PARIS & WALTHAM, Mass.—In an announcement that has raised some eyebrows because of its high price, Sanofi and Bioverativ Inc., a biopharmaceutical company focused on therapies for hemophilia and other rare blood disorders, announced Jan. 22 that they had entered into a definitive agreement under which Sanofi will acquire all of the outstanding shares of Bioverativ for $105 per share in cash, representing an equity value of approximately $11.6 billion (on a fully diluted basis). The transaction was unanimously approved by both the Sanofi and Bioverativ boards of directors.
As Sanofi notes, hemophilia represents the largest market for rare diseases, given that it affects 181,000 people globally and present an opportunity for about $10 billion in annual sales overall. Moreover, the market is expected to grow more than 7 percent per year through 2022.
Bioverativ’s FDA-approved extended half-life therapies, Eloctate and Alprolix for the treatment of hemophilia A and B, respectively, represented the first major advancements in the hemophilia market in nearly two decades when launched. In 2016, Bioverativ generated $847 million in sales and $41 million in royalties. Bioverativ currently markets the two products in the United States, Japan, Canada and Australia, with plans to expand into other countries. The therapies are also commercialized in the European Union and other countries under a collaboration agreement.
Sanofi believes factor replacement therapy will remain the standard of care in hemophilia for many years due to excellent safety and its increasingly superior long-acting profile, and the company says it will be able to leverage Bioverativ’s clinical expertise and existing commercial platform to advance fitusiran, an investigational RNA interference (RNAi) therapeutic for hemophilia A and B, with or without inhibitors. Sanofi recently announced a restructuring of its rare disease alliance with Alnylam Pharmaceuticals, with Sanofi obtaining global development and commercialization rights to fitusiran.
“With Bioverativ, a leader in the growing hemophilia market, Sanofi enhances its presence in specialty care and leadership in rare diseases, in line with its 2020 Roadmap, and creates a platform for growth in other rare blood disorders. Together, we have a great opportunity to bring innovative medicines to patients worldwide, building on Bioverativ’s success in driving new standards of care with its extended half-life factor replacement therapies,” commented Olivier Brandicourt, Sanofi’s CEO. “Combined, we will continue to leverage our scientific know-how, disciplined focus and development expertise that best position us to drive value for our shareholders and create breakthrough treatments for patients.”
Bioverativ CEO John Cox added: “Bioverativ was created to bring meaningful progress to people living with hemophilia and other rare blood disorders, and I am extremely proud of the accomplishments we’ve made toward that mission over the past year. We have expanded upon the success of Eloctate and Alprolix, which are making a difference in the lives of people with hemophilia every day, and built a pipeline of novel programs for people with rare blood disorders. Sanofi brings proven capabilities and a global infrastructure, which we believe will help to more rapidly expand access to our medicines globally and further our mission of transforming the lives of people with rare blood disorders.”
Backtracking a bit to Brandicourt’s “roadmap” comment, it should be noted that one of the priorities of Sanofi’s 2020 roadmap is to “Reshape the Portfolio” and focus on areas where the company currently has, or can effectively build, a leadership position. According to Sanofi, the addition of Bioverativ supports this priority “by adding to our portfolio a differentiated offering of innovative therapies and providing a platform for growth in rare blood disorders, which will expand our presence in specialty care, further strengthen our leadership position in rare diseases and meet the needs of the patient community.”
Bioverativ doesn’t just offer approved products, though. Its pipeline includes a program in Phase 3 testing for cold agglutinin disease, as well as early-stage research programs and collaborations in hemophilia and other rare blood disorders, including sickle cell disease and beta thalassemia.
Echoing Sanofi’s own thoughts, Zacks Investment Research commented, “The acquisition should be beneficial for Sanofi, as it can leverage the expertise of Bioverativ in rare blood disorder therapies, especially haemophilia. Moreover, the deal is line with Sanofi’s long-term outlook to strengthen its presence in specialty care and leadership in rare diseases.”
However, the deal is viewed with some hesitation among market analysts.
“Although Sanofi expects this acquisition to be immediately accretive to earnings—thanks to Bioverativ's two Food and Drug Administration-approved hemophilia drugs Alprolix and Eloctate—the price of this deal is still rather questionable, to put it mildly,” noted George Budwell on the Motley Fool website. “Perhaps because of its recent failures on the mergers and acquisitions scene, Sanofi was apparently willing to pay 8.5 times Bioverativ's projected 2018 sales to get this deal done.”
He did add that in all fairness, “the price tag does fall in line with other recent buyouts in the industry, but that's still a lot of cash to pay for a quick boost to earnings,” adding that Sanofi might have to wait nearly 10 years to turn an actual profit on this purchase.
An investor note from Morningstar noted that the deal terms were “well ahead of our $49.50 stand-alone valuation of the company, and we expect to slightly lower our fair value estimate for Sanofi. However, we continue to view Sanofi’s wide moat as intact, as the overpayment is relatively small compared with the overall size of Sanofi. We believe near-term core earnings support (excludes amortization costs) the ability to geographically expand Bioverativ’s key drugs into emerging markets, and the potential to create a foundation in hemophilia for Sanofi’s pipeline drove the acquisition, as Bioverativ’s pipeline looks thin. Given the acquisition agreement and the rapid nature of the transaction (to close this quarter), we also expect to raise our Bioverativ fair value estimate to match the offer price.”
