Sanofi Buys Principia for $3.7 Billion. Both Stocks Are Rising. - Barron's

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Sanofi is narrowing its drug-development focus, discontinuing its diabetes and cardiovascular research.

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The French pharmaceutical giant Sanofi is digging into the cash it amassed earlier this year with the sale of its $11.7 billion stake in Regeneron Pharmaceuticals, snapping up the biotech firm Principia Biopharma in a $3.7 billion deal announced Monday morning.

Shares of Principia (ticker: PRNB) have risen 65.6% this year amid speculation over an acquisition. The company, which has no approved products, is developing drugs to treat multiple sclerosis, among other immune-mediated diseases.

The deal gives Sanofi (SNY) full ownership of a multiple-sclerosis drug called SAR442168 that it had been developing in partnership with Principia.

“This acquisition advances our ongoing R&D transformation to accelerate development of the most promising medicines that will address significant patient needs,” Sanofi CEO Paul Hudson said in a statement.

In a note out Monday morning, H.C. Wainwright & Co. analyst Joseph Pantginis suggested that the deal wasn’t unexpected, writing, “Morning surprise…Well not really.”

Sanofi will pay $100 per share in cash for Principia. The stock closed at $90.74 on Friday and was trading at $99.25 Monday morning.

Shares of Sanofi were up 1.7% Monday morning, while shares of Principia were up 9.4%. The S&P 500 was up 0.2%. Sanofi’s sponsored American depositary receipts trade at 13.8 times earnings expected over the next 12 months, close to the 5-year average of 13.4 times earnings, according to FactSet. Of the 22 analysts who cover the stock tracked by FactSet, 15 rate it a Buy and 7 rate it a Hold.

Shares of Sanofi are up 0.3% this year. Hudson, who took over last fall, has laid out a plan that involves narrowing its drug-development focus, discontinuing its diabetes and cardiovascular research. The company bought the immuno-oncology focused biotech Synthorx in December for $2.5 billion. Its sale of a large stake in Regeneron gave it cash and led to speculation about which companies it planned to acquire.

The Principia deal begins to answer that question. The company’s focus on immune-mediated diseases, and particularly multiple sclerosis, coincides with existing Sanofi business lines. The company sells a number of multiple-sclerosis drugs, including Lemtrada and Aubagio.

The Principia drug SAR442168, a so-called BTK inhibitor, is in a Phase 3 study in multiple-sclerosis patients. Another Principia BTK inhibitor, called rilzabrutinib, is in Phase 3 trials in patients with pemphigus, a rare autoimmune disease, and is expected to be tested in a Phase 3 trial in patients with immune thrombocytopenia, a bleeding disorder.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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Sanofi Buys Principia for $3.7 Billion. Both Stocks Are Rising. - Barron's
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