Copia Di Sanofi Aventis PDF

312-054-1
Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Federico Frattini, from 5-Mar-2020 to 30-Apr-2020. Order ref F376862.
Purchased for use on the EMBA Serale 2019, at MIP Politecnico di Milano.
SANOFI-AVENTIS’ CORPORATE STRATEGY
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I
Order reference F376862
This case was written by Thibaut Bardon, Assistant professor at Audencia

Nantes School of Management (France) and Emmanuel Josserand, Professor at
HEC Geneva (Switzerland).
It is intented to be used as the basis for class discussion rather than to illustrate
either effective or ineffective handling of a management situation.
© 2012, Audencia Nantes School of Management
© 2012, HEC Geneva
No part of this publication may be copied, stored, transmitted, reproduced or

distributed in any form or medium whatsoever without permission of the
copyright owner.
Distributed by The Case Centre North America Rest of the world

www.thecasecentre.org t +1 781 239 5884 t +44 (0)1234 750903
case centre All rights reserved f +1 781 239 5885
e info.usa@thecasecentre.org
f +44 (0)1234 751125
e info@thecasecentre.org
312-054-1
PHARMACEUTICAL INDUSTRY OVERVIEW
The pharmaceutical industry is doing well overall. Its current annual turnover is
around 1,072 billion US dollars (Datamonitor, 2010a). Between 2005 and 2009, it
registered an average yearly growth rate of close to 7% (Datamonitor, 2010a). This
trend is likely to slow down in the next few years and should stabilise at an annual
growth rate of 5% as of this year. The relatively positive trend looks set to continue,
however, due to an ageing population and growing demand from emerging countries
(http://www.imshealth.com).
Testo
However, the pharmaceutical industryTesto remains fragmented despite the fast-moving
consolidation process. In effect, there have been a number of mergers in recent years,

including Novartis/Hexal, Teva/Ivax, Watson/Andrx, Bayer/Schering, Bayer/ORT de

Roche, Merck/Serono, etc. These mergers have resulted in increasingly well-funded
laboratories. The consolidation movement is liable to be stepped up in the next few
years as R&D costs rise across all markets. The pharmaceutical industry includes
several segments, in particular:
Patented drugs market
The patented drugs market was worth an estimated 740 billion US dollars in 2009. In
terms of annual turnover, the 5 leading groups are (in order of size): 1) Pfizer, 2)
GlaxoSmithKline, 3) Merck, 4) Sanofi-Aventis, 5) Astra-Zeneca
(http://www.imshealth.com).
Average annual growth for this market is expected to hover around 3.5% in the next
few years (Datamonitor, 2010a) due in particular to the fact that several ‘blockbuster’
patents will soon fall into the public domain. In the patented drugs market, a
laboratory's performance depends largely on its capacity to innovate, which in turn
determines the number of molecules they are able to patent. In effect, molecules can
be patented for up to 20 years, ensuring exclusive manufacturing and marketing rights
for the laboratory that developed it. Patents give pharmaceutical laboratories the
incentive to embark on costly (average development cost of a molecule was US$868
million in 2006, long-term (averaging 11 years from the start of the project to the
molecule patent, and uncertain R&D programmes, (uncertain as very few projects
succeed in creating marketable drugs) (Weinmann, 2008). In effect, molecules take
longer and longer to develop as they are becoming increasingly complex. Secondly,
the health and safety regulations for new drugs are becoming stricter. This led to a
50% fall in drug marketing authorisations between 1996 and 2006 (Weinmann, 2008).
Finally, the average development cost for a molecule more than doubled between
2
312-054-1
1996 and 2006, and pharmaceutical groups need to rapidly increase their income to
cover the shortfall (Weinmann, 2008).
Patented molecules also provide laboratories with a guaranteed income for a number
of years. The so-called ‘blockbuster’ drugs generate annual sales worth over a billion
US dollars. Lorenox alone, for instance, turned over more than 3 billion dollars for
Sanofi-Aventis, in other words, 10% of its total sales figures. Profit margins for
patented products are considerable. Indeed, Bernstein Research estimates that the 40
top selling prescription drugs yield operating margins of over 50%. (Secafi, 2010).
However, patents have a limited lifespan and once they have expired the way is open
to generic versions, in other words, drugs that share similar active ingredients but are
produced by rival firms.
There are two main technical processes to develop new molecules. The chemical

