This week sanofi-aventis agreed to acquire the consumer healthcare company Chattem for $1.9 billion, maker of such products as Selsun Blue haircare products and Gold Bond medicated powders and lotions. In a press release, sanofi says the move is part of its strategy of including consumer healthcare and over-the-counter products (OTC) as part of its core growth plans. The move also reflects Big Pharma’s increased interest in building some targeted revenue streams outside of innovator prescription drugs.

sanofi says the addition of Chattem, based in Chattanooga, Tennessee, will make sanofi the fifth largest consumer healthcare company globally and will position sanofi in the US consumer healthcare market. As part of its OTC strategy, sanofi also said it will convert its antihistamine drug, Allegra (fexofenadine) in the US from a prescription to an OTC product. Sales of Allegra, one of sanofi-aventis’s top 15-selling drugs in 2008, have been hurt by increased generic-drug competition. The drug posted sales of EUR 688 million ($979 million) in 2008, a 2.5% decline from 2007.

Admittedly, OTC products and generic drugs represent and will continue to account for but a fraction of Big Pharma’s total revenues, but their importance has resurfaced as of late as part of tactical efforts by Big Pharma to plug revenue holes formed by slowing growth based on increased generic-drug incursion and fewer new product introductions. As a case in point, the prescription-drug business of sanofi-aventis generated 2008 sales of EUR 22.9 billion ($32.7 billion); OTC products accounted for EUR 1.4 billion ($2.0 billion), and generics for EUR 349 million ($498 million), according to company information. With recent acquisitions of several generic-drug companies, Zentiva (Czech Republic), Kendrick (Mexico), and Medley (Brazil), sanofi is further enhancing its generic-drug portfolio.

Other Big Pharma companies are also positioning themselves into generics and OTC products. Pfizer sold its consumer healthcare business to Johnson & Johnson for $16.6 billion in 2006, but it reacquired a much smaller position in the OTC segment with the acquisition of Wyeth, which had 2008 sales of $2.7 billion in its consumer healthcare business. Merck garnered an OTC component with its acquisition of Schering-Plough, which posted 2008 sales of $1.3 billion in its consumer healthcare business. Among the Big Pharma companies, Novartis stands out with its OTC and generics strategy. In 2008, it garnered sales of $5.8 billion in its consumer healthcare business and $7.6 billion in its generics business, according to company information. Earlier this year, Sandoz, the generics arm of Novartis, added to its generics portfolio by acquiring the generic oncology injectables business of EBEWE for EUR 925 million ($1.3 billion).

The commodity nature of OTC and generic products have historically made these segments less attractive to the pharmaceutical majors, but the need to replenish revenue streams as they contend with generic-drug incursion and fewer new product introductions is creating greater tactical consideration of these segments. Not a revenue game-changer, but enough to take notice.

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