Bumpy road won't deter Sanofi's push into emerging markets

Chris Viehbacher, Chief Executive Officer of Sanofi, attends the company's 2012 annual results presentation in Paris February 7, 2013.

Credit: Reuters/Jacky Naegelen

By Sumeet Chatterjee

MUMBAI | Mon Sep 30, 2013 10:11am EDT

MUMBAI (Reuters) - French drugmaker Sanofi SA will not be deterred from expanding in emerging markets through acquisitions despite government crackdowns on pricing and closer scrutiny of western pharmaceutical companies' business practices, its CEO said.

Multinational drugmakers such as Pfizer Inc, Sanofi and AstraZeneca PLC have depended on rising demand in emerging markets as sales in the developed economies slow due to a wave of patent expirations on top-selling drugs.

"Emerging markets has six billion people and I think the marketplace will be bumpy on occasions, but the need for healthcare is undeniable," Sanofi Chief Executive Chris Viehbacher told reporters in Mumbai on Monday.

"For the longer term I continue to believe in the importance (not just) from the healthcare point of view but also from the business point of view in emerging markets," he said.

Sanofi's India unit was believed to be one of the bidders for the domestic drug formulations business of India's Elder Pharmaceuticals Ltd for $400 million-$450 million, sources had told Reuters in July.

Viehbacher declined to comment on the Elder deal, but said the company would continue to look for acquisition opportunities in the emerging markets, which accounts for a third of Sanofi's revenue, including in India.

Western drugmakers who covet a bigger share of India's fast-growing $13 billion drugs market have been frustrated by a series of decisions on intellectual property and pricing.

India in August revoked a patent granted to GlaxoSmithKline for breast cancer drug Tykerb, a decision that followed a landmark court ruling disallowing patents for incremental innovations that was a blow to global pharmaceutical firms.

The decision was the latest in a series of rulings on intellectual property and pricing in India that have frustrated attempts by Western drugmakers to sell their medicines.

Viehbacher said instead of focusing on lowering prices of drugs, the Indian authorities should focus on improving access to quality healthcare and invest in innovation. India spends about 5 percent of its gross domestic product on healthcare.

CHINA CRACKDOWN

The pharmaceutical industry should support China's efforts to curb corruption, Viehbacher said, with a crackdown on bribery in the country's drug sector hurting sales at a number of firms.

With China's healthcare spending forecast to nearly triple to $1 trillion by 2020 from $357 billion in 2011, according to consulting firm McKinsey, China is a magnet for makers of medicines and medical equipment.

However, a string of investigations and visits by authorities to the China-based offices of global firms has prompted businesses to step up internal compliance and rein in sales teams.

"I think the Chinese government's approach to reduce corruption has to be supported by all of us. As companies, all of us are absolutely proactively cooperating with the agencies who are investigating," Viehbacher said.

Sanofi said in August that one of its 11 regional offices in China had been visited by the State Administration for Industry and Commerce (SAIC) in Shenyang, but added it was not aware of the purpose of the visit from the agency.

Industry insiders expect its China drug sales growth to slow sharply or even reverse in the third quarter after a 14 percent year-on-year rise in the three months to end-June.

(Reporting by Sumeet Chatterjee; editing by David Evans)

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