Sanofi-Aventis: French Pharma Giant

Owning big pharma stocks in recent years has pretty much been a prescription for losing money. Product recalls (Vioxx and Bextra, for example), litigation, patent expirations, generic competition, limp new-drug pipelines and unfavorable publicity have buffeted the sector. Stocks such as Pfizer and Eli Lilly have been mostly falling since early 2004.

But over in Europe, pharmaceutical stocks such as Novartis and Roche have been in ruddy good health. Wendell Perkins, co-manager of JohnsonFamily International Value, recommends Sanofi-Aventis, a French pharma giant formed in a 2004 megamerger. Perkins favors Aventis, the world's third largest drugmaker (after Pfizer and GlaxoSmithKline), for its deep, diverse product portfolio and promising pipeline.

Consider: Aventis boasts billion-dollar blockbuster drugs in categories ranging from anti-coagulants (Lovenox and Plavix) and oncology medicines (Taxotene and Eloxatin) to diabetes (Lantus) and insomnia (Ambien) fighters. The company also sells the leading vaccines for afflictions such as influenza and polio. The sources of Aventis's revenues are well balanced geographically: Europe accounts for 40% of sales, the U.S. for 30%, and the rest of the world the remaining 30%.

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Aventis's laboratories have been remarkably fertile. They are currently developing 129 products. Perkins thinks Acomplia, an anti-obesity drug expected to receive approval from the Food and Drug Administration in the second half of this year, will be a new blockbuster.

Sanofi-Aventis is still benefiting from large cost savings wrung out of the merged companies. But unlike many U.S. drug companies, sales growth -- 10% in the first quarter of this year -- has remained robust. Trading at $48 a share, Aventis's American depositary receipts (symbol SNY) sell for 14 times the average of analysts' 2006 earnings estimates.

--Andrew Tanzer