Regeneron Shares Swing On Sanofi's Hint At Sale Of Ownership Stake, Amendments To Drug Collaborations

Regeneron Pharmaceuticals Inc REGN shares were rebounding Tuesday as investors digested French pharma giant and collaboration partner Sanofi SA's SNY potential liquidation of its Regeneron stake — and the restructuring of a collaboration agreement between the two. 

Hints At Regeneron Stake Sale

At Sanofi's Capital Markets Day, the company announced a slew of measures intended to drive innovation and growth.

Apart from prioritizing key growth drivers — Dupixent and vaccines — and accelerating an R&D focus on six potentially transformative medicines, Sanofi said it would improve operating efficiencies to fund growth.

While discussing its capital allocation policy, Sanofi said that, apart from cash generated from its businesses, it has the wherewithal to raise capital through asset disposals and monetizing its stake in Regeneron after the lockup period expires in December 2020.

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The Sanofi-Regeneron Collaboration

Sanofi and Regeneron entered a global collaboration agreement in November 2007 to develop fully human therapeutics antibodies using the latter's VelociSuite technologies.

Sanofi, known as Sanofi-aventis at the time, also said it will increase its stake in Regeneron from 4% to 19% by buying 12 million newly issued shares at $26 per share.

The companies later announced an immuno-oncology collaboration agreement in 2015 to jointly develop a PD-1 inhibitor, which was then in Phase 1 testing.

This agreement was restructured in January 2019 ahead of its scheduled expiration in mid-2020.

The amendment made in 2019 allowed Regeneron to retain rights to its IO discovery and development programs and Sanofi to advance its early stage IO program independently.

Over the years, Sanofi increased its stake in Regeneron to 21.6%.

Antibody Collaboration To Be Restructured

In a separate release, Sanofi and Regeneron said they intend to restructure their collaboration for the rheumatoid arthritis treatment candidate Kevzara and heart drug Praluent in a bid to simplify the deal.

Sanofi expects to gain sole global rights to Kevzara and ex-U.S. rights to Praluent, with the U.S. rights going to Regeneron.

The companies have decided to leave the existing collaboration agreement for Dupixent intact.

A finalized agreement is expected to be in place in the first quarter of 2020.

Sanofi Streamlines

Apart from the earmarking of Dupixent and vaccines as growth drivers, Sanofi said it will accelerate its R&D focus on six transformative medicines: the RNAi therapeutic Fitusiran, the factor VIII therapy BIVV001, the lysosomal storage disorder treatment candidate venglustat, the HR-positive breast cancer treatment SERD, the preventative RSV treatment option nirsevimab and the MS treatment BTKi.

The company expects to expand its operating income margin to 30% by 2020, with a 32% target set for 2025.

It plans to structure its business as three core global business units: Specialty Care, vaccines and general medicines, while maintaining Consumer Healthcare business as a standalone business with integrated R&D and manufacturing functions.

Sanofi also said it will discontinue research in the diabetes and cardiovascular portfolio.

Regeneron shares were up 1.1% at $369.64 at the time of publication Tuesday, while Sanofi shares were up 6.32% at $48.16.