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Sanofi to hike Regeneron stake
February 13, 2013
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PARIS: French drugmaker Sanofi is to buy more shares in US biotech company Regeneron Pharmaceuticals, its partner in the development of potential blockbuster treatments for cholesterol and rheumatoid arthritis. Sanofi’s plans, disclosed by the companies in separate statements, boosted both companies’ shares.

Sanofi controls 16.7 per cent of Regeneron, or 15.82 million shares, according to Reuters data. Sanofi said in an email that it has the right to raise the stake to as much as 30 per cent under its decade-long partnership with Regeneron.

“We are very happy with the relationship with Regeneron, but we needed this technical filing to get freedom to operate,” the company said. Sanofi disclosed its plans to buy Regeron shares on the open market in a filing with the US Federal Trade Commission.

Peter Dworkin, a spokesman for Regeneron, said that under terms of their partnership, Sanofi is not allowed to increase its stake beyond 30 per cent until five years after the planned 2017 conclusion of their collaboration.

“The 30 per cent limit they can acquire without our permission is in force and will remain in force” until 2022, Dworkin said.

Under the partnership, Sanofi and Regeneron have agreed to equally split US profits from medicines they develop together.

Regeneron Chief Executive Leonard Schleifer has said his company enjoys “unprecedented” favorable financial terms from the partnership because Sanofi funds 100 per cent of expenses to develop their drugs.

“I think this is a sign that they (Sanofi) are taking more interest in the company,” said Deutsche Bank analyst Robyn Karnauskas. “I don’t think investors should immediately conclude that an acquisition is coming soon.”

Morningstar analyst Lauren Migliore said it was unclear whether Sanofi was merely boosting its stake in Regeneron or eventually aimed for a controlling stake or outright ownership.

“I wouldn’t want to speculate either way,” Migliore said. “But Regeneron has a great drug portfolio and technology and a very strong partnership with Sanofi, so a merger would make sense.”

She also said a merger would be costly because acquirers typically have to pay premiums of 30 to 100 per cent for shares of attractive biotechs, and Regeneron’s stock has risen more than fourfold in the past two years. The company’s valuation has soared on booming sales of Eylea, a treatment for macular degeneration, and greater awareness on Wall Street of its promising experimental drugs.

Regeneron shares were up 2.8 per cent in afternoon trading. Shares of Sanofi, whose earnings have been hurt by generic competition for its Plavix blood-clot preventer, rose 3.4 per cent in Paris.

Regeneron is best known for Eylea, co-marketed with Bayer. The drug is expected to garner sales this year of up to $1.3 billion.

US regulators last summer approved Regeneron’s Zaltrap treatment for metastatic colorectal cancer, co-developed with Sanofi. Analysts believe the drug could eventually bring in annual sales of $400 million. Investors are closely watching the Regeneron-Sanofi cholesterol drug, which is in late-stage trials.


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