UPDATE 1-Sanofi moves into devices with diabetes test deal

* Links with AgaMatrix to sell blood sugar monitoring tests

* First products from alliance on sale later this year

* Move strengthens Sanofi position in diabetes market

(Adds Sanofi quotes, background)

By Ben Hirschler

LONDON, March 31 (Reuters) - French drugmaker Sanofi-Aventis (SASY.PA) further broadened its healthcare business on Wednesday by agreeing to develop blood sugar monitoring systems with AgaMatrix, a privately held U.S. firm.

The move takes the group into the world of medical devices and is part of a strategy by Chief Executive Chris Viehbacher to diversify Sanofi, reducing its traditional reliance on branded prescription drugs.

Viehbacher told Reuters last year he was interested in certain areas of medical technology, including devices that allow patients to measure their health at home.

"The vision of the company is to become a healthcare company (so) it's logical to look at some kinds of devices," he said at the time. [ID:nL5498514]

Under the terms of the agreement, AgaMatrix and Sanofi will co-develop blood glucose monitoring devices that can simplify the management of insulin therapy, where Sanofi is already a leader with insulin drugs such as Lantus and Apidra.

Sanofi plans to start selling the first products from the partnership in the second half of 2010, it said.

Financial terms of the collaboration were not disclosed but the blood monitoring systems will be exclusive to Sanofi and will be designed to work synergistically with its existing diabetes treatments.

"This agreement is a concrete step towards fulfilling our vision to deliver integrated solutions to patients and become the partner of choice in the field of diabetes," said Pierre Chancel, head of Sanofi's diabetes division.

Diabetes is a growing focus for global pharmaceutical companies as the cases of the disease, which is linked to obesity, increase worldwide.

AgaMatrix, based in Salem, New Hampshire, already develops and manufactures a line of blood glucose monitoring products featuring patented technologies that personalise each test to provide improved accuracy.

Viehbacher has also put renewed emphasis on other areas of diversification, including over-the-counter medicines, where he recently agreed to buy U.S.-based Chattem for $1.9 billion. [ID:nLDE5BK12I]

He has also expanded Sanofi's generic drugs business, notably in the fast-growing emerging markets of Latin America and Asia. (Editing by David Holmes)