Sanofi Group

40 Avenue George-V 75008
Paris
France
(1)47-23-01-50

Public Company
Incorporated: 1973
Employees: 21,286
Sales: FFr 14.5 billion (US$1.91 billion)
Market Value: FFr 4.827 billion (US$639 million)
Stock Index: Paris

The history of the Sanofi Group begins with the 1973 merger of a number of cosmetic, health care, and animal nutrition firms into a corporate subsidiary of the French state-owned Elf Aquitaine oil company. This undertaking marked an ambitious program of diversification that created a state enterprise capable of competing in the health care industry on an international scale. Today Elf Aquitaine maintains a 63.2% interest in the company. Sanofi grew from a moderate concern into the second largest pharmaceutical company in France; it was chosen to coordinate all Elf Aquitaine’s biotechnology activities.

René Sautier assumed the responsibility of running both the Sanofi Group and Atochem, Elf Aquitaine’s recently acquired chemical operation. Although Sautier’s position was subordinate to that of Michel Pecqueur, the president of the state-owned oil company, a program of rationalization restructured the company into five decentralized divisions and allowed Sautier a certain degree of independence in running the company. Much of Sanofi’s success is attributed to his business acumen.

Although Sanofi was created in order to form an amalgamation of companies, it was only in 1979 that all its pharmaceutical activities were regrouped under a single organization. This tactic represented an effort to strengthen research activities and overseas market penetration. Three companies including Labaz, Parcor and Galor, all previously affiliated with Sanofi, were now wholly absorbed, and for the first time Sanofi gained a separate stock market quotation through the issuing of public stock on the Paris exchange.

While currency exchange fluctuations caused Parcor to register a profit decline in 1979, that same year Sanofi reported an overall increase in company profits. The following year Sanofi increased its holdings by merging with the Clin-Midy division of CM Industries, a manufacturer of pharmaceuticals, veterinary, chemical, medical-surgical and food products. This action significantly increased Sanofi’s research and development budget and expanded the company’s size by 50%. Sanofi now ranked among the leading pharmaceutical companies in France.

By mid-1980 Sanofi’s profits reached unprecedented heights. A 56% increase over the previous year’s figures was attributed to benefits gained from the reorganization. Although the sale of pharmaceuticals accounted for a majority of Sanofi’s activities, a significant increase was generated from the sale of cosmetics and veterinary products.

Between the years 1978 and 1982 Sanofi’s international sales improved by 275%. By gaining access to two of the world’s most important markets, the United States and Japan, Sanofi’s overseas activities generated nearly half of the company’s consolidated revenues. A joint subsidiary formed in 1981 with the U.S. based American Home Products company was followed by a similar agreement established with the Japanese groups Meiji-Seika-Kaisha and Taisho. Through the operations of these joint ventures $104 million was generated from the sale of just three drugs. In addition to expanding pharmaceutical operations, Sanofi was successful in tripling its foreign sales in the cosmetics division.

Sanofi’s research and development activities, supported by a 34% increase in expenditures during 1982, produced a number of potentially profit making drugs. Among the products undergoing clinical testing were an anti-arrhythmic, a third-generation cephalosporin and a treatment for certain forms of cancer. In addition, research proceeded on a psychotropic drug and on an anti-convulsion drug. Sanofi’s pharmaceutical research takes place at five laboratories in France as well as at facilities in Brussels and Milan.

One of the most important developments in Sanofi’s research activities was the 1983 inauguration of a biotechnology center in Labége, the largest of its kind in France. At the same time the company acquired a minority interest in Entremont, a dairy products firm engaged in researching biotechnological applications. In particular, Sanofi was interested in Entremont’s investigation into the production of milk compounds through biotechnology. These two developments marked an important step towards building Sanofi’s future position as the biotechnological center of all Elf Aquitaine’s activities.

In addition to advances in the field of biotechnology, Sanofi continued its program of acquisition. In 1983 Choay, a pharmaceutical company specializing in the area of venous thrombosis, was acquired by Sanofi. Sanofi now gained access to a new line of important pharmaceuticals. The animal health division also increased its holdings through the acquisition of Institut Ronchèse, a manufacturer of vaccines and other veterinary medicines.

By 1984 Elf Aquitaine’s increasing biotechnological activities compelled the state-owned oil group to reorganize its company structure. Chairman Pecqueur transferred most of Elf Aquitaine’s activities in this area, from health care to agricultural products, to the control of Sanofi. While Atochem, Elf Aquitaine’s chemical subsidiary, maintained control of biotechnological activities in the area of industrial products, Sanofi solidified its role as the center of Elf Aquitaine’s innovative technologies.