approach consists of developing molecules from synthetic substances, while the

biotechnological approach also includes biological products in their development.
Generally speaking, biotechnological processes offer much higher growth potential
than chemical processes. Indeed, their medication potential appears to be much greater
than chemically produced drugs. Although they currently only account for 24% of
patented drug turnover, biotechnological drugs account for 60% of growth for
products patented by pharmaceutical laboratories. Consequently, this market is

expected to increase by an annual 15% in the next four years according to A.D Little
(Business and Strategy). The trend looks set to continue in the coming years. In fact,
biotechnological approaches are considered the future of patented drugs. In addition to
their clear innovation potential, biotechnological approaches have the advantage of
being harder for rivals to ‘copy’ compared to patented drugs because of the highly
specific expertise required and the complex legal authorisations required before they
can be marketed. Similarly, there is less pressure from generic drugs with this type of
product. It should also be noted that biotechnological approaches require very
different and specific technical skills compared to chemical approaches. It is very
difficult for a laboratory that uses a chemical approach to switch to a biotechnological
approach with its original team. However, there can be significant synergies between
the two approaches, both in manufacturing (in the galenic production forms) and in
marketing (distribution network).
Generics market
Generic drugs are thus the frontrunners to replace branded drugs whose patents have
expired into public domain. The price of generics is usually around 40% lower than
the brands. This is because their production costs are much lower as the laboratories
that make them do not need to invest huge sums in R&D. The generic drug market
was valued at 149 billion US dollars in 2009. The booming market recorded average
3
312-054-1
yearly growth of over 11% between 2005 and 2009 (Datamonitor, 2010c). This trend
is expected to slow down in 2010, although annual growth rates should hover around
8% until 2014 (Datamonitor, 2010c). However, despite the high growth rate, profit
margins are pretty small in this sector as cost-leadership is the main market strategy as
‘price’ is the determining factor with this kind of product. Thus, in order to win
market share, the players need to have considerable production capacity so as to make
significant economies of scale, thereby cutting production costs. They also need a
large and well-trained sales force since consumers usually buy generics on the
recommendation of chemists.
Around 50% of the global generics market is dominated by 8 players. The sector is
consolidating rapidly, with smaller players increasingly being targeted for buy-outs,
which is likely to result in the sector restructuring around a few well-positioned
multinationals.

The leading market players are the following (market shares expressed in value):
Market
Share
Teva 18%
Sandoz 10%
Mylan 6%
Watson 6%
Ratiopharm 3%
Stada 3%
Actavis 2%
Ranbaxy 2%
Autres (‐2%) 50%
Source : http://www.mon‐medicament‐generique.fr
Over-the-counter (OTC) or non prescription market
The over-the-counter or OTC market refers to drugs sold without prescription. This
market is currently valued at 110.6 billion US dollars and it is expected to grow at a
rate of 3.5% per year between 2007 and 2012 according to UBS (lepoint.fr), which is
relatively low compared to the industry’s average growth rate. However, the level of
growth is expected to remain stable, bolstered by the current trend towards
homeopathy in Western countries.
4
312-054-1
The major market players are:
Market Share Total Revenues (in BUS$)
Johnson & Johnson 12,80% 14,08
GlaxoSmithKline 5,70% 6,27
Bayer AG 4,50% 4,95
Others (‐4,5%) 77% 84,7
TOTAL 100% 110
Source : Datamonitor, 2010d
The market remains relatively fragmented despite a strong trend towards

consolidation. The cost of developing a new product in this market is lower than for

vaccines and patented drugs. However, the lifespan of these products is also much

shorter, which means a fast turnaround of product lines. In effect, as these medicines
are not reimbursed by the state, people tend to look at them as everyday purchases and
are thus more influenced by price, packaging and innovation than for prescription
drugs. Profit margins are therefore middling in this highly competitive market
(Dominique Hibon, 2004). Furthermore, economies of scale are hugely important in

