Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
Sanofi-Aventis SA (SNY)Stock (Drug Manufacturers - Major Industry, Pharma & Healthcare Industry)
 Sanofi-Aventis (NYSE: SNY) is the fourth largest pharmaceutical company in the world and the largest in Europe by Revenue with $37B in sales in 2006. Some of Sanofi-Aventis' most successful products include cardiovascular drugs Lovenex and Plavix and insomnia fighter Ambien. One of the main attractions to sanofi-Aventis is its strong global presence. In the coming years, sanofi-Aventis will be able to leverage this advantage to capitalize on key demographic shifts such as rapidly aging populations in developed countries like the US and the rising middle class in emerging markets. The company's strong pipeline of over 120 drugs in development will complement its gains from these trends. Several challenges cloud these sunny prospects. Some of the company's most profitable drugs face patent challenges or expirations not far down the road. Furthermore, governments in its largest markets are seeking to cut healthcare costs and expand drug availability, which would adversely impact the company's margins. The company has also suffered some major setbacks in drug development. Most recently, US Food and Drug Administration refused to approve obesity drug Accomplia, which had been considered key to short term revenue growth.
[edit] Corporate OverviewHeadquartered in Paris, sanofi-Aventis was formed in 2005 when Sanofi-Synthélabo merged with Aventis in a €54.5B ($73B) transaction. The merger produced one of the world's five largest drugmakers and the number one drug maker in Europe. In fiscal 2006, sanofi Aventis reported €28B ($38B) in consolidated sales and €4B ($5.3B) in gross profit. sanofi Aventis operates in two broad segments: pharmaceuticals and vaccines.
[edit] PharmaceuticalsSanofi-Aventis' pharmaceutical segment brings in the vast majority of the company's revenue and profit. In 2006, the company had a total of eight blockbuster drugs which each brought in over €1B ($1.3B) in revenue. Sanofi-Aventis concentrates its pharmaceutical efforts in six major therapeutic areas: thrombosis, cardiovascular diseases, metabolic disorders, oncology, central nervous system disorders, internal medicine and vaccines. [edit] Blockbusters & Major Therapeutic AreasThrombosis: Plavix & Lovenex. Thrombosis occurs when clots obstruct blood vessels. The most familiar thrombotic diseases are strokes and heart attacks. Sanofi-Aventis has two blockbuster drugs targeting thrombotic disease. Plavix, which impairs clot formation, brought in €2.3B in revenue in 2006. Lovenex, which targets certain heart attack causing clots and clots that form in the legs, brought in €2.4B in revenue. Cardiovascular Disease: Aprovel. Cardiovascular disease is the leading cause of premature death in the world, accounting for 30% of all human deaths. Hypertension or high blood pressure is the most common of all cardiovascular diseases affecting 25% of the world's population. Hypertension may result in stroke, heart attack or kidney failure. Sanofi-Aventis markets one blockbuster drug that targets hypertension: Aprovel (€1B in sales FY 2006.) Metabolic Disorder (Diabetes): Lantus. Diabetes impairs one's ability to control blood sugar levels. Over 230 million people worldwide suffer from diabetes. Diabetes may lead to further complications including heart attack, kidney failure, amputation and eye problems. Sanofi-Aventis has one blockbuster diabetes drug: Lantus. Lantus is the first 24 hour effective insulin available to victims of type 1 and type 2 diabetes. In FY 2006, Lantus brought in €1.6B in revenue. Oncology (Cancer Treatment): Taxotere & Eloxatine. Cancer is now the second leading cause of death in the US and Europe after cardiovascular disease. Over 10 million people are diagnosed with cancer on a yearly basis. Sanofi-Aventis is on the leading edge of the fight against cancer. The company currently markets two blockbuster oncology drugs. The first, Taxotere is a chemotherapy drug that inhibits the division of cancerous cells. Taxotere targets solid tumors that cause breast, colon, lung and prostrate cancers, generating €1.7 in sales in 2006. The second drug, Eloxatine, targets colorectal cancer which is particularly prevalent in the US and Europe. Eloxataine generated almost €1.7B in revenue in FY 2006. Nervous System Disorders: Ambien & Copaxone. Sanofi-Aventis also markets two blockbuster drugs that target nervous system disorders. One of the company's most successful drugs has been Ambien which treats insomnia. Insomnia involves difficulty falling asleep and waking up repeatedly during the night. Approximately 150 million people suffer from insomnia worldwide. Ambien generated over €2B in sales in FY 2006. Yet another blockbuster drug targeting central nervous system disorders is Copaxone, which targets multiple sclerosis. Copaxone generate just over €1B in sales in 2006 [edit] VaccinesSanofi Pasteur is a subsidiary of Sanofi-Aventis which produces and markets Sanofi-Aventis' wide array of vaccines. In 2006, Pasteur was responsible for vaccinating over 500 million people worldwide against a host of potentially deadly diseases. Sanofi-Aventis estimates that Pasteur is the leader in vaccinations with 26% of the world's market share and 35% market share in Europe and the United States which are the two largest vaccination markets. Pasteur focuses primarily on Polio/Whopping Cough, Booster, Influenza, Travel and Meningitis vaccines. Sanofi-Aventis' vaccine division generated €2.5B in revenues in 2006. Aventis Pasteur recently gained regulatory approval for a meningitis vaccine. This release, in addition to the release of six other vaccines, including one for bird flu, is expected to more than double the unit's revenue to €5.4B. Sanofi Aventis sees its vaccines business growing to represent more than 15 percent of total sales 'within the next years', from under 10 percent right now.