Sanofi-Aventis S.A. (SAN.FR) said Thursday it is in talks with a potential partner to enter the Japanese generic drug market, as it seeks to expand its growth potential and lower its dependence on blockbuster products.

"We are interested in the Japanese generic market, we are in discussions with a partner and those discussions are successful," the French drug maker's Chief Executive Christopher Viehbacher said in a news conference, without naming the potential partner.

The move is the latest evidence of growing interest among overseas drug makers in the generic drug business in Japan, as the government seeks to nearly double the use of generic products in the world's second largest pharmaceutical market to 30% by 2013.

Foreign companies already active in Japan's generic drugs market include Pfizer Inc. (PFE) and Teva Pharmaceutical Industries Ltd. (TEVA.TV), and the addition of Sanofi-Aventis will increase the competitive pressure on smaller domestic suppliers. Japanese drug maker Daiichi Sankyo Co. Ltd. (4568.TO), the parent company of Ranbaxy Laboratories Ltd. (500359.BY), is another recent newcomer.

Generic drugs had a 17.6% share of Japan's $80 billion-a-year drug market in the fiscal year ended March 31, 2009, according to the latest figures from the Japan Generic Medicines Association.

Patrick Chocat, the president of the French company's Japanese unit Sanofi-Aventis K.K., said the world's sixth largest pharmaceutical group is seeking a tie-up with "a partner with good access to the local generic market," indicating it would likely be a leading Japanese supplier without an existing alliance.

The Nikkei reported Thursday that Sanofi-Aventis plans to set up a joint venture with Japan's largest generic drug maker, Nichi-iko Pharmaceutical Co. Ltd. (4541.OK).

Nichi-iko declined to comment on whether it is in talks for a tie-up with Sanofi-Aventis or other companies.

Viehbacher said his company is also interested in small- and medium-sized acquisitions in other business areas, but added the company would be selective in seeking opportunities to expand.

"I don't see us as being a generics company and I don't see us as wanting to compete everywhere with major generic players," he said.

In the fast-growing Indian pharmaceutical market, where Sanofi-Aventis has been doing business since 1956, the company is not looking for more acquisitions in the near future, Viehbacher said.

The company is also speaking to competition authorities in markets where it operates for possible anti-trust divestitures of its animal health business and it may make a divestment decision, if needed, in the second half of this year, Viehbacher said.

Sanofi-Aventis bought Merck & Co. Inc.'s (MRK) interest in their animal health product joint venture last year.

"There is significant interest" in Sanofi's animal health assets, he said, but stopped short of naming possible bidders.

-By Kazuhiro Shimamura, Dow Jones Newswires; 813-6269-2790; kazuhiro.shimamura@dowjones.com