Via Financial Times

Sanofi plans to sell down most of its 20.6 per cent stake in US biotech Regeneron as part of chief executive Paul Hudson’s promised overhaul of the French pharmaceutical maker.

The two companies have had a research and marketing partnership since 2003, which led Sanofi to build up an equity stake worth $12.1bn as of the market’s close on Friday.

They will continue to work together after the divestment and jointly own fast-growing eczema drug Dupixent, as well as Kevzara, a rheumatoid arthritis drug that is being tested for treating Covid-19.

The divestment will take place as an underwritten public offering starting on Tuesday in New York. Sanofi said it intends to sell approximately 12.8m Regeneron shares out of a total of 23.2m, and may also sell an additional 10 per cent of the offering, or 1.28m shares, in the next 30 days if there is sufficient demand.

If the proposed public offering is completed, Regeneron said it would repurchase $5bn of its stock from Sanofi using $3.5bn of its own cash and a loan from Goldman Sachs.

After the two stages of the transaction, Sanofi would be left with about 400,000 shares in the company.

Mr Hudson said in an interview that it was the right time for the two companies to take this step, since a lock-up on the shares was expiring, Regeneron felt able to buy back the shares and Sanofi wanted capital to drive its own development.

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“We should not be a passive investor in another company. For us, it’s a big opportunity to redeploy capital to do good science,” he said.

“But nothing will change on our collaboration with Regeneron and we’ll be in partnership for many, many years to come.”

The British executive, who took over as CEO in September, set a new strategy for Sanofi in December, which will see it focus on key growth areas such as oncology, rare diseases and immunology while ending research into diabetes and heart disease. The company is also testing two experimental vaccines for Covid-19.

Mr Hudson said the cash from the Regeneron exit would go towards boosting Sanofi’s research and development of new drugs and could include acquisitions along the lines of that of Californian biotech Synthorx for $2.5bn in December.

“We want to add to our pipeline organically through our own R&D and through acquisitions,” he said, adding that the proceeds would not go to pay down debt.

The public offering comes as Regeneron shares are trading near all-time highs, having risen 82 per cent in the past year and outperforming the S&P 500 index’s 4.5 per cent rise in the same period.

It will occur simultaneously in the US and internationally. Bank of America and Goldman Sachs are acting as joint bookrunners.

Investors have responded positively to Mr Hudson’s plans for Sanofi, sending the shares up 11 per cent since his arrival. But the CEO created a firestorm in France and was summoned to meet President Emmanuel Macron recently when he suggested that the US might get access to a potential vaccine for Covid-19 first since its government was financing companies’ research.

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