It looks like Sanofi-Aventis (NYSE:SNY) isn’t shying away from its recently announced new goals for itself. Only a little less than two weeks after proclaiming it would make expanding into the generic-drug business one of its main near-term objectives, Sanofi raised its bid on Monday to acquire Czech generic drugmaker Zentiva.

Sanofi has been in a bidding war for Zentiva with a rival Czech investment group since June. Its last offer of 1,150 Czech korun ($69.49) per share, about $2.6 billion (1.8 billion euro) in total, seems to have clinched the deal -- Zentiva’s board of directors recommended accepting this new higher offer. Sanofi already holds approximately 25% of Zentiva.

Sanofi’s push into generic drugs -- and, in particular, generic drug sales in emerging markets like eastern Europe -- is the same strategy for growth being pursued by some of the company’s rivals. In late 2006, Barr Pharmaceuticals (NYSE:BRL) won a $2.5 billion bidding war for Croatian generic drugmaker Pliva, and GlaxoSmithKline (NYSE:GSK) recently announced its own push into emerging markets. In fact, most large-cap pharmaceutical firms, including Pfizer (NYSE:PFE) and Novartis (NYSE:NVS), have their own generic-drug subsidiaries, and now it seems Sanofi will as well.

The reason drugmakers are pushing into emerging markets is clear. Sales of pharmaceuticals in the largest pharmaceutical markets like the United States and Japan didn't grow much last year. Sales in emerging markets are expanding rapidly, though, albeit from a significantly smaller base. And they have a lot of room to grow before per-capita sales approach the levels reached in more developed regions of the world.


Selected countries’ pharmaceutical sales growth in 2007

Share of overall worldwide pharmaceutical sales in 2007

United States


















Source: AstraZeneca's form 20-F for 2007.

While the push to increase revenue in less mature pharmaceutical drug markets like Eastern Europe, Asia, or Latin America can’t hurt, investors should wonder what sort of statement Sanofi and the rest of big pharma is making when the best use they can find for their cash is expanding into low-margin, highly competitive generic-drug sales.

However, using Zentiva to build up its sales and marketing infrastructure in the emerging Eastern European market makes sense if Sanofi will also sell its more valuable branded pharmaceuticals there.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has an A+ disclosure policy.