As a first step in creating Sanofi Elf Bio Industries, Sanofi merged with Rousselot, a gelatine, protein, and glue producer in which Elf Aquitaine formerly held a majority interest. Through the action of this merger, Elf Aquitaine’s stake in Sanofi increased to 62%. To increase the financial standing of Elf Aquitaine’s biotechnological developments, Pecqueur announced plans to double the company budget in this area to $22 million.

By 1985 Sanofi posted an annual sales figure of FFr15 billion. This marked an significant increase from the FFr2 billion generated yearly during the 1970’s. Yet Sautier, commenting on the weak European market and price controls for pharmaceuticals on the domestic market, initiated a program of internationalization in hopes of recouping investments on foreign markets. Two important targets of this overseas market penetration were the U.S. and Japan. Thus, a sizeable amount of cash savings was set aside for any acquisition suitable for this expansion. Additional foreign acquisitions included a Brazilian subsidiary of Revlon, as well as a 50% interest in a South Korean company.

Other significant events which occurred during 1985 included the introduction of the first low molecular weight heparin. This product, developed by the Choay subsidiary, marked a significant step in the prevention of thromboembolic diseases. In addition, Diagnostics Pasteur, a subsidiary in the area of medical equipment, released the Elavia test for detecting the antibody to LAV, a virus associated with AIDS.

Two successful U.S. acquisitions following Sautier’s plans for expansion included the Dairyland Food Laboratories, a Wisconsin dairy company, and Dahlgren, a large crop seed producer. Both companies managed a successful biotechnology program. The following year a 35% bid for Barberet & Blanc, an Antibes-based specialist in carnations and gerberas, further strengthened Sanofi’s operations in plant and genetic technologies. Barberet & Blanc, a small family operation located on the French Riviera, had developed expertise in “in vitro” plant-growing techniques as well as creating new carnation varieties resistant to deadly fungus.

Thus, through a series of acquisitions of small but high-technology concerns, Sanofi has gained expertise in the area of biotechnological processes in food additives, dairy products and large crop seed sectors. Some 25.8% of Sanofi’s 1985 sales resulted from products developed out of these technologies. In addition to benefits from this product orientation, Pecqueur’s plan to internationalize Sanofi’s operation resulted in 50% of the company’s sales being generated from foreign markets.

During the same time that successful biotechnological products emerged from Sanofi’s laboratories, the sale of pharmaceuticals continued to account for 46.8% of group sales. In the United States, the Food and Drug Administration recently approved the marketing of Cordarone, a major anti-arrhythmic drug. This drug is marketed through a joint venture between Sanofi and American Home Products.

As Sanofi continued to broaden its activities and generate profits through the sale of health care products, cosmetics, additives, seed sectors, and animal pharmaceuticals, the company implemented an employee profit-sharing program. Recently, a company savings plan and a share purchase option completed this program.

The future of Sanofi depends on the company’s continuing success in developing innovative products and penetrating foreign markets. The company today maintains a strong position as a leading French pharmaceutical concern. As Sanofi’s diverse activities suggest, the company will continue to hold this position in the years to come.

Principal Subsidiaries

Centre Pharmaceutique Européen (C.P.E.); Centre de Recherches Clin-Midy (C.R.C.M.); Diagnostics Pasteur; Diphac; Distrithera; Farmadis; Francis SpA (Italy); Francopia; Labaz GmbH (West Germany); Labaz-Sanofi NV (Belgium); Laboratoires Choay; Laboratoires Clin-Midy; Laboratoires Labaz; Laboratoires Lafarge; Laboratoires Millot-Solac; Laboratoires Pharmygiène; Laboratoires Robilliart; Laboratoires Roland-Marie; Laboratoires Sauba; Laboratoires Labaz (Spain); Midy Arzneimittel GmbH (West Germany); Midyfarm; Midy SpA (Italy); Moehs (Spain); Opiaramon; Parcor; Produits Dentaires Pierre Rolland; Prophac; Sapchim; Sempa Chimie; Sintebras (Brazil); Ceva Laboratories Inc. (USA); Cie Rousselot; C.M. Aromatics Inc. (USA); Dairyland Food Laboratories Inc. (USA); Dahlgren (USA); Eurogat; Fondoirs de la Moselle; Méro-Rousselot-Satia; Rousselot Bénélux (Belgium); Rousselot Ltd (U.K.); Sanofi Elf Bio Industries; Société Anonyme de Récupération Industrielle & Agricole (S.A.R.I.A.); Création et Diffusion Internationale de Parfumerie (C.D.I.P.); Omnium de la Parfumerie de Luxe (Parfums Van Cleef & Arpeis); Parfums Charles Jourdan; Parfums de Molyneux; Roger & Gallet; Sanofi Beauté; Secta Laboratoires de Cosmetologie Yves Rocher; Stendhal. Sanofi also has subsidiaries in the following countries: Brazil, Mexico, Netherlands, Switzerland and the United Kingdom.