this segment, which suggests that acquisitions will continue. As the market is fiercely
competitive, players who want to stay in the race will need to engage in rapid growth
strategies in order to remain competitive.
Animal health market
The animal health market involves the manufacture of drugs and vaccines for
veterinary purposes. Animal health is a ‘small’ market compared to its human
counterpart, and is relatively concentrated, worth around 20 billion US dollars
(Datamonitor, 2010a). This market is expected to maintain its average 5% growth rate
in the next few years. The players include both pharmaceutical firms that have
diversified their activities to include animal products and exclusively veterinary firms
(also known as ‘pure players’). The market positioning of the key players is as
follows:
5
312-054-1
Breakdown of market share – Animal health
Market Share
30.0%
Merial/Intervet 25,80%
Pfizer 18,70%
25.0%
Bayer 7,40%
20.0%
Ufy 7,20%
15.0% Novartis 6,10%
10.0% Boehringer 5,60%
5.0% Vibac 3,60%
0.0%
Ceva 2,90%
Alpharma 2%
Others 18,90%

Source : Various
Generally speaking, the market is less competitive than the human healthcare market,
and its players are under less pressure from generic drugs firms in terms of costs.
Moreover, R&D spending costs are lower compared to patented drugs, although they
still remain high. On average, animal vaccines take around 5 to 7 years to develop
(IFAH, 2008). The market is consumer-driven and is therefore extremely susceptible
to pricing and advertising. On the other hand, it provides pharmaceutical firms with
substantial profits.
Vaccine market
The vaccine market recorded total sales of 17 billion US dollars and manufactured 4
billion doses in 2009. It is expected to exceed 23 billion in 2012 (www.leem.org). Of
course, growth was boosted in 2009 by the H1N1 flu virus and the widespread
national vaccination programmes. Nevertheless, annual growth in this market should
remain strong at an average rate of 10% in the next 5 years (www.leem.org). Much
like the development of patented drugs, developing a vaccine is a lengthy, very
expensive and uncertain process. The average cost of developing a vaccine is between
1 and 2 billion Euros and it takes around 12 years on average
(www.sanofipasteur.com)
The vaccine market is virtually oligopolistic, with 4 leading players accounting for
nearly 80% of total sales :
6
312-054-1
Market Share, 2007
Novartis 6%
Merck & Co 15%
Whyeth 17%
JV Sanofi/Merck 7%
GSK 25%
Sanofi Pasteur 25%
Others 5%
However, huge financial resources are need to cover the production and investment
costs needed to remain competitive, which means that profit margins are not
particularly high (Secafi, 2010). Moreover, several laboratories, particularly those
with a strong biotechnological focus (e.g.: Dendreon, Intracel, Biomira, etc.) are
starting to tap this market, attracted by its current growth. The competitive dynamic is

therefore likely to change in the coming years and players are still in the process of

consolidating their position. This trend is likely to continue, further intensifying
competition in the near future. In the longer term, laboratories with a strong
biotechnological slant are likely to be the main winners in the vaccine market. It
should also be noted that potential synergies exist between drug and vaccine
development which adopts a biotechnological approach.

PRESENTATION OF SANOFI-AVENTIS GROUP
“Sanofi-Aventis is a global healthcare leader that discovers, develops, produces and

markets innovative therapies that enhance people’s lives. Its activities (...) include a
pharmaceutics division which produces prescription drugs, consumer healthcare
(over-the-counter and combined over-the-counter and prescription drugs) and
generics, as well as vaccines and animal health.” (www.sanofi-aventis.com ) In 2009,
Sanofi-Aventis posted a turnover of 29.3 billion Euros (around 35 billion US dollars),
up 6.3% compared to 2008.
7
312-054-1
Sanofi-Aventis Sales Breakdown by division in 2009 (in billion Euros)
Animal Health
7,45%
Vaccines
10,15%
Generics
2,95%
Over the
Counter
4,17%
Patented drugs
75,28%

Source: www.sanofi‐aventis.com
Simplified financial statements for Sanofi-Aventis are included in Appendix 1.

