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Sanofi Acquires Rolaids Rights

Zacks Equity Research

Sanofi’s (SNY) US consumer healthcare division, Chattem, Inc., recently announced that it has acquired worldwide rights of an over-the-counter antacid Rolaids from McNeil Consumer Healthcare, a subsidiary of Johnson and Johnson (JNJ).

Rolaids, initially launched in 1954, is used to relieve heartburn and acid indigestion. Sanofi plans to re-launch the drug and make it available to the customers within a year of launch.

Sanofi is one of the major players in the consumer health care market in the US. The company provides a strong platform for the potential conversion of prescription medicines to OTC status in the US. We are positive on the addition of Rolaids to Sanofi’s consumer healthcare portfolio, which includes products such as Allegra over-the-counter, Icy Hot, Gold Bond, Cortizone-10, Selsun Blue, ACT and Unisom.

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 acquisition of Rolaids rights is a step in that direction.

We currently have a Neutral recommendation on Sanofi. The stock carries a Zacks #2 Rank (Buy) in the short run.

Besides Sanofi, other stocks in the large-cap pharma sector that appear to be equally attractive include stocks like Novo-Nordisk (NVO) and Novartis (NVS). Both these companies carry a Zacks #2 Rank (Buy).

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