French pharmaceutical giant Sanofi have agreed to acquire Bioverativ, a U.S. hemophilia specialist for $11.6 billion. This deal is the biggest for Sanofi in seven years, with the aim of achieving a stronger position in the rare disease space. After initially falling due to investor speculation that Bioverativ was overvalued, shares in Sanofi have since recovered to pre-deal levels. This deal comes as analysts are expecting efforts on big value acquisitions to intensify from the larger players in the industry, with 2018 expected to see a significant increase from last year. (January 22, 2018)
The Bioverativ deal will be Sanofi’s first major acquisition success since they bought Genzyme in 2011. In the last few years, Sanofi have failed in multiple acquisition attempts, including losing out to Pfizer for Medivation and to Johnson & Johnson for Actelion. It is possible that these failures influenced their decision to spend big on Bioverativ.
Bioverativ currently have two drugs marketed for two of the most common types of hemophilia, A and B, that had combined sales of $291.6 million in Q3 of 2017. These products will give Sanofi a much needed and immediate boost to its revenue, given its primary source of revenue, Lantus, lost patent protection in 2015 and is increasingly under pressure from generic competitors. The Bioverativ pipeline contains a number of clinical and preclinical candidates, providing Sanofi with other promising avenues of research. The pipeline includes an early stage gene therapy for hemophilia as well as a genome editing candidate and various biologics and small molecules.
With this deal, Sanofi will be able to enter the highly lucrative and increasingly competitive hemophilia market. Annual sales in the sector currently add up to around $10 billion, making it the largest rare disease market, and Sanofi anticipate the market will grow 7% per year up to 2022. With BioMarin and Spark both producing highly promising results in trials of their respective gene therapies for hemophilia, Sanofi have taken a small gamble on the more traditional treatment type. Sanofi leadership however seem convinced that traditional hemophilia therapies are here to stay, and that they will continue to be the standard of care in the future. With BioMarin already in Phase III trials for their hemophilia A therapy and Spark a little further behind, it is possible that there is only a limited window for these drugs to dominate the hemophilia market. This window should still be large enough to bring in a sizeable amount of revenue. The good news for Sanofi is that these therapies will not be effective for all patients. The hemophilia gene therapy that Bioverativ are developing with San Raffaele-TIGET institute is still in the discovery phase, so it remains to be seen how this can separate itself from the other gene therapy prospects.
Investors are not overly excited by this deal. Immediately after announcing the acquisition, shares in Sanofi were down more than 3%, with many investors speculating that the price tag of $11.6 billion was excessive price for Bioverativ. The deal is certainly a risk, but Sanofi are hoping that this can reinvigorate their business and give them both a short-term and long-term boost. Analysts believe that this may prove overly optimistic, given what Bioverativ brings to the table, but Sanofi are confident of achieving a return on investment of more than the acquisition cost within three years.