[1] The company has spent $150 million to build a flu vaccine plant that will increase U.S. production capacity to 100 million doses by 2009. Several other vaccine factories are slated to open in China and France in the next five years. The company has announced that it expects its global vaccine sales to double to €22 billion by 2016 and will invest €4 billion to expand its production capacity.[2] The vaccine industry may offer some key advantages to major drugmakers hurt by generic competition. The U.S. government has given outright grants to vaccine manufacturers in anticipation of a feared worldwide flu outbreak. Government support and the complexity of vaccine manufacturing makes it more difficult for generic drug manufacturers to gain market share. [edit] Business GrowthSanofi-aventis posted a 3.3 percent decrease in revenue to €6.94 billion in the first quarter of 2008 and net profits were down by 14 percent to €1.32 billion. Sales of the sleeping pill Ambien fell by 62 percent compared to a year ago with the arrival of generic competition in the U.S. However, this decrease was somewhat offset by growth of the blood thinner Lovenox, up 22 percent, the anti-clotting drug Plaix, up 19 percent, and the insulin drug Lantus, up 31 percent. On November 29, the company entered into a research agreement with U.S. based Regeneron Pharmaceuticals. In an investment valued at over $800 million, Sanofi increased its stake in the company from 4 percent to 19 percent. Sanofi and Regeneron are currently developing a drug for rheumatoid arthritis and an experimental cancer drug. Sanofi-aventis posted a €1.7 billion counteroffer for Zentiva, a Czech generics manufacturer, on June 18. [edit] Research & DevelopmentResearching and developing new drugs is the single most important consideration when identifying the prospects of any pharmaceutical company. The process, which includes a series of clinical trials, is lengthy and extremely costly. During development phases, researchers and scientists must screen hundreds of thousands of compounds. Out of these hundreds of thousands of compounds only one may be effective for treatment. This process represents the pharmaceutical equivalent of finding a needle in a haystack. The hunt for the next blockbuster drug may take in excess of 10 years and can cost as much as $800 million dollars. A successful drug pipeline is critical for pharmaceutical companies because former blockbusters losing patent protection must be constantly replaced by new viable drugs. In fiscal 2006, sanofi-Aventis had an R&D budget of €4.4B, representing a 9.5% increase. The company employs over 18,000 researchers and scientists globally. As of 2006, sanofi-Aventis had approximately 125 compounds in development, 46 of which were in the latter phases II or III of development. When a drug enters phase II, it is determined safe enough for experimental usage among a few hundred patients. Phase III testing involves calculating the risk/reward ratio of a potential drug. The company estimates that 30 to 40% of its new drugs were "first in class" or unique in their method of action. Despite this, sanofi-Aventis has recently faced several setbacks in drug development. On June 13, 2007, the FDA denied approval of the much hoped for obesity drug Accomplia. Sanofi-Aventis recently announced that its 2008 R&D spending will be similar to spending in 2007. The company has attributed the lack of growth to a generally difficult environment in the pharmaceutical industry. The company plans to file 20 drugs with the FDA in 2008-9 and 23 in 2010-11. [edit] Trends & Forces[edit] Aging Populations One macro trend that is sure to benefit the pharmaceutical industry on a mid to long term horizon is the world's aging population. Increased life expectancy coupled with decreased fertility in developed nations has produced a population that is, as a whole, older. In the United States, Western Europe and Japan median the median age has been on the rise for decades now and this trend is likely to accelerate with the upcoming wave of aging baby boomers. According to the United Nations, the population of people aged over 60 in the world is expected to rise dramatically from 606 million in 2000 to nearly 2 billion in the year 2050. In developed nations, the United Nations predict that people aged over 60 will compose almost 35% of the population by 2050 opposed to under 20% in the year 2000. Additionally, sanofi-Aventis will also benefit from trends in emerging markets such as China's aging population. A rapidly expanding older population represents a key growth opportunity for sanofi-Aventis because this demographic represents the company's core market. [edit] Emerging MarketsEmerging markets across the globe present another strong growth opportunity for sanofi-Aventis. As populations in emerging markets such as BRIC (Brazil, Russia, India and China) grow wealthier, they are gaining access to ever more sophisticated health services. A continuation of this trend will expose hundreds of millions of potential customers to sanofi-Aventis pharmaceuticals and vaccines. In fiscal 2006, sanofi-Aventis reported a 10.5% increase in sales in emerging markets opposed to a 1.1% increase in Europe and a 3.9% increase in the United States. The vast size of the populations of these emerging markets present an exciting opportunity for expansion. [edit] The Weakening DollarAnother trend affecting sanofi-Aventis is the relative strength of the dollar. Although the company is based in Paris, sanofi-Aventis derives more than a third of its profits from the United States. Because of this, the company is very sensitive to the strength of the dollar. Over the past few years, the euro has been strengthening consistently against the dollar. The weakness of the dollar erodes the value of revenue derived in the United States. If the dollar continues to weaken, it will continue to have an adverse effect on sanofi-Aventis' earnings. [edit] Generic Drugs
