Monday, April 13, 2009

French Pharma Sanofi-Aventis Buys Brazil's Leading Drugmaker Medley

. Monday, April 13, 2009

By stockOzone team

French pharmaceutical giant Sanofi-Aventis elbowed further into the generic drug sector last Thursday, unveiling a 500 million euro acquisition of Brazil's leading generic drugmaker, Medley. Teva Pharmaceutical Industries had been negotiating to buy Medley itself but balked at the high asking price.

In Thursday's deal, Sanofi will repay Medley's 170 million euros in debt.

Privately-owned Medley controls 5.7% of the Brazilian market. Its year-2008 sales were around 153 million euros. The acquisition boosts Sanofi's share of Brazil's generic drugs market, which is growing by 20% a year, to 12%.

Generic drugs accounted for 16% of all medicines sold in Brazil last year and are expected to reach 20% this year, out of total sales estimated at $2.3 billion.

Sanofi recently unveiled two other generic acquisitions, Mexico's Kendrick Laboratories and the Czech Republic's Zentiva. These purchases boosted Sanofi to 11th from 23rd place on the list of the world's largest generic drugmakers.

Medley markets 127 generic products, accounting for 65% of the company's sales. Seventeen of Brazil's 20 top-selling generic drugs are sold by Medley, whose sales have increased by over a quarter annually for the past three years. Medley has 1,550 employees, 500 of whom work in its sales department. The company has two manufacturing facilities in Sao Paulo province, with annual output of 180 million tablets.

Teva has traditionally been wary of Brazil due to regulatory issues. For example, generic companies were not required to prove their products' bioequivalence - that a generic drug is as effective as the original branded product. This lowered the threshold to enter the generic market, easing the path for local companies.

Over the past year, however, Brazil's Health Ministry has demanded that drugmakers conduct bioequivalence tests at recognized institutes, making the market more attractive for the Israeli company.

Brazil has often been accused of ignoring patent laws designed to protect drug firms, in its attempts to reduce the cost for treating contagious diseases such as AIDS.

Disclosure: Author does not own any of the stocks discussed here.

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