The group is a global leader in healthcare, research and development and is well known for its regional approach to business operations. In the pharmaceutical industry it is known as a global leader. In Pakistan it is the fifth largest pharmaceutical company. It was incorporated in 1976 and was previously known as Aventis Limited.
The name was changed to Sanofi Aventis in September 2005 when Aventis S.A. was acquired by Sanofi Synthelabo. Sanofi Aventis is a subsidiary of SECIPE. The company is engaged in serving the cause of health and well being through research and development, manufacture and sale of pharmaceutical products. It focuses its activities on seven therapeutic areas namely: cardiovascular, thrombosis, oncology, central nervous system, diabetes, internal medicines and vaccines.
The products of the company consist of prescription medicines, vaccines, generic medicines and consumer healthcare products. It uses its regional distribution network to market its products to retailers and wholesalers while its institutional agents deal with the government and private hospitals.
Product Portfolio Sanofi Aventis has a wide-range of medicines, vaccines and healthcare products in its global portfolio. Amongst those that it markets and sells in Pakistan include Actonel, Amaryl, Clexane, Eloxatin, Epilim, Flagyl, Lantus, Nasacort, Stilnox, Telfast, Taxotere, Tritace.
Nine of the company's pharmaceutical brands are known as market leaders in the therapeutic category and another 8 are number two in other categories. One of the fastest growing brands during CY11 has been claforal. Flagyl has maintained the market leadership position for many years. No Spa is another success story which originally belonged to Searle.
The company has well-sought insulin and diabetes market that it addresses fairly well.The company is a pioneer in insulin and has a range of oral anti-diabetic products. Lantus launched a little over a decade ago has enabled the company to investigate the possibility of regenerating the insulin-producing cells in the body.
Revenues and Profits Revenues of the pharmaceutical company achieved moderate growth during the course of six months ended June 30, 2012. Representing an increase of 12 percent YoY for 1HCY12, the top line growth was reasonable given the tough economic environment ad industry dynamics.
The company's core business, the pharmaceutical segment, registered net sales worth Rs 3.94 billion showcasing a growth of 16.3 percent YoY for 1HCY12. The revenues for the first half of the year rode on high volume growth of some of the key brands of Sanofi Aventis and acquisition of new product licenses like Insuman during CY11.
Adding to that, the revenues also gained pace due to company's endeavour to explore and commercialise the Genzyme business. Furthermore, the revenues also depict some effects of price increase of drugs that were categorised as hardship cases.
During CY11, the company ventured into consumer health-care business and took over Salsun Blue, a product of Sanofi Group. However, the vaccine segment depicted an abysmal performance of a 74 percent decline year to date, as no tender was awarded to the company during the period under review.
Coupled with moderate revenue growth, the bottom line of the company for 1HCY12 got a lift from cost curtailment. During the period ending June 30, 2012, the pharmaceutical company continued to spend on advertising and promotional activities essential for investment in its core business activity and new product roll out. This is seen as a climb in the distribution and marketing costs for the period.
Gross margins and operating margins for the period were accentuated by a 32 percent decline in operating expenses which mainly comprises of exchange losses. Exchange losses for 1HCY12 were 47 percent less when compared to 1HCY11.
However, the full impact of this decline could not be felt by the net earnings of the company due to higher borrowing levels by the company, translating into a whopping 46 percent increase in the companies finance cost. Nonetheless, net profit of the company for 1HCY12 increased by 36 percent versus that of 1HCY11.
Future Plans and Outlook The company went under extensive capital expenditure of Rs 386 million during CY11 for various projects during the CY11, with a plan to spend over Rs 428 million in the CY12. This capital expenditure is particularly for expansion, upgrading and modernisation of plant and equipment.
An issue which is unique to the country is that with the passing of the functions of MOH to provinces under the 18th Constitutional Amendment, concerns loom over the future of the regulatory framework of the industry.
To much extent, the viability of the pharmaceutical companies greatly depends upon the progress in this regard. The decision on setting up an autonomous Drug Regulatory Authority (DRA) is a step that has lifted hopes in the industry with regard to the delay of registration and pricing of the medicines and pharmaceutical products. Amid continued cost increase on the back of energy price escalation, inflation and Rupee depreciation, rationalisation of taxes was demanded by the pharmaceutical sector before the budget announcement.
In response, the slashing of the customs duty on the pharmaceutical sector's 88 raw materials in the recent budget was some relief to the sector but only as long as one does not know the actual number of imported raw materials that go in the production of medicines and drugs. Amongst one thousand types of items imported by the pharmaceutical sector for the local production, many are already enjoying a customs duty of 5 percent. Other concerns like IPR violation, spurious drugs and quality issues continue to plague the industry and require concerted efforts across the board.
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Sanofi Aventis
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1HCY10 1HCY11 1HCY12
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Profitability
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Gross margin 28.24% 27.06% 28.08%
Operating margin 7.85% 4.22% 5.41%
Net margin 2.29% 1.26% 1.54%
ROA 5.47% 3.35% 4.12%
ROE 2.25% 1.34% 1.40%
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Liquidity & leverage
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Current Ratio 1.42 1.21 1.08
Debt to Equity Ratio 0.38 0.18 0.00
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Operations
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Fixed Assets Turnover 2.23 2.70 2.82
Total Asset Turnover 0.98 1.07 0.91
Market Value
EPS (Rs) 7.38 4.96 6.76
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