The Business of Diabetes: More Disclosure from Sanofi Aventis

While Lilly's insulin business has been struggling recently, Sanofi Aventis' insulin business has been on roll, at least according to sales statistics from IMS Health.

Although Sanofi Aventis is based in France, the insulin franchise has its origins in Germany, the product of numerous mergers in recent years, starting with a company once known as Hoechst AG, and much of the innovation from the company in insulin remains based in Germany.

Its Lantus is now the best-selling insulin analog worldwide, and the company also offers Apidra (insulin glulisine rDNA origin), a rapid-acting analog that competes directly with Humalog and Novolog. Both Lantus and Apidra have seen their sales grow rapidly in recent years.

The problem with Sanofi Aventis is that while they offer some great products, traditionally, we haven't seen much that the company is working on. Unlike Lilly and Novo, we really don't know much about investments the company is making in new treatments. Investors have also been frustrated by Sanofi Aventis because like other companies based in France, the company has not been as forthcoming with investors as its global rivals.

Despite being home to some of Europe's largest companies, the French market has been much slower than others in embracing the open disclosure practices for a wide variety of reasons, including the high number of large corporate cross-ownership and/or holdings among French companies. But the high levels of international investment in the French market has undoubtedly added pressure on French companies to be more forthcoming with investors. Attempts to emulate U.S. and U.K. investment practices has become increasingly common among French blue chips.

Even as Sanofi grew through acquisitions to become the world's third-largest drug company by sales, behind Pfizer Inc. and GlaxoSmithKline PLC, investors saw the close-knit management team as insular and secretive. The company is required by French law to announce significant, or "material," news to investors, but has been far less transparent than most rivals. This has created a cloud of uncertainty over the company, because understanding the pharmaceuticals pipeline is key for investors. As a result, Sanofi's stock price has lagged behind its peers partly because the company doesn't tell the market much about what's going on.

In an October report titled "The Price of Silence," Sanford C. Bernstein & Co. analyst Gbola Amusa said that the stock's "discount relates more to the level of transparency on Sanofi than anything else."

Drug Pipeline Curtain at Sanofi Aventis to be Lifted

It seems the curtain behind Sanofi's drug pipeline is about to be lifted. Yesterday, The Wall Street Journal reported that Sanofi's chief executive, Gérard Le Fur, said that Sanofi was ready to start talking.

"I accept the criticism that we weren't good enough in this area, so we have to improve our communication," Dr. Le Fur said from company headquarters in Paris. Sanofi promises the first signs of its new transparency will come at its 2006 year-end earnings conference Feb. 13, 2007 which will include an update on research and development.

To help improve its interaction with investors and the outside world, Sanofi recently hired a new communications chief and is now considering holding another research-and-development presentation this year, as most other big drug companies do annually or biennially. That would be separate from the Feb. 13, 2007 event.

The R&D event to be held in February will be Dr. Le Fur's first public appearance as CEO. He plans to expand the company's development and production of biotechnology drugs, which are made from proteins, rather than the chemicals used in most medicines, a strategy rival Lilly and others are also pursuing, as biotech drugs tend to be more profitable and more difficult for generic manufacturers to copy.

Investors and patients with diabetes have been eager to see what is in the company's development pipeline for some time. Perhaps now, we will get a peek into what lies ahead for Sanofi Aventis!