(SNY) recently announced that it has completed the acquisition of Chattem Inc. This acquisition will help strengthen Sanofi’s presence in the US consumer health care market, which represents 25% of the current worldwide market.
Chattem is an established player in the consumer health care segment (brands include Selsun Blue and Icy Hot, among others), with almost 130 years of experience catering to niche market segments in the US. Sanofi also announced its intention of converting several prescription medicines to over-the-counter (OTC) products starting with Allegra (fexofenadine HCl), which should be an important growth driver for the company.
This acquisition should help Sanofi become the world’s fifth-largest consumer health care company. The transaction, valued at approximately $1.9 billion, is likely to be accretive to Sanofi’s earnings from the very first year. The sale of Chattem’s products in new geographic territories should help boost the top line.
Sanofi has been entering into several deals in the recent past to compensate for the expected loss of sales from patent expiry of many of its lead products. Sanofi acquired a majority stake in Indian vaccine maker Shantha Biotechnics for €550 million ($788.4 million) to boost the company’s vaccine business as well as expand its presence in emerging markets.
Sanofi is working on growing its presence in emerging markets, which represent significant commercial opportunities. The company has a strong presence in Latin America and is expanding its presence in Asia, especially India and China.
We currently have an Underperform recommendation on Sanofi. Our biggest concern for Sanofi-Aventis is the high exposure to generic risk on many of its leading franchises. We see risk to Avapro, Allegra, Lovenox, Eloxatin, Delix, Taxotere, Plavix and Ambien all keeping a lid on shares. With Eloxatin facing generics from 2009, the next wave of generic erosion will occur in 2010 when Taxotere loses exclusivity.

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