* Sanofi to buy Regeneron shares on open market
* Regeneron shares rise 2.8 percent
* Sanofi up 3.4 percent
(Adds analyst and company comments, background on partnership,
By By Ransdell Pierson
Feb 11 French drugmaker Sanofi SA is
buying more shares in U.S. biotech company Regeneron
Pharmaceuticals Inc, its partner in the development of
potential blockbuster treatments for cholesterol and rheumatoid
Sanofi's plans, disclosed by the companies in separate
statements on Monday, boosted both companies' shares.
Sanofi controls 16.7 percent of Regeneron, or 15.82 million
shares, according to Reuters data. Sanofi said in an email that
it has the right to raise the stake to as much as 30 percent
under its decade-long partnership with Regeneron.
"We are very happy with the relationship with Regeneron, but
we needed this technical filing to get freedom to operate," the
company said. Sanofi disclosed its plans to buy Regeron shares
on the open market in a filing with the U.S. Federal Trade
Peter Dworkin, a spokesman for Regeneron, said that under
terms of their partnership, Sanofi is not allowed to increase
its stake beyond 30 percent until five years after the planned
2017 conclusion of their collaboration.
"The 30 percent limit they can acquire without our
permission is in force and will remain in force" until 2022,
Under the partnership, Sanofi and Regeneron have agreed to
equally split U.S. profits from medicines they develop together.
Regeneron Chief Executive Leonard Schleifer has said his
company enjoys "unprecedented" favorable financial terms from
the partnership because Sanofi funds 100 percent of expenses to
develop their drugs.
"I think this is a sign that they (Sanofi) are taking more
interest in the company," said Deutsche Bank analyst Robyn
Karnauskas. "I don't think investors should immediately conclude
that an acquisition is coming soon."
Morningstar analyst Lauren Migliore said it was unclear
whether Sanofi was merely boosting its stake in Regeneron or
eventually aimed for a controlling stake or outright ownership.
"I wouldn't want to speculate either way," Migliore said.
"But Regeneron has a great drug portfolio and technology and a
very strong partnership with Sanofi, so a merger would make
She also said a merger would be costly because acquirers
typically have to pay premiums of 30 to 100 percent for shares
of attractive biotechs, and Regeneron's stock has risen more
than fourfold in the past two years. The company's valuation has
soared on booming sales of Eylea, a treatment for macular
degeneration, and greater awareness on Wall Street of its
promising experimental drugs.
Regeneron shares were up 2.8 percent in afternoon trading.
Shares of Sanofi, whose earnings have been hurt by generic
competition for its Plavix blood-clot preventer, rose 3.4
percent in Paris.
Regeneron is best known for Eylea, co-marketed with Bayer AG
. The drug is expected to garner sales this year of up
to $1.3 billion.
U.S. regulators last summer approved Regeneron's Zaltrap
treatment for metastatic colorectal cancer, co-developed with
Sanofi. Analysts believe the drug could eventually bring in
annual sales of $400 million.
Investors are closely watching the Regeneron-Sanofi
cholesterol drug, which is in late-stage trials. The drug has
slashed levels of "bad" LDL cholesterol by 60 percent through a
new mechanism - blocking a protein called PCSK9.
Another drug from the partnership, which blocks an
inflammation-causing protein called interleukin 6, is being
tested against rheumatoid arthritis. Some analysts believe the
cholesterol and arthritis drugs could each become $1
billion-a-year sellers if approved.
The expiration of Sanofi's patent on Plavix, once the
world's second-best-selling prescription drug, is expected to
slice around $1.1 billion off earnings in the first half of
2013, Sanofi said last week. The company aims to have 18 new
drugs on the market by 2015.
(Additional reporting by Debra Sherman in Chicago, Elena Berton
in Paris and Zeba Siddiqui in Bangalore; Editing by John