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Sanofi SA, the renowned French drugmaker, has announced its plans to shell out a staggering $2.9 billion to acquire the biotech firm Provention Bio. The purchase decision comes off the back of an existing co-marketing deal between the two pharma companies.
The acquisition, expected to finalize in Q2 of 2023, would grant Sanofi full ownership of Provention Bio’s recently FDA-approved type 1 diabetes therapy, Tzield. This would help Sanofi regain its dominant position in the lucrative U.S. diabetes market and bolster its medication pipeline after a series of setbacks.
Following Sanofi’s bid to pay cash for Provention Bio at $25 a share, its shares increased almost fourfold in premarket trading after closing at $6.70 the previous day. The move had the opposite effect on Sanofi’s shares, which tumbled 1.5% in afternoon trading.
The pace at which Sanofi closed the deal and its hefty share price tag show that the acquisition was highly competitive, possibly with two or so other viable unsolicited bids on the sidelines. Sanofi had to snap up the top-performing biopharma firm quickly before the deal could be snatched right out of its hands.
Nonetheless, Provention Bio is the latest in an array of mid-tier pharma companies and startups that Sanofi’s CEO Paul Hudson has acquired since switching the company’s focus on immune diseases and cancer.
Despite paying a premium, the purchase is undoubtedly a solid deal. Sanofi’s drug pipeline, particularly R&D, has come under heavy criticism in recent years, despite its flagship medication for eczema and asthma, Dupixent, raking in sales.
The acquisition of Provention by Sanofi is timely, given the company’s shift away from investing in Type 2 diabetes, which was once the bread & butter of its pharmaceutical business. The company paved the way for advanced diabetes treatments like the once-in-a-week insulin Icodec.
However, Sanofi perceives Tzield’s Type 1 diabetes treatment as more closely linked to the field of immunology — something emphasized during a recent investor call by Hudson, the company’s representative.
Type 1 diabetes, formerly referred to as juvenile diabetes, is a medical condition characterized by an autoimmune response that results in the destruction of the beta cells in the pancreas, which produce insulin. As a result of this damage, individuals with Type 1 diabetes require frequent insulin injections to manage their blood glucose levels.
Tzfield is an injectable type 1 diabetes therapy designed to delay the onset of the condition characterized by insulin deficiency. Sanofi’s acquisition of the drug builds upon a shared promotion agreement between the two drugmakers. The co-marketing deal gave Sanofi exclusive commercial rights to Tzield in exchange for a $20 million upfront payment to Provention Bio.
The ultimate path of Tzield towards FDA approval was a long-time coming, a journey that saw the drug candidate change hands between Eli Lilly and MacroGenics. As with the MGD009 cancer drug that was put on hold during the Phase 1 trial, the real test came when it faced the first FDA rejection.
Provention has set the cost of the drug at $13,850 per vial, resulting in a total cost of $193,900 for a 14-vial treatment regimen. This cost is, of course, higher than the anticipated amount, as predicted by industry analysts.
The approval of the drug relied on the outcome of a 2019 study that demonstrated the potential of the treatment to defer the advancement of the disease to a Stage 3 diagnosis. This positive development caught the attention of Sanofi, who agreed to collaborate with Provention by co-marketing the drug and investing in equity.
According to Thomas Smith, an analyst at SVB Securities, the pharmaceutical company is anticipating results from a late-stage trial later this year that focuses on patients recently diagnosed with Type 1 diabetes. Positive outcomes from the study may open up new opportunities for Tzield, with Smith estimating potential peak revenues of $250 million.
As noted by Smith to his clients, Sanofi’s acquisition of Provention has been deemed a suitable strategic match. The purchase aligns with Sanofi’s aim of broadening its portfolio of innovative immunology treatments and disease-modifying therapeutics, complemented by its established commercial presence and expertise in metabolic diseases, along with the existing partnership.
Indeed, this comes at an opportune time for Sanofi, which has, over the years, been edged by its close diabetes market rivals, Eli Lilly and Danish drugmaker Novo Nordisk. The French pharmaceutical conglomerate and the brand behind long-acting insulin formulations Lantus and Toujeo has shelved type 2 diabetes R&D since 2019.
Last month, Sanofi’s CEO Paul Hudson stated that the company was optimistic about the potential of developing drugs for type 1 diabetes. He also reiterated the company’s pledge to avoid any future involvement in the development of drugs for type 2 diabetes and obesity.
The good news is that Provention Bio obtained approval from the FDA for Tzield in the United States last year. This made it the first drug authorized for delaying the progression of the final stage of type 1 diabetes in kids older than 8 and adults who are at stage two of the disease.