Sanofi to Buy Chattem, Expand in U.S. Consumer Health

Dec. 21 (Bloomberg) -- Sanofi-Aventis SA agreed to buy Chattem Inc., the maker of Gold Bond medicated body powder, for $1.9 billion to enter the U.S. consumer health care market.

Sanofi will pay $93.50 a share in cash, which is 34 percent above Chattem’s closing price on Dec. 18, the Paris-based drugmaker said today. The purchase will create the world’s fifth-largest consumer health company by revenue, Sanofi said. The company plans to use the deal to convert its Allegra allergy drug to an over-the-counter medicine marketed by Chattem.

The acquisition is the second-biggest by Sanofi Chief Executive Officer Chris Viehbacher, 49, since he took the helm a year ago. He’s done more than a dozen deals in emerging markets, vaccines and now consumer health to replace revenue that will be lost to generic competition. Products that account for 20 percent of Sanofi’s annual sales will lose patent protection by 2013.

The purchase “will create for us an extremely important consumer health platform in the U.S.,” Viehbacher said on a conference call with reporters. “Our objective clearly is to drive sustainable and profitable growth for the company over time.”

Sanofi, the best performer among Europe’s five biggest drugmakers this year, declined 29 cents, or 0.5 percent, to 54.41 euros as of 3:31 p.m. in Paris trading. Chattem surged $22.82, or 33 percent, to $92.80 in New York.

Icy Hot

Chattem, which makes Selsun Blue dandruff shampoo and Icy Hot pain-relief products, had sales of $454.9 million in the year ended November 2008. Top executives, including CEO Zan Guerry, agreed to remain with Sanofi, which will base its U.S. consumer-products business at Chattem’s Chattanooga, Tennessee, headquarters.

“We’ve never had a consumer health-care presence in the United States,” Viehbacher said. “‘Chattem is the ideal entry for us into this market.” The market for U.S. over-the-counter health products is about $20 billion and growing about 3 percent annually, he said.

Sanofi is paying about 18.4 times Chattem’s estimated 2010 earnings per share, according to Bloomberg data.

“This is pretty much in line with transactions that are done in this space and recognizes the longer-term growth potential of businesses in the OTC market,” Viehbacher said on the conference call.

Acquisitions

Viehbacher, who joined Sanofi in December 2008, has searched outside Sanofi’s own laboratories for new medicines. In April, Sanofi bought closely held BiPar Sciences Inc. of the U.S. to gain the U.S. company’s BSI 201 cancer drug.

He’s also looking beyond branded drugs and the search for new blockbusters to businesses that are less subject to patent expirations.

Sanofi has acquired generic-drug makers Helvepharm AG of Switzerland, Medley SA of Brazil and Laboratorios Kendrick SA of Mexico, building the company’s offering of lower-priced medicines. The company also took control of Indian vaccine maker Shantha Biotechnics. In September, Viehbacher closed his biggest purchase, buying partner Merck & Co.’s 50 percent of their Merial animal-health venture for $4 billion.

130 Years Old

Chattem, founded 130 years ago as the Chattanooga Medicine Co., built a stable of products in recent years by buying brands that were cast off by larger companies. The company in 2007 acquired five products from Johnson & Johnson and Pfizer Inc., including ACT mouthwash, the Balmex diaper-rash product, the anti-diarrhea medicine Kaopectate, Cortizone anti-itch cream and sleep aid Unisom. It purchased Selsun Blue in 2002 from Abbott Laboratories.

Sales of the allergy drug Allegra have been in decline since at least 2005, when Teva Pharmaceutical Industries Ltd. and Barr Pharmaceuticals Inc. began selling generic versions. The drug brought in 688 million euros for Sanofi last year. “We’ve had significant interest from the major actors in the OTC world to switch Allegra,” said Viehbacher on an analysts’ call. “There’s a huge appetite for a switch like this.”

Source: http://www.bloomberg.com/apps/news?pid=20601103&sid=aka8Hi.HMBdY