Sanofi-Aventis and the patented pharmaceuticals market
Sanofi’s patented drug activities generated a turnover of around 23 billion Euros in

2008 (around US$29 billion), in other words, almost 80% of total sales. Sanofi-
Aventis has long experience in developing molecules through chemical synthesis. Its
patent activity revolves around a handful of blockbuster drugs that result exclusively
from chemical synthesis. Thus, 5 drugs (Lantus®, Lovenox®, Plavix®, Taxotere®
and Aprove®) account for over 50% of Sanofi-Aventis’ sales in this market and
almost 40% of its total turnover. Sanofi has a particularly strong foothold in drugs for
cardiovascular diseases and nervous system disorders. These segments represent 42%
of Sanofi-Aventis’ total earnings. As these drugs are already extremely effective, there
has been little incentive to innovate further and to develop the patent portfolio, and
this has undermined the income growth potential associated with this kind of product
(MarketWatch, 2010). Most of the patents of the company’s flagship products are
about to expire, opening the door to generic versions. The AOF estimates that the loss
of patent protection is likely to wipe more than 30% off the group’s turnover by 2013.
Sanofi-Aventis’ profits from Plavix sales, for example, are expected to shrink from
3.6 billion dollars today, to 1.9 billion dollars in 2013 (Market Watch, 2010).
In addition to these expected losses, there is also a profit shortfall resulting from loss
of sales of blockbuster drugs whose patent has expired in certain countries. Sanofi’s
8
312-054-1
appeal to prevent the generic version of Lovenox being launched by Sandoz (a

Novartis subsidiary) on the US market was recently dismissed (June 2009), for
instance. This is indeed bad news for Sanofi-Aventis since Lovenox sales garnered 1.8
billion dollars in the United States alone, and a further 3 billion worldwide in 2009.
Thus, 5% of its turnover is now at risk, plus a potential 10% more when this patent
expires in other countries. In addition, an increasing number of firms are getting round
the patent laws by offering products of equal medicinal value but which differ very
slightly from the composition of patented molecules. Finally, all of these issues are
likely to reduce the liquid assets generated by patented drugs, which are crucial for
financing other activities, much faster than expected. This loss of earnings is all the
more serious when one considers that Sanofi-Aventis has very few drugs in the latter
stages of development that could possibly lead to a rapid recovery in sales.

Sanofi-Aventis and the generics market
On the generics market, Sanofi-Aventis has embarked on a strategy of rapid growth

through acquisition. The group has made a series of acquisitions in recent years,
including the Mexican Kendrick in 2008, the Czech Zentiva (March 2009, for 1.8
billion US dollars) and the Brazilian Medley. Sanofi-Aventis’ turnover in the generics
market consequently rocketed from 389 million EUR in 2008 to 1 billion EUR in
2010, in other words a rise from around 1% to 3% of its turnover. However, Sanofi-
Aventis still remains a very minor player on the generics market when compared to
the dominant players. This seriously calls into question the relevance of its purchases
given its relatively limited capacity to achieve the economies of scale needed at this
level. Moreover, its retail network of pharmacy providers is still underdeveloped and
would benefit from being extended further. What’s sure is that it needs to invest a lot
more if it is to remain competitive on this market.
Sanofi-Aventis and the animal health market
The group is present in the animal health market via Merial, its wholly-owned
subsidiary. Sanofi-Aventis bought Merck’s 50% stake in Merial on 30 July 2009 for
US$4 billion. Sanofi-Aventis and Merck have also announced that they will create a
joint venture by the end of 2011, combining Merial and Intervet Shering Plough (a
subsidiary of Merck) so as to create the global leader in animal health. The new entity
will be owned on a fifty-fifty basis by both groups; the valuation discrepancy between
the two entities will be bridged by an additional readjustment payment of 1 and 2
billion by Sanofi-Aventis. The Intervet/Merial group will then emerge as market
leader with 25.8% of the market share. It should also be noted that Sanofi-Aventis is
particularly skilled in marketing this type of product.
9
312-054-1
Sanofi-Aventis and the OTC market
Over-the-counter activity generated US$1.4 billion for Sanofi-Aventis in 2009. In

