Sanofi’s (SASY.PA) latest deal looks to be an attempt at damage control. On Tuesday, CEO Paul Hudson announced that the 116 billion euro French drugmaker would pay $2.2 billion for INBRX-101, a drug being developed for a genetic lung condition, from its Nasdaq-listed parent company Inhibrx (INBX.O). The takeover is Hudson’s first deal since he wiped 25 billion euros off the drugmaker’s market capitalisation in October last year with plans to ditch its 2025 profit targets and spend more on research and development to boost the drug pipeline.
The payment plan for the latest deal suggests he has learned from that experience. Sanofi will pay $30 in cash per share, offer Inhibrx shareholders 0.25 shares in a new company and, crucially, pay $5 per share in contingent value rights (CVRs). The latter is a common way for Big Pharma to pay for promising, but unproven, medicines. If a drug makes it through different phases of development the seller receives milestone payments. But it’s also a way for buyers to hedge against a drug’s failure. Between 2018 and April 2023, there were 37 deals involving publicly traded companies that leaned on CVRs, 84% of which were in life sciences, according to law firm Sidley. Hudson’s target is designed to treat Alpha-1 Antitrypsin Deficiency, a genetic disease that causes progressive deterioration of lung tissue. Its acquisition will augment Sanofi’s rare disease portfolio, which provided 8% of the company’s near 43 billion euros of sales in 2022. The cautious approach looks necessary to show investors that Hudson’s M&A strategy abides by the medical principle of “first, do no harm”. (By Aimee Donnellan)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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