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Sanofi CEO Won't Focus On Blockbuster Drugs

With two of Sanofi's top blockbusters?hurt by generic rivals, CEO Viehbacher wants to diversify and focus on businesses that don't depend on patents.

TRENTON, N.J. (AP) -- After 20 months running drugmaker Sanofi-Aventis SA, Chris Viehbacher wants to end the roller coaster of revenue peaks and valleys as blockbuster drugs climb to billions in sales and suddenly plummet when generic competition hits.

With two of the French company's top blockbusters now hurt by generic rivals -- the latest one so unexpectedly last week, the company was forced to cut its 2010 profit forecast -- Viehbacher is seeking future growth by diversifying.

His strategy as CEO is to make deals for dozens of drugs aimed at smaller patient groups, and to boost revenue from emerging markets, consumer health products and generic medicines. The company, based in Paris, the world's fourth-largest drugmaker by revenue, already was a leader in veterinary medicines and in vaccines. Those rarely face generic competition.

"Above all, what I'm looking for is businesses that are not dependent on patents," Viehbacher told The Associated Press in an interview Thursday. "This is my fourth patent cliff in my career and I'm looking to avoid a fifth."

Earlier Thursday, Sanofi reported that second-quarter net income jumped 61 percent to $2.2 billion. But it warned its 2010 income, excluding one-time items, will be flat to down 4 percent, rather than up 2 to 5 percent as previously forecast.

The company blamed a U.S. Food and Drug Administration ruling July 23 allowing Momenta Pharmaceuticals Inc. to sell enoxaparin, a generic version of Sanofi's powerful anticlotting medicine Lovenox. The complex injected drug, a purified version of heparin, brought Sanofi about $2 billion in revenue in the first half of this year. Sanofi has gone to court to contest the FDA decision, but could not get a judge to bar Momenta from selling its generic now.

"In long-range plans, we had no Lovenox sales left in 2013," Viehbacher said, but the FDA decision to allow a copycat version that hasn't also been through extensive human testing caught him by surprise. "I was actually in the car on the way to the airport in ... China around 11 o'clock" at night there and had to scramble to set up a conference call with analysts in the West.

Meanwhile, blood thinner Plavix, the world's second-bestselling drug, saw generic rivals slash its sales 53 percent in Europe in the second quarter and Viehbacher expects further decline there. The decline will be partly offset by rising Asian sales. Plavix is under patent until 2012 in the U.S., where partner Bristol-Myers Squibb Co. sells it.

Viehbacher wouldn't comment on Sanofi's talks to buy Genzyme Corp., possibly for more than $15 billion.

Another source with knowledge of the talks told the AP that talks with the Cambridge, Mass., biotech company are continuing and an announcement is not imminent. Genzyme has been struggling since manufacturing problems halted sales of its Cerezyme and Fabrazyme, drugs for genetic diseases.

Since Viehbacher defected from rival GlaxoSmithKline PLC and took the top spot at Sanofi in December 2008, Sanofi has completed about 50 generally small- to mid-sized acquisitions and partnerships

A key deal was its $1.9 billion March purchase of Chattem Inc. of Chattanooga, Tenn., the maker of over-the-counter mainstays like Gold Bond skin products, Icy Hot pain relief medicine and Selsun Blue shampoo. That boosted Sanofi to the No. 5 spot in consumer health, with more than $1 billion in sales in the first half of 2010, Viehbacher noted.

The deal also brought Sanofi-Aventis a distribution base for its popular allergy drug Allegra, which is awaiting approval to switch from prescription-only to an over-the-counter version, and for future switches of other drugs at the end of their patents.

After 2012, Sanofi has no more major patent expirations, but just in the first half of this year, generic competition reduced sales by about $1.25 billion, Viehbacher noted.

To help compensate, he expects to quickly double sales in emerging markets, particularly the so-called BRIC countries (Brazil, Russia, India and China), from about $9 billion in 2008 to $18 million in 2013.

Half of the volume of Sanofi sales now comes from emerging markets, Viehbacher noted. That equates to 30 percent of sales because of lower prices.

While the growing middle class in those countries can't afford U.S. drug prices, Viehbacher said his company can still make profit margins about the same as in Europe, where government price controls keep levels below U.S. prices.

"Your entire cost basis is lower because you manufacture locally, you hire locally," he said. "We can produce as low-cost as any Indian generic company."