(Adds analyst comment, share purchase detail, updates trading)
By Bill Berkrot
July 1 Regeneron Pharmaceuticals Inc shares jumped nearly 7 percent Tuesday after Sanofi SA said it would raise its stake in the U.S. biotechnology company, and as a competitive threat to Regeneron's top drug appeared to diminish.
French drugmaker Sanofi, in a U.S. regulatory filing, said it would boost its Regeneron holdings to up to 22.5 percent by July 29, under an agreement between the companies allowing Sanofi to own up to 30 percent of Regeneron.
As part of that effort, Sanofi bought 50,000 Regeneron shares Friday at various prices between $272.69 and $277.43 per share, the filing said.
Sanofi had a 20.5 percent stake in Regeneron as of April 7.
The Sanofi vote of confidence in Regeneron helped push Regeneron shares back above $300 after a nearly 10 percent decline over the past month.
"As the stake keeps going up it gives the perception to the Street or investors that Sanofi will eventually acquire Regeneron," said Roth Capital Partners analyst Joseph Pantginis.
There is currently a no-acquisition clause in the long-term agreements between the two companies.
"The standstill clause does protect them, but deals can always be renegotiated," Pantginis said. "They already renegotiated maximum cap that Sanofi can own."
In January, Regeneron said its investor agreement with Sanofi allows the French drugmaker to take a 30 percent stake and to name a board member. It appointed Robert Ingram to Regeneron's board earlier this year.
The two companies have several drug development partnerships, including on the big-selling eye drug Eylea and a potential multi-billion dollar cholesterol drug which is completing late-stage development.
Sanofi and Regeneron investors were also cheered by news from Allergan Inc on Monday. Allergan provided an update on Darpin, its potential rival to Eylea, that eased concerns over any near-term competition. Allergan said it would not begin pivotal Phase III trials of the drug before the second quarter of 2015.
Regeneron reported first-quarter U.S. Eylea sales of $359 million.
Darpin is "definitely a competitive threat for Eylea, but the time line seems to be quite a while for them to get it on the market," said Morningstar analyst Stefan Quenneville.
Analysts said the Phase II data Allergan released and its Phase III plans alleviated some concerns, and that the Regeneron stock had been oversold.
"The comparator they're using in Phase 3 is (Roche's Lucentis, not Eylea," Quenneville noted. "For some people it's indicative that they don't have a lot of confidence that they would be able to show significant differentiation against Eylea."
Regeneron shares were up $18.93, or 6.7 percent, at $301.40 in afternoon trading on Nasdaq. (Reporting by Caroline Humer and Bill Berkrot; Editing by Bernadette Baum)