heparin, brought Sanofi about $2 billion in revenue in the first half of this year. Sanofi has gone to court to contest the FDA decision but could not get a judge to bar Momenta from selling its generic now.
"In long-range plans, we had no Lovenox sales left in 2013," Viehbacher said, but the FDA decision to allow a copycat version that hasn't also been through extensive human testing caught him by surprise. "I was actually in the car on the way to the airport in ... China around 11 o'clock" at night there and had to scramble to set up a conference call with analysts in the West.
Meanwhile, blood thinner Plavix, the world's second-best-selling drug, saw generic rivals slash its sales 53 percent in Europe in the second quarter. Viehbacher expects further decline there. The decline will be partly offset by rising Asian sales. Plavix is under patent until 2012 in the U.S., where partner Bristol-Myers Squibb Co. sells it.
After 2012, Sanofi has no more major patent expirations, but just in the first half of this year, generic competition reduced sales by about $1.25 billion, Viehbacher noted.
Building with BRIC
To help compensate, he expects to quickly double sales in emerging markets, particularly the so-called BRIC countries (Brazil, Russia, India and China), where sales rose from about $9 billion in 2008 to $18 billion in 2013.
Half the volume of Sanofi sales now comes from emerging markets, Viehbacher noted. That equates to 30 percent of sales because of lower prices.
While the growing middle class in those countries can't afford U.S. drug prices, Viehbacher said his company can still make profit margins about the same as in Europe, where government price controls keep levels below U.S. prices.
"Your entire cost basis is lower because you manufacture locally, you hire locally," he said. "We can produce as low-cost as any Indian generic company."
Genzyme speculation
Viehbacher wouldn't comment on Sanofi's talks to buy Genzyme possibly for more than $15 billion.
Genzyme has been struggling since manufacturing problems halted sales of its Cerezyme and Fabrazyme, drugs for genetic diseases.
