Big Year Unfolds for Sanofi-Aventis

Plavix is just one of Sanofi-Aventis' big drugs under patent challenge. Lovenox faces a patent trial starting Nov. 15 from Amphastar Pharmaceuticals, a private company based in Rancho Cucamonga, Calif.

Even if Sanofi-Aventis loses the Lovenox case, Prudential's Anderson says generic competition is probably two years off.

He adds that the company expects to receive results in the fourth quarter of a late-stage clinical trial that examines Lovenox as a treatment for heart attack patients. Favorable data "would help establish a serious presence" for Lovenox in treating acute heart problems, Anderson says.

Morningstar's D'Amore is even more enthusiastic: If the FDA approves Lovenox for heart attack patients, it would "quadruple the drug's potential market," he says.

Sanofi-Aventis lawyers also will remain busy because several companies are mounting a patent fight over Allegra. No trial date has been set, says Anderson. If Sanofi-Aventis loses, he figures generic challengers might reach the market in mid-2006.

What Else to Watch

In addition to legal uncertainty, Sanofi-Aventis must continue dealing with the financial hangover of merging two giant companies and the debt incurred to realize the transaction. Moody's Investors Service recently gave the merged company a mixed review, upgrading its rating on 9 billion euros worth of debt but cutting the company's outlook to stable from positive.

On the one hand, Moody's praises the company for extracting savings from the transaction and for its "high degree of diversification, a strong drug portfolio and high profitability."

At the same time, the ratings agency says the financial foundation is still weak for a company whose rating was just raised from A2 to A1, the top level for an upper-medium grade rating. (A1 is the fifth-best rating.) Sanofi-Aventis says it will pay off the debt from the transaction in five years.

That stable outlook depends on the company's ability to keep reducing debt, to avoid making "material acquisitions," and to keep developing new drugs that will offset revenue losses from drugs affected by generic competition, Moody's says. The most immediate risk, Moody's adds, is the challenge to the Plavix patent.

And for investors, that's plenty of reason to keep a close eye on developments at Sanofi-Aventis.

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