2008 and 2009, the company concluded a series of acquisitions, including Kernpharm
in the Netherlands, Laboratorios Gramon in Argentina, Oenobiol in France and
Chattem in the United States. It also signed agreements to set up a consumer
healthcare joint venture in China with Minsheng Pharmaceutical Co. Ltd
(www.sanofi-aventis.com ). Despite a number of recent acquisitions, over-the-counter
business represents less than 5% of the group’s sales. Overall, these operations
amounted to over US$8.5 billion in 2009. Sanofi ranks 5th among today’s market
players, although its turnover is relatively small compared to the market leader’s
US$14 billion. Sanofi-Aventis is the French market leader. However, its small size in
international terms calls into question its ability to make the economies of scale
required by this market. Moreover, and as with the generics market, it needs to extend

its retail chemists network. Thus, if Sanofi-Aventis hopes to remain a market player, it
will have to invest heavily to remain competitive.
Sanofi-Aventis and the vaccine market

Sanofi-Aventis is present on the vaccine market via its subsidiary Sanofi-Pasteur, the
world leader in this market. Sanofi is recognised for its technical expertise and know-
how in this area, with sales totalling US$3.4 billion in 2009. Its strong growth was
further boosted by massive orders for pandemic vaccines against the Influenza
A/H1N1 strain. However, Sanofi-Pasteur’s vaccine activity requires huge financial
resources and generates insufficient cash. Its R&D activities require cutting-edge
expertise that can only be had through substantial and sustained investment.
10
312-054-1
Presentation of Genzyme
Genzyme is a biotechnological laboratory with a turnover of US$4.5 billion. In 2009,

it employed 12,000 people. Genzyme is a mid-size player in the pharmaceutical
industry, and therefore lacks the financial resources to compete against the
pharmaceutical giants in their specific markets. However, Genzyme specialises in rare
genetic diseases, and renal and cardiometabolic treatments, niche markets that are
relatively sheltered from competition with the multinationals. Genzyme is highly
reputed for its expertise in biotechnological processes. In 2009, the company was
severely shaken by a contamination outbreak in one of its facilities, which temporarily
brought the production of two of its flagship products, Cerezyme and Fabrazyme, to a
halt. Genzyme could take between three to four years to fully comply with the
controls and adjustments required by the FDA (Food and Drug Administration) and
resume production of the two products. This will have a major impact on Genzyme’s

earnings during the period in question once existing stocks run out. However, the loss
in revenue could be partially offset by the launch of new drugs that are now in the
final stages of development. Genzyme’s product portfolio is well-stocked and includes
treatments for multiple sclerosis, hypercholesterolemia and certain types of cancer,
which could very well generate a significant turnover provided they get the go-ahead
from the regulatory authorities (MA: Marketing Authorisation). According to

unsubstantiated rumours, some major laboratories are potentially interested in taking

over the group.
11
December 2009
12
APPENDIX 1: Sanofi-Aventis simplified consolidated income statements - 31
312-054-1
312-054-1
REFERENCES
Datamonitor (2010a), Global Pharmaceuticals, Biotechnology & life sciences,

Industry profile
Datamonitor (2010b), Global biotechnology, Industry profile
Datamonitor (2010c), Global generics, industry profile
Datamonitor (2010d), Global OTC pharmaceuticals, Industry profile
Datamonitor (2010e), Global Vaccines, Industry profile
Hibon, D. (2004), les contraintes réglementaires : “se développer séparément et

s’enrichir mutuellement”, communiqué de presse, Valois

IFAH (2008), Animal vaccines: development, registration and production,

IFAH-Europe factsheet
Market Watch (2010), company spotlight – Sanofi-Aventis
Secafi (2010), Le secteur de la pharmacie : Enjeux et perspectives dans le

monde et en Europe Intervention du 1er septembre 2010 - EMCEF – Séminaire

Gif-sur-Yvette
Weinmann, N. (2005) La globalisation des leaders pharmaceutiques, Rapport

du Ministère de l’industrie, Direction Générale des Entreprises Observatoire
des Stratégies Industrielles Mission Prospective
Weinmann, N. (2008) R&D des compagnies pharmaceutiques : Ruptures &

