Sanofi buys cancer-focused biotech and targets key growth areas
Drugs group unveils tighter strategic vision as Merck also acquires oncology biotech
Sanofi, the French drugmaker, is to intensify its focus on key growth areas such as oncology, rare diseases and immunology while ending research into diabetes and heart disease, as it tries to combat falling revenues in its one-time core franchises.
Unveiling the strategic shift, Paul Hudson, chief executive, targeted €2bn in efficiency savings by 2022 and announced that its consumer healthcare division would become a standalone business as he gave the first insight into his priorities since taking the helm in September.
The company had earlier signalled its ambition in oncology when it announced it was buying Californian biotech Synthorx for $2.5bn. Separately, US-headquartered Merck said it would acquire another cancer-focused biotech, ArQule, for about $2.7bn as it attempts to build on its recent success in oncology.
Mr Hudson said Sanofi would “anchor our efforts in leading-edge science, with clearer priorities and a focus on delivering results”.
As well as stopping research into diabetes and cardiovascular disease, it said it would not pursue plans to launch efpeglenatide, a long-acting diabetes medicine currently under development.
Sanofi has been seeking to strengthen its portfolio following the loss of patent protection on key diabetes treatments and political pressure in the US over the cost of insulin. However, in a call with reporters, Mr Hudson said the decision to pull out of diabetes research, even when a trial was under way, was not due to “short-term pricing pressures”.
Describing it as a “trade-off”, he added: “It was a recognition that to compete in diabetes, with similar mechanisms, in a similar patient population, would require a significant, disproportionate investment that we believe should be made elsewhere in the portfolio”.
Mr Hudson also announced a simplification of Sanofi’s structure, with four core global business units to be reduced to three: speciality care covering immunology, rare diseases, rare blood disorders, neurology and oncology; vaccines; and general medicines, taking in diabetes, cardiovascular, and established products.
Sanofi had been grappling with a dilemma already confronted by a number of other big pharma companies in deciding whether to remain a diversified company or to sell, or spin off, its consumer health division.
On Monday Mr Hudson announced that consumer healthcare would become a standalone business unit with integrated R&D and manufacturing functions. The objective was “to unlock value and entrepreneurial energy by growing faster than the market over midterm”, he said.
Among key growth drivers he identified for the company were Sanofi’s vaccines business and its anti-inflammatory medicine Dupixent, for which the company on Monday set the ambition of achieving more than €10bn in peak sales.
The medicine was already on course for “mega blockbuster” status, Mr Hudson said, but had hardly penetrated the potential patient populations, with just 3.5 per cent of sufferers of atopic dermatitis and even fewer asthmatics taking the drug.
Overall, the company expected to expand its business operating income margin to 30 per cent by 2022, with an ambition for it to exceed 32 per cent by 2025.
The Synthorx deal could be a model for future acquisitions, Mr Hudson argued, as he looked for “first and best in class” drug candidates that would fit well with the existing portfolio and could even be used in combination. “We are open minded and interested and we’ll see how the science evolves,” he said.
Sanofi will acquire all of the Californian biotech’s outstanding shares for $68 a share in cash, representing an aggregate equity value of approximately $2.5bn on a fully diluted basis. The acquisition price represents a 172 per cent premium to Synthorx’s closing price on Friday.
Meanwhile Merck is buying ArQule because of its advances in precision medicine for cancer, which includes a leukaemia drug in the early stages of clinical development. The acquisition comes after Merck’s success with Keytruda, a blockbuster drug that harnesses the immune system to fight cancer. The cash deal of $20 a share is a 107 per cent premium to ArQule’s closing price on Friday.