Due to Food and Drug Administration (FDA) regulations, pharmaceutical patents last 20 years in the United States, during which a pharmaceutical company has an exclusive right to manufacture a particular drug. After the patent expires, generic versions of the product can be produced and sold by competitors. Generic medication is cheaper than brand medication, undercutting the pricing power of the original pharmaceutical producer. It is estimated that the loss of patent protection for brand named drugs may reduce sales by up to 90%. Because of the stark decrease in pricing and general revenue generation that occurrs with the lost of patent protection, sanofi-Aventis business model is highly sensitive to patent protection and the enforcement of intellectual property rights. There is currently concern over patent protection of several of sanofi-Aventis blockbuster drugs including: Plavix, Lovenox, Eloxatine and Ambien. Plavix and Lovenox, in particular, currently face legal challenges to their patent protection. [edit] Major AcquisitionsOne effective way for pharmaceutical companies to expand their drug portfolios and pipelines is through major acquisitions. One potential acquisition target for sanofi-Aventis is Bristol-Meyers Squibb, with whom it partnered with to produce and market Plavix, the world's second best selling drug. Bullish Wall Street analysts believe that a merger with Bristol-Meyers Squibb could provide substantial cost savings and boost earnings significantly in the short to mid-term. In the longer term, these analysts believe that Bristol's pipeline is much more promising for earnings in the long term, particularly after the year 2012. Bearish analysts caution that the earnings boost in the early years of a merger would decrease substantially looking past a longer term of 4 to 6 years. Additionally, they caution that sanofi-Aventis already has a strong presence in all major geographical regions and that it already possesses broad expertise in most therapeutic areas. Thus, they argue that a merger will not substantially increase sanofi-Aventis' competitiveness. [edit] Unfavorable Legislative EnvironmentsSanofi-Aventis also faces serious political pressures to increase accessibility to drugs in its two major markets: Europe and the United States. In these two markets, politicians have been pushing aggressively for sanofi-Aventis to lower drug costs or expand generic licensing. In 2006, European governments such as France and Germany took particularly drastic price reduction measures that adversely affected earnings in these markets. In the United States, legislators have also sought price reductions by giving federal programs such as Medicare and Medicaid increased latitude in its negotiations with pharmaceutical companies.
[edit] Comparison to CompetitorsThe various aspects of patent protection and the extremely high costs of researching and developing drugs marks the pharmaceutical industry with high risk and high competitiveness. It is important to keep in mind when considering a comparison of industry players that competition does not arise between each company as a whole but rather between specific drug areas and their relative advantages in therapeutic treatment. For example, sanofi-Aventis blockbuster Plavix faces intense competition from the world cholesterol drug leader Lipitor, produced by Pfizer. Additionally, blockbuster Ambien faces renewed competition from Lunesta produced by Sepracor. Additionally, sanofi-Aventis' diabetes drug Lantus faces new competition from inhaled insulin drug Januvia produced by Merck. Sanofi-Aventis has outperformed the broader S&P Healthcare Index for the past five years, but the overall performance of the healthcare industry in the recent past can be best described as tepid. Sanofi-Aventis' performance may be credited to the strong performance of blockbusters such as Plavix and Lovenox and its strong pipeline marked by a large number of drugs in the latter phases of development. .jpg)
[edit] Bulls vs Bears[edit] Bulls
[edit] Bears
[edit] Annotations06/01/2007 - 06/13/2007: The prospects of FDA approval for sanofi-Aventis' Accomplia dim after the FDA announces that the drug raises inclinations to commit suicide. The FDA eventually unanimously rejects the drug for use in the United States. 03/13/2007 - 04/16/2007: Sanofi Aventis' stock is buoyed as it receives approval for the first bird-flu vaccine on the market. 01/24/2007 - 02/01/2007: Rumors swirl over a possible merger between Sanofi-Aventis and Bristol-Meyers Squibb. Despite possible synergies and Bristol's strong pipeline investors send Sanofi-Aventis' stock down due to uncertainties of such a deal. [edit] References
|
The Shelf
|
Edit
History
Bookmark
