Sanofi/Translate Bio: do recruit the messenger
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Hoping for a comeback, beaten champions often ape their rivals. Vaccine group Sanofi was an also-ran in the race to develop a Covid-19 vaccine. The French pharma company is now playing catch-up by investing heavily in the technology used by its more agile challengers Moderna and BioNTech/Pfizer. Its $3.2bn acquisition of US messenger RNA specialist Translate Bio, announced on Tuesday, is a sign of its determination to get back on the podium.
The price tag is a hefty 63 per cent premium over the three-month average share price. That reflects excitement around mRNA, the molecules that carry the genetic information needed to make proteins.
The potential is not limited to vaccines. Sanofi reckons mRNA may be able to disrupt areas such as immunology, oncology and rare diseases. That thinking lay behind April’s $470m purchase of Tidal Therapeutics, a privately owned US mRNA specialist working on cancer therapies.
There are no guarantees. Translate Bio, which is researching mRNA drugs for cystic fibrosis, reported disappointing early trial results in March.
The deal makes sense, even so. Under a collaboration to develop mRNA vaccines for infectious diseases that started in 2018, Sanofi could have ended up paying success fees of up to $1.9bn. Nor will the all-cash deal strain the French group’s balance sheet. Selling $6.1bn of Regeneron shares last year gave it plenty of firepower. Net debt/ebitda is less than one.
Most importantly, the transaction will help it defend its vaccine business, which accounted for 17 per cent of last year’s sales. That largely relies on traditional manufacturing techniques, which are complex and slow. Effective existing vaccines are unlikely to be supplemented by mRNA ones. But there is plenty of room for improvement when it comes to flu jabs which account for more than two-fifths of Sanofi’s vaccine portfolio. Speedy, flexible mRNA manufacturing techniques would allow for a quicker response to new strains.
For Sanofi, mRNA is a threat and an opportunity. The Translate Bio deal, along with plans to step up mRNA vaccine research, should reduce the danger of Sanofi being embarrassingly left behind again.
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