By Daniel S. Levine
If you want to know what Big Pharma will look like in ten years, Sanofi-Aventis may hold the answer. The French pharmaceutical giant entered into a ten-year agreement with Covance (NYSE:CVD), a contract research organization, for up to $2.2 billion as it continues to outsource research and development.
As part of the agreement, Sanofi is selling its Porcheville, France and Alnwick, United Kingdom sites and facilities to Covance for approximately $25 million. Covance plans to retain the employees at these sites for at least the next five years.
The deal, in part, reflects Sanofi’s efforts under CEO Chris Viehbacher to improve its inadequate returns on R&D investment by outsourcing research and development activities and looking outside its own walls for innovation. Like other Big Pharmas, Sanofi is facing the expiration of key patents on its biggest selling drugs and the loss of billions of dollars in revenue to competition from generic drugmakers. Drugs that accounted for more than 40 percent of the company’s $40 billion (€29.3 billion) revenue in 2009 are all set to go off patent between 2010 and 2012.
“A key strategy for Sanofi-Aventis is to transform its R&D model and discover new medicines through the use of novel technologies and innovative partnerships,” says Marc Cluzel, executive vice president of research and development for Sanofi.
Big Pharma has its strengths. These tend to be pushing drugs through the regulatory process, manufacturing, and marketing. When it comes to discovery and development, the industry is increasingly acknowledging that others can do it faster, cheaper, and better.