Sanofi Relies on Shopping to Offset Patent Losses on Key Drugs

French drug giant Sanofi (NYSE: SNY ) continues to seek additional mergers and
acquisitions to help the company overcome the patent cliff it's battling.
Since taking over the helm at Sanofi nearly three years ago, CEO Chris
Viehbacher has shown no hesitation about doing whatever it takes to recharge the
company's batteries. By acquiring 23 companies since January 2009, he has
pumped up sales in emerging markets and branched out into vaccines, animal
health, consumer products and rare diseases. Sanofi's biggest purchase was
U.S. biotech Genzyme, which the French company acquired earlier this year for
$20 billion. Adding Genzyme gave Sanofi its own dedicated research team in the
U.S. as well as more expertise in biological drugs, which are proteins made in
living cells. The company is counting on the acquisitions to help restore profit
growth, probably in 2013, when the patent cliff ends. The impact of losing
marketing exclusivity on some of its key products was reflected in Sanofi's
third-quarter results, when profits declined 3% to $3.3 billion on a sales gain
of 5% to more than $12 billion. For the full year, the Paris-based firm still
expects business earnings per share to be 2% to 5% lower than in 2010 at
constant exchange rates. Although the company saw good results with its diabetes
franchise, sales of the cancer drug Taxotere fell nearly 65% because of generic
erosion. Another key drug, the anticoagulant Lovenox, saw sales dip for the same
reason. Emerging markets boosted the company's results with sales of $3.6
billion, an increase of nearly 7%. Sanofi is counting on two Genzymes
blockbusters, Cerezyme and Myozyme, to help offset the loss of revenues from the
blood thinner Plavix, which loses patent protection in the United States in
2012. It also should help replace the erosion of revenues from generic drug
competitors to Taxotere and Lovenox. Investors appear to be sitting on the
sidelines, waiting for Sanofi to gain profit traction before showing some
affection for its shares. In the past year, the company's stock price has slid
about 1% versus a gain of more than 8% for the Dow Jones U.S. Pharmaceutical
Index. Investors might not want to wait too long. Last week, Sanofi and U.S.
biotech Regeneron (NASDAQ: REGN ) provided some impressive evidence that their
new medicine, an antibody called REGN727, dramatically cut cholesterol in
patients who also were taking high doses of the best-selling cholesterol drug,
Pfizer 's (NYSE: PFE ) Lipitor. Given the drug will have need to undergo more
testing in larger trials before it can even be considered for approval, REGN727
won't provide any near-term boost for Sanofi or Regeneron. However, it gives
the companies a promising entry into the race to market the first medicine to
tap into a gene mutation that drops heart-attack risk dramatically. The size of
the market for cholesterol treatments is huge estimated at nearly $37 billion
worldwide in 2010, according to IMS Health. So it's understandable that Sanofi
and Regeneron have plenty of competitors in the hunt for treatments based on the
gene mutation, led by Amgen (NASDAQ: AMGN ) and Pfizer. We should learn more
this week when both Regeneron and Amgen present data from early human trials at
the American Heart Association meeting. As of this writing, Barry Cohen was long
PFE and AMGN.