Sanofi SA (SNY - Get Report) is poised to end its long search for a biotech deal after agreeing an $11.6 billion offer for Massachusetts-based Bioverativ Inc. (BIVV) , setting up a deal that will add hemophilia treatments to offset falling profits from under-pressure diabetes treatments.
France's Sanofi said Monday, Jan. 22, it will pay $105 per share in cash, a 64% premium to Bioverativ's closing price on Friday, Jan. 19.
"With Bioverativ, a leader in the growing hemophilia market, Sanofi enhances its presence in specialty care and leadership in rare diseases ... and creates a platform for growth in other rare blood disorders," Sanofi's CEO Olivier Brandicourt said in a statement.
Sales of treatments for hemophilia are worth about $10 billion per annum and are expected to grow at about 7% a year through to 2022, making it the world's biggest market for so-called rare diseases, according to Sanofi.
Sanofi shares traded Monday morning at €70.99 down 2.69%. Bioverativ's stock climbed to 62% in pre-market trading to $103.75.
Paris-based Sanofi has spent more than two years looking for a major biotech deal to boost its portfolio of treatments and replace declining sales and profits from former blockbuster diabetes treatments, including Lantus, which have lost patent protection and are exposed to competition from low-cost generic alternatives.
In January last year, Sanofi bid for Switzerland's Actelion Pharmaceuticals but missed out on a deal after the target agreed to sell itself to Johnson & Johnson (JNJ - Get Report) for $30 billion. That set back came just over six-months after a failed bid for San Francisco-biotech Medivation Inc., which was eventually sold to Pfizer Inc. (PFE - Get Report) for $14 billion.
Nasdaq-listed Bioverativ was spun out of Biogen Inc. (BIIB - Get Report) in early February 2017. It makes two hemophilia treatments, Eloctate and Alprolix, and has a pipeline that includes another late-phase treatments for hemophilia as well as experimental treatments for other blood disorders including sickle cell anemia and thalassemia.
The company had sales of $847 million in 2016 and $41 million in royalties and is expected to post revenues of over $1 billion when it announces its full year results in February, and about $1.37 billion of sales in 2018.
"Sanofi is paying c8.4x 2018E revenue, or c27x earnings for BIVV," Jefferies International Ltd.'s analysts including Jeffery Holford noted on Monday. The bid "is logical in terms of building around Sanofi's presence and pipeline in rare diseases and hemophilia, though management may have to argue against concerns on competition."
The French bidder said a deal would be immediately accretive, adding about 5% to its 2018 earnings per share. Sanofi will fund the deal using cash on hand and new debt.
The offer is is dependent on acceptances from a majority of Bioverativ shareholders. It is due to begin in February and should close within three months, subject to regulatory approval. The target's largest shareholder is Greenwich, Conn.-based hedge fund Sarissa Capital Management LP, led by founding partner and CIO Alexander Denner.
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