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Sanofi, Regeneron to Amend Agreement for Kevzara & Praulent

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Sanofi (SNY - Free Report) and its collaboration partner, Regeneron Pharmaceuticals (REGN - Free Report) intend to restructure their antibody collaboration into a royalty-based agreement for Kevzara (sarilumab) and Praluent (alirocumab). However, the terms of the agreement related to blockbuster drug, Dupixent (also included in the antibody collaboration) will remain unchanged.

Under the proposed changes to the agreement, Sanofi is likely to gain sole rights to Kevzara globally and to Praulent in ex-U.S. markets. Moreover, Regeneron will likely have sole U.S. rights to Praluent. Global development and commercialization expenses for Kevzara will be borne by Sanofi. Regeneron will be responsible for the development and commercialization of Praulent in the United States while Sanofi will undertake such activities for the drug in ex-U.S. markets. The restructuring of the antibody collaboration will likely be finalized by the first quarter of 2020.

Under the existing collaboration, the companies co-commercialize Kevzara and Praluent in the United States while Sanofi carries out marketing of these drugs in ex-U.S. markets. Any late-stage development costs related to label expansion of these two drugs is shared by the companies. The profit and loss on these two drugs are shared equally in the United States and in pre-determined ratio in ex-U.S. markets.

Sanofi has stated that the amendment to the agreement is being done to increase efficiency and streamline operations related to Kevzara and Praulent. We expect the amendment of the collaboration agreement to a royalty-based one to help Sanofi simplify monetization of these drugs, if it decides to divest rights in the future.

Sanofi and Regeneron also have a collaboration agreement to develop immuno-oncology therapies. The amendment to the antibody collaboration is not likely to have any impact on this collaboration.

Sanofi’s shares were up 6.2% on Dec 10 following the announcement. Shares of the company have gained 10.8% so far this year compared with the industry’s increase of 7.3%.

We note that Sanofi had hinted at monetizing its stake in Regeneron, following the expiry of the lock-up period earlier this week while announcing a new strategic framework at its Capital Markets Day. We note that Sanofi held 21.7% stake in Regeneron as of Dec 31, 2018.

Under the new framework, the company announced that it is discontinuing all its research activities in diabetes and cardiovascular area and focusing on high-growth franchises included under its Specialty Care global business units. In 2019, sales at the Specialty Care franchises grew the most with Immunology franchise leading the growth. The company has also prioritized six investigational therapies, including fitusiran, venglustat and nirsevimab, and expects these to be potentially practice changing therapies in areas of high unmet patient need.

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Sanofi Price

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Zacks Rank & Stocks to Consider

Sanofi currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked large-cap pharma stocks are Merck & Co (MRK - Free Report) and Bristol-Myers Squibb Company (BMY - Free Report) . Both companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merck’s earnings estimates increased from $5.11 to $5.15 for 2019 and from $5.44 to $5.49 for 2020 over the past 30 days. The company delivered a positive earnings surprise in the trailing four quarters, the average beat being 12.51%. Share price of the company has increased 16.6% so far this year.

Bristol-Myers’ earnings estimates increased from $4.33 to $4.38 for 2019 and from $5.30 to $5.66 for 2020 over the past 30 days. The company delivered a positive earnings surprise in all the trailing four quarters, the average beat being 8.3%. Share price of the company has increased 19.5% so far this year.

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