Sanofi-Aventis's New JV Will Provide Entry into China’s OTC Market

Sanofi-Aventis (NYSE: SNY) signed a letter of intent last Saturday to establish a joint venture with Minsheng Pharmaceutical Group of Hangzhou. The JV will focus on OTC vitamin and mineral products. Minsheng already produces the best selling product in the sector: 21-Super Vita multivitamin-multimineral tablets.

For Sanofi-Aventis, the JV will provide an entry into China’s OTC market. Sanofi-Aventis will have the majority share in the JV. No other financial details were disclosed.

Sanofi-Aventis and Minsheng already share a Hangzhou-based JV. In May of this year, Sanofi announced it would invest 270 million RMB ($40 million) to build a new pharmaceutical packaging plant for the JV in Hangzhou Binjiang Hi-Tech Industry Development Zone. The new facility will also house the joint venture, called Hangzhou Sanofi-Aventis Minsheng Pharmaceutical. The plant, which will be completed in 2012, will have the capacity to produce 160 million packages.

Although Minsheng has long owned the biggest share in OTC vitamin and mineral supplements, it is facing increasing competition from products developed in the west, including Amway's Nutrilite, Wyeth's (NYSE: WYE) Centrum and Bristol-Myers Squibb’s (NYSE: BMY) Theragran Gold. By itself, Amway reportedly spent $90 million advertising its Nutrilite product in 2008.

Sanofi-Aventis has declared that it would pursue joint research projects in China, rather than establishing an in-house R&D facility there. In recent years, the company has made several large investments in manufacturing facilities, expanding its Beijing diabetes drug manufacturing plant and building a flu vaccine facility in Shenzhen, in addition to the Hangzhou JV.

Olivier Charmeil, Sanofi-Aventis' senior vice president for pharmaceutical operations in Asia/Pacific and Japan, pointed out that China will become the world's second largest OTC market in 2010. Revenues from China OTC products are currently around 70 billion RMB ($10.3 billion), and it is projected that the market will increase by double-digit percentages for each of the next five years.

Disclosure: none.