Sanofi: What To Think About The Bioverativ Acquisition?

Summary

• The acquisition of Bioverativ was unexpected.
• The deal has some merits but exposes the company to a challenging market, namely hemophilia.
• The timing, valuation, and the ROIC expected are not supportive of the acquisition.

On January 22nd, Sanofi (NASDAQ:SNY) has announced the acquisition of Bioverativ (BIVV) for $ 11.6B in cash (€ 9.5B). The deal price represents a 64% premium to the previous day's closing price.

A quick overview of Bioverativ

Bioverativ (spun off from Biogen (BIIB)) is a US biotech company focusing on hemophilia and rare blood disorders. The company already markets two drugs: Eloctate approved in hemophilia A ($ 513M of sales in 2016) and Alprolix indicated in hemophilia B ($ 334M of sales in 2016). These drugs are marketed in the US, Japan, Canada and Australia. European commercialization is carried out by a Swedish company named Sobi. The consensus expects both drugs to grow over time (peak sales of roughly $ 900M and $500M). The company is also developing a phase III compound in cold agglutinin disease (CAgD) which is a rare disease in which red blood cells are destroyed when exposed to cold temperature leading to fingers and toes turning blue. This program has been granted the breakthrough therapy designation by the FDA. The company is also investigating early stage programs in hemophilia and rare blood disorders (sickle cell disease and beta thalassemia).

For an introduction on Sanofi, you can consult this link.

Hemophilia?

Hemophilia is a hereditary genetic deficiency that impairs the human body from controlling blood clotting (clots) in order to stop bleeding. There exist two forms of hemophilia: Hemophilia A and hemophilia B. Hemophilia A is the most widespread and is characterized by a deficiency in the clotting factor FVIII. Hemophilia B is caused by a mutation of the factor IX (F-IX).

The standard of care for hemophilia A is replacement therapy of the FVIII clotting factor. This therapy can be plasma derived or artificial (recombinant). In the past, the plasma derived products were used extensively. However, some patients were infected by viruses

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