About Sanofi

Sanofi is engaged in the research, manufacture and distribution of pharmaceutical products. It operates in the following segments: Pharmaceuticals, Healthcare and Vaccines. The Pharmaceuticals segment includes specialty care, diabetes and cardiovascular disease, established prescription and generic drugs, and research, development, and manufacturing activities. The Health Care segment includes commercial operations for proprietary products, while the Vaccines segment consists of Sanofi Pasteur's commercial operations. The company was founded in 1973 and is headquartered in Paris, France.

Details of the latest deal

INBRX-101, an experimental drug developed by Inhibrx Inc, is currently in the second of three phase II clinical trials. It is designed to treat alpha-1 antitrypsin deficiency (AATD), an inherited rare disease that causes progressive degeneration of lung tissue.

The boards of directors of both parties have unanimously approved the acquisition agreement, which is subject to final regulatory approval and other conditions. The acquisition is expected to be completed in the second quarter of 2024.[1] Sanofi will assume and retire Inhibrx's outstanding debt to third parties and fund Inhibrx with $200 million in cash. Sanofi will also retain an 8% interest in the newly formed New Inhibrx.

Strategy change: R&D through acquisitions

Sanofi, which gets most of its revenue from anti-inflammatory treatments, last year dropped its 2025 profit targets to boost research and development (R&D). CEO Paul Hudson's unexpected change in strategy led to a 15% drop in the share price.*

Despite dominating sales of asthma and eczema drug Dupixent, it was the company's lack of drug development activity that was criticised by investors.

In response to investors, Sanofi provided a comprehensive update to its strategy called Play to Win. This strategy continues to focus on the critical goals of implementing transformative medicine and bringing vaccines to market. It also includes promoting efficient deployment of resources and increasing R&D productivity.

As part of the new strategy, the Company aims to improve its capital structure, with the support of senior management, to support an increase in its annual free cash flow of approximately 50%. The focus is to be on the APAC region, which accounts for up to 18% of global sales.[1]

Sanofi's share price development over the last 5 years. Source: Yahoo finance.*

History of Sanofi acquisitions

In March 2023, Sanofi bought Provention Bio Inc. for $2.9 billion to boost its U.S.-approved portfolio of type 1 diabetes treatments after setbacks with the development of its own drugs for the disease. Provention's Tzield became the first drug indicated to delay the onset of third- and final-stage type 1 diabetes in adults and children as young as 8 years old.

CEO Paul Hudson said in response to the acquisition that the company sees great promise in the development of type 1 diabetes drugs and reaffirmed its commitment to avoiding further development of drugs for type 2 diabetes and obesity.[1] The rationale is to guide the company on a path of increasing profitability, in segments where there is more potential to do so.

Conclusion

Despite Sanofi's dominant revenues from sales of asthma and eczema drug Dupixent, investors have criticized the company's lack of drug development activities. Thus, the company proceeded with a new strategy. This involves promoting efficient deployment of resources and increasing R&D productivity. The company has also set a target of increasing its annual free cash flow by around 50%. This enabled it to fund the acquisition of Inhibrx with $200 million in cash. 

Adam Austera, principal analyst at Ozios

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate or based on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.citibank.com/tts/case-studies/sanofi-capital-goals.html

[2] https://www.fiercepharma.com/pharma/sanofi-throws-down-29b-acquire-diabetes-partner-provention