Sanofi eyes acquisitions in market for rare disease drugs
Sanofi is open to acquisitions in the market for rare disease treatments in a sign of confidence that the high prices commanded by so-called orphan drugs are sustainable.
David Meeker, head of Sanofi’s Genzyme specialty care business, said rare disease assets were among the French group’s potential targets as it hunted growth. Acquisitions were possible “up to the size of Genzyme”, which Sanofi bought for $20bn in 2011, he added.
Mr Meeker would not be drawn on the identity of potential targets. There are numerous small and midsized drug developers focused on rare diseases, mostly in the US, and their valuations have fallen since a bull run in the sector ended last summer.
This has fuelled expectations that big pharmaceuticals groups could go bargain-hunting, but Mr Meeker insisted Sanofi would remain disciplined. “Valuations have come down but from high levels,” he said. “There is a certain resetting of valuations.”
Genzyme was Sanofi’s last big deal until an €18bn asset swap with Boehringer Ingelheim in December and the group’s new chief executive, Olivier Brandicourt, has indicated there will be more ahead.
He recently appointed Alban de La Sabliere, a former Morgan Stanley banker, as head of mergers and acquisitions, and said Sanofi was “very active in evaluating and looking at opportunities”.
“We have a pretty clean balance sheet, so using leverage should help us,” Mr Brandicourt said recently.
Mr Meeker said Sanofi was keen to expand in speciality medicines of the kind made by Genzyme, which has become one of its strongest sources of growth when it is facing pressure from the decline of its best-selling Lantus insulin for diabetics.
He said rare, or “orphan” diseases — defined in Europe as conditions affecting fewer than 1 in 2,000 people — remained an area with high, unmet medical need. Less than 10 per cent of the roughly 7,000 known rare diseases have an effective treatment.
Orphan drugs command the biggest margins in the sector because of the small number of patients from which manufacturers can make a return on investment. Prices of up to several hundred thousand dollars per patient often stir controversy but Mr Meeker said that, without strong pricing, companies would have no incentive to invest in the high-risk field.
High drug prices are facing mounting political scrutiny in the US but Mr Meeker felt that rare disease treatments were “relatively protected from the discussion” because of their unique economics.
Mr Brandicourt has moved to deepen integration of Genzyme into the parent group, renaming it Sanofi Genzyme and giving it responsibility for all of Sanofi’s speciality medicines. The Massachusetts-based unit reported a 29.5 per cent increase in revenues last year to $3.7bn — a tenth of total group sales — with multiple sclerosis drugs driving growth.
UK-listed Shire has said it will overtake Genzyme to become the largest maker of rare disease drugs after its $32bn takeover of Baxalta, a specialist in haemophilia, last month.