Sanofi M&A punt soothes France’s COVID-19 shame

France’s biggest drugmaker should have been a Covid-19 winner

  
French police stand in front of the Sanofi headquarters during a protest by Sanofi's workers against job cuts in Paris as part of a national day of strikes and protests against layoffs and government's economic and social policies amid the coronavirus disease (COVID-19) outbreak in France, France, February 4, 2021.

French police stand in front of the Sanofi headquarters during a protest by Sanofi's workers against job cuts in Paris as part of a national day of strikes and protests against layoffs and government's economic and social policies amid the coronavirus disease (COVID-19) outbreak in France, France, February 4, 2021.

REUTERS/Benoit Tessier

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

LONDON - Sanofi’s latest deal may help France reverse its Covid-19 shame. The $131 billion Paris-listed drugmaker has gobbled up America’s Translate Bio, giving it a leg up in the hot new messenger RNA technology that trounced conventional vaccines during the pandemic. For shareholders, however, the deal’s payoff is less certain.

France’s biggest drugmaker should have been a Covid-19 winner. It is a big player in vaccines and teamed up with fellow industry behemoth GlaxoSmithKline to develop a product. It also had support from the deep pockets of the European Union. But in December, Sanofi’s Covid-19 drug failed to produce a decent response. That has left the field open to the more versatile so-called mRNA jabs developed by companies like Moderna, which has enjoyed an 18-fold increase in its share price since February of last year.

Sanofi Chief Executive Paul Hudson is now getting in on the action. MRNA technology injects genetic code that instructs a patient’s cells to construct part of a virus, enabling an immune response. It could be used to fight a host of diseases: Translate Bio is working on remedies for Covid-19 and flu, but Hudson now hopes to get at least six mRNA treatment candidates ready for testing by 2025. Sanofi was already partnering with Translate Bio on some treatments, so buying the company outright saves on future milestone payments.

Yet the deal also brings risks. Translate Bio’s Covid-19 treatment uses a similar technology to a product developed by German group CureVac, which failed to produce a sufficient immune response in a June trial. And its flu vaccine will have to compete with a rival product from Moderna, which is further advanced. And, given likely high investment, shareholders will face a long wait before they can see any financial return on the deal: Jefferies analysts reckon Translate Bio will still be generating an operating loss by 2030.

Standing still could be even costlier. If the new technology does take off beyond Covid-19, it will likely come at the expense of Sanofi’s existing business, especially its vaccine unit, which made up 17% of its revenue in 2020. MRNA jabs also can be tweaked quickly and cheaply, making them ideal for treating fast-changing diseases like flu. For France at least, Sanofi’s latest deal will help dull the Covid-19 humiliation.

CONTEXT NEWS

- Sanofi on Aug. 3 said it had agreed to buy Translate Bio in a deal valuing the U.S. biotechnology company at $3.2 billion.

- Sanofi said it would acquire all outstanding shares of Translate Bio, which specialises in so-called messenger RNA treatments, for $38 per share in cash.

- Sanofi and Translate Bio have been working together since 2018 and joined forces last year to develop a vaccine for Covid-19. They expect interim results for phase 1 and 2 clinical trials in the third quarter.

- Shares in Sanofi were up 0.22% at 86.97 euros by 0733 GMT on Aug. 3.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Neil Unmack and Oliver Taslic) ((For previous columns by the author, Reuters customers can click on DONNELLAN/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | Aimee.Donnellan@thomsonreuters.com; Reuters Messaging: Aimee.Donnellan.thomsonreuters.com@reuters.net))


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