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From itches to arthritic pain relief, consumers globally are increasingly treating their own maladies, a shift French drug maker Sanofi-Aventis aims to embrace with its $1.9-billion (U.S.) purchase of Tennessee-based Chattem Inc.

The deal, announced yesterday, will create the world's fifth-largest consumer health-care company and comes amid the "growing propensity to self-medicate," Paris-based Sanofi said.

The acquisition, which includes the Gold Bond body powder and Cortizone ointment brands, comes as Sanofi is trying to diversify from its prescription drugs, many of which will lose patent protection in the coming years and face stiffer competition from generic drugs. It opens the door to the U.S. consumer health-care segment, home to the world's largest over-the-counter market.

"This is clearly aligned with our willingness to move away from the dependence on blockbuster medicines ... and have more diversified platforms that move us away from patents," said Christopher Viehbacher, chief executive officer, on a conference call. It provides "long-term sustainable growth in this area."

The move marks Sanofi's first foray into the U.S. consumer health-care market and also gives the firm "momentum" to expand in Canada, it said. "This is an opportunity for us to build onto our existing products," said Hugh O'Neill, CEO of Laval, Que.-based Sanofi-Aventis Canada Inc. "Clearly with patients taking more control of their own management of their diseases, it's a growing market."

Global over-the-counter medicine sales hit $86.6-billion (U.S.) last year and have been growing by about 4 per cent a year. The U.S. represents about a quarter of the worldwide market.

Meantime, Sanofi has been reducing its reliance on developing drugs. Earlier this year, it slashed its pipeline by cutting 14 drugs from development. Yesterday, it said it's halting two medicines amid setbacks in developing them.

Yesterday's purchase will give Sanofi steady revenues, analysts said. "These are products that don't have the blockbuster potential, but they are slow and steady," said Viren Mehta of Mehta Partners in New York. "Sanofi is already strong in pharmaceuticals in the U.S. Now they would like to have a strong, diversified presence. So this makes sense."

Chattem was founded on Feb. 21, 1879 on a muddy street in the railway town of Chattanooga, Tenn. Its first products were a laxative called Black Draught, reputedly given to sailors along with their usual doses of rum, and Dr. McElree's Wine of Cardui, "a tonic for women based on the sedative and antispasmodic properties of Cnicus benedictus."

Today, its brands range from Selsun Blue dandruff shampoo to Dexatrim diet pills, ACT mouthwash and Icy Hot pain relief cream. The firm has 488 workers and the U.S. accounts for about 95 per cent of sales.

Sanofi said it plans to market Chattem's products in emerging markets in Latin America and Asia. It's also relying on Chattem to help switch Sanofi's popular Allegra allergy medicine from prescription to an over-the-counter brand, part of a broader move in the industry as patents expire.

Sanofi is paying $93.50 (U.S.) a share in cash for Chattem, and the deal is expected to close in the first quarter of next year. Chattem's top executives, including CEO Zan Guerry, will remain with the company.

Yesterday's announcement comes at the tail end of a slow year for mergers and acquisitions. Global M&A activity has fallen 56 per cent this year as slumping economies put the brakes on corporate marriages, the OECD said this month.

CHATTEM (CHTT)

Close: $93.14 (U.S.), up $23.16

Big Pharma deals

The push to consolidate. Drug pipelines of the big firms aren't producing enough to keep growth going as patents expire.

PFIZER

In January, Pfizer Inc. bought Wyeth for $68-billion (U.S.), solidifying its No. 1 rank in the industry.

MERCK

In March, Merck & Co. bought Schering-Plough Corp. for $41.1-billion, making Merck the world's No. 2 drug maker.

ROCHE

Also in March, Swiss pharmaceutical giant Roche bought California-based Genentech for $46.8-billion (U.S.).

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
MRK-N
Merck & Company
+0.15%131.95
PFE-N
Pfizer Inc
-0.11%27.75
SNY-Q
Sanofi-Aventis S.A. ADR
-1.9%48.6

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