Mutations, Rapport du Ministère de l’économie de l’industrie et de l’emploi,
Direction Générale des Entreprises Observatoire des Stratégies Industrielles
Mission Prospective
Sites internet
www.leem.org
http://www.imshealth.com
www.lepoint.fr
www.mon-medicament-generique.fr
www.sanofi-aventis.com
www.sanofipasteur.com
www.genzyme.com
13

Copia Di Sanofi Aventis PDF

Uploaded by

Copyright:

Available Formats

You might also like

Copia Di Sanofi Aventis PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Copia Di Sanofi Aventis PDF

Uploaded by

Copyright:

Available Formats

312-054-1

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

This case was written by Thibaut Bardon, Assistant professor at Audencia

© 2012, Audencia Nantes School of Management

© 2012, HEC Geneva

No part of this publication may be copied, stored, transmitted, reproduced or

Distributed by The Case Centre North America Rest of the world

PHARMACEUTICAL INDUSTRY OVERVIEW

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Federico Frattini, from 5-Mar-2020 to 30-Apr-2020. Order ref F376862.

Patented drugs market

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Federico Frattini, from 5-Mar-2020 to 30-Apr-2020. Order ref F376862.

products patented by pharmaceutical laboratories. Consequently, this market is

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Over-the-counter (OTC) or non prescription market

The major market players are:

The market remains relatively fragmented despite a strong trend towards

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Federico Frattini, from 5-Mar-2020 to 30-Apr-2020. Order ref F376862.

(Dominique Hibon, 2004). Furthermore, economies of scale are hugely important in

Animal health market

Breakdown of market share – Animal health

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Federico Frattini, from 5-Mar-2020 to 30-Apr-2020. Order ref F376862.

development which adopts a biotechnological approach.

PRESENTATION OF SANOFI-AVENTIS GROUP

“Sanofi-Aventis is a global healthcare leader that discovers, develops, produces and

Sanofi-Aventis Sales Breakdown by division in 2009 (in billion Euros)

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Simplified financial statements for Sanofi-Aventis are included in Appendix 1.

Sanofi-Aventis and the patented pharmaceuticals market

Sanofi’s patented drug activities generated a turnover of around 23 billion Euros in

appeal to prevent the generic version of Lovenox being launched by Sandoz (a

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

On the generics market, Sanofi-Aventis has embarked on a strategy of rapid growth

Sanofi-Aventis and the animal health market

Sanofi-Aventis and the OTC market

Over-the-counter activity generated US$1.4 billion for Sanofi-Aventis in 2009. In

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Sanofi-Aventis and the vaccine market

Genzyme is a biotechnological laboratory with a turnover of US$4.5 billion. In 2009,

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

from the regulatory authorities (MA: Marketing Authorisation). According to

unsubstantiated rumours, some major laboratories are potentially interested in taking

Datamonitor (2010a), Global Pharmaceuticals, Biotechnology & life sciences,

Datamonitor (2010b), Global biotechnology, Industry profile

Datamonitor (2010c), Global generics, industry profile

Datamonitor (2010d), Global OTC pharmaceuticals, Industry profile

Datamonitor (2010e), Global Vaccines, Industry profile

Hibon, D. (2004), les contraintes réglementaires : “se développer séparément et

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Federico Frattini, from 5-Mar-2020 to 30-Apr-2020. Order ref F376862.

Market Watch (2010), company spotlight – Sanofi-Aventis

Secafi (2010), Le secteur de la pharmacie : Enjeux et perspectives dans le

monde et en Europe Intervention du 1er septembre 2010 - EMCEF – Séminaire

Weinmann, N. (2005) La globalisation des leaders pharmaceutiques, Rapport