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SNY to Expand Animal Health Business

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MRK55.74-0.57

French pharmaceutical company, Sanofi’s (SNY) Animal Health division, Merial, recently announced that it will acquire a privately-held India-based company, Dosch Pharmaceuticals Private Limited. The deal is expected to close in the first half of 2013. The financial details of the deal were not disclosed.

Dosch Pharmaceuticals’ animal health business has more than 86 animal health therapeutics and nutritional feed supplements and other products.

We expect this deal to help Sanofi tap the Indian animal health market better. Sanofi estimates that the Indian animal health market will generate 2012 sales of €350 million, exhibiting double-digit growth year over year.

As a reminder, Merial was founded in 1997. It was a 50/50 joint venture between Merck & Co. (MRK) and Sanofi. Sanofi acquired Merck’s 50% share in September 2009 for $4 billion (approximately €2.9 billion). Currently, it is a wholly owned division of Sanofi.

We note that Sanofi’s biggest challenge is the generic threat that is being faced by several of its products. The company lost approximately €2.2 billion in sales in 2011 due to genericization.

Sanofi is looking to combat the generic threat through inorganic growth. Moreover, Sanofi is introducing new products to counter the loss of revenues due to genericization of key drugs. We believe that the proposed acquisition of Dosch Pharmaceuticals is a step in that direction.

We currently have a Neutral recommendation on Sanofi. The stock carries a Zacks #3 Rank (Hold) in the short run.

Large-cap pharma stocks currently holding a Zacks #2 Rank (Buy) include companies like Novo-Nordisk (NVO).
 

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