Sanofi Inks Deal with Genfit

French pharma giant, Sanofi-Aventis (SNY - Analyst Report) recently entered into a new contract with biopharma company, Genfit. The companies will collaborate for the research and development of new treatments for metabolic disorders.

Genfit is focused on the discovery and development of treatments for cardiometabolic and related disorders. With this agreement, Sanofi will gain exclusive global rights for the development and commercialization of any molecules discovered under this agreement.

Per the terms of the deal, Sanofi will make annual payments to Genfit to fund its research efforts for the collaboration. Besides, Sanofi could pay up to $54.5 million on the achievement of development, registration and commercialization milestones. Once products are commercialized, Genfit will be eligible to receive royalties on product sales.

Sanofi has been actively pursuing collaborations and acquisitions to expand and strengthen its pipeline. In mid Feb 2011, Sanofi entered into a definitive agreement for the acquisition of Genzyme Corporation (GENZ). Per the terms of the agreement, Genzyme shareholders will receive $74 per share in cash (or $20.1 billion) in addition to a contingent value right (CVR) for each share.

With the Genzyme acquisition, Sanofi is looking to create a new source of growth. Sanofi has a high exposure to generic risk on many of its leading franchises. The company suffered a blow with the entry of a generic version of its anti-coagulant Lovenox, which was a major contributor to the top-line.

In addition to Lovenox, we see generic risk to other products as well. In such a scenario, it is imperative for Sanofi to successfully develop and launch new products in order to make up for the loss of revenues once major products lose exclusivity and start facing generic competition. The acquisition of Genzyme will boost Sanofi’s revenues as well as its pipeline.

Sanofi will also get the chance to expand its presence in biotechnology. The deal is scheduled to close early in the second quarter of 2011.

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