What’s the rationale for this? Probably Sanofi wants to become less reliant on the blockbuster patented drug business.

Three major issues that confront the industry: the rise of generic products, the difficulty in finding new treatments, and the large amount of spending on sales and marketing.

The first challenge is that in most countries, a drug company has a 17 to 20 year period when its product is protected by patent. However, this period does not start when the drug comes on the market, because patents are filed during the research phase. On average, a patented drug is on the market for around 12 years before the patent expires and generic competition arrives. Once the drugs have come off patent, their market share and price premium are significantly reduced, because the generic alternative is less expensive.

Second, there is a general feeling that all the ‘low hanging fruit’ of disease have been picked. The industry relies on blockbusters, which are drugs that bring in annual revenues of $1 billion or more. Evidence suggests that it is getting increasingly difficult – and more expensive – for companies to find new treatments. This has led to a significant change in the basic approach to research. Companies are moving from chemistry-based therapies to biology-based therapies, but since the major pharmaceutical companies tend to lack expertise in this area, they are either buying or forming partnerships with either smaller, more specialised outfits or are forming partnerships with larger drug companies.

The third challenge for all major pharmaceutical companies is that they spend a great deal on sales and marketing. Pharmaceutical companies position themselves as research-oriented organizations. In fact, the actual amount that they spend on research and development is less than the amount they spend on sales and marketing.