Added firepower could signal a spending spree for Sanofi

Speculation that Sanofi is gearing up for acquisitions could grow after it banks billions from its Regeneron stake sale.

Deals

Paul Hudson, Sanofi's chief executive, could be signalling that he is on the hunt for new assets by announcing the sale of most of the French company’s 20.6% stake in US biotech Regeneron.  

A lock-up on the shares was due to expire at the end of this year, however an 85% rise in Regeneron’s stock over the past 12 months must have presented an opportunity too good to miss. 

In what will be the biggest public offering in healthcare history, Sanofi plans to sell up to 61% of its 23.2 million Regeneron shares, netting it just over $8bn based on Friday’s closing price. Regeneron is separately repurchasing $5bn of its stock from Sanofi, potentially leaving the French firm with just 400,000 shares in the US biotech.

Writing on the wall

Hints of the partners' conscious uncoupling had been dotted throughout Sanofi’s recent investor updates. In December Mr Hudson said the group would adjust its portfolio through divestments and M&A, and announced that it would be restructuring its 12-year-old deal with Regeneron over the PCSK9 drug Praluent and rheumatoid arthritis treatment Kevzara, from partnership to a royalty-based arrangement.

At the time Mr Hudson said the new set-up, which saw Sanofi gain sole global rights to Kevzara and ex-US rights to Praluent, would free the French drug maker from joint decision making around the drugs.

But it is also part of Mr Hudson’s go-it-alone strategy for Sanofi. This has seen it end other partnerships, including with Lexicon and with the Google company Verily.

However, this is not a complete break. Sanofi is hanging on to a 4% stake in Regeneron, allowing it an admittedly small share in the US group’s future success, but also to joint rights to Dupixent. Mr Hudson has previously outlined his belief that Dupixent could achieve $10bn of annual sales, although consensus forecasts from EvaluatePharma see the drug only hitting $9.2bn by 2026.

Ploughing its own furrow

Sanofi has been clear in its plans to set a new course under the leadership of its English chief executive. Alongside deprioritising diabetes and cardiovascular products, Mr Hudson has said the group will now focus on the more lucrative areas of oncology and rare diseases.

Mr Hudson has already made good on this pledge with the $2.5bn purchase of the biotech group Synthorx, for its immuno-oncology pipeline. However there is expectation that more novel technology deals might be in the offing as Sanofi seeks to catch up to its rivals in oncology, gene therapy and rare diseases.

There have also been rumours that the billion-dollar proceeds could be used help Sanofi regain control of the 9.4% stake that L’Oreal holds in the French pharma giant. And, in what could turn out to be corporate musical chairs, L’Oreal in turn might use the money from its sale of Sanofi stock to buy back Nestle’s 23% stake in itself.

Mr Hudson has made it very plain that his ultimate goal is to simplify and expand Sanofi. Proceeds from the Regeneron sale are unlikely to hang around in the group’s bank account for long.

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