Sanofi AventisFrench drug manufacturing giant Sanofi-Aventis is stepping up its presence in the nonprescription drug market in the United States and Europe.

Sanofi AventisThe move is viewed as indicating the commercial potential and value of Perrigo, the U.S. leader in the private-label over-the-counter drug market in drugstore chains.

Sanofi has signed an agreement to buy the controlling stake in American nonprescription drug maker Chattem for $1.9 billion. This is Sanofi's fourth acquisition of an OTC maker but the company's first sortie into the American market.

The reasons given by Sanofi for this purchase reinforce Perrigo's claims regarding the strength of its business model. The nonprescription drug market is one of the company's five main target markets, and sources at Sanofi note that medical consumer products offer an opportunity for stable growth.

The global OTC drug market totaled $87 billion in 2008, with the U.S. accounting for 25% of that. The American nonprescription drug market is estimated at $22 billion, with 25% of sales coming from private-label products at drugstore chains. Perrigo has a 70% share in the private label market.

Perrigo Israel CEO Refael Lebel said he is pleased with Sanofi's entry into this market, noting that the more companies like Sanofi invest in nonprescription drugs, the greater the market for similar private-label OTCs.