Sanofi to sell 97% of its stake in Regeneron; shares fall 3%

French pharmaceutical group Sanofi announced on Tuesday 26 May 2020 that it has agreed to sell 11.8 million shares of US biotech firm Regeneron Pharmaceuticals' (NASDAQ: REGN) common stock through a registered offering at a price of US$515.00 per share.

Sanofi shares fell 3.3% following the announcement, while Regeneron saw its share price decline as much as 5.5% on an intra-day basis, based on IG trading data.

As at 10:00 CET on Wednesday 27 May 2020, Sanofi stocks are trading at 86.67 euros apiece.

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Share sale will result in US$12 billion pay-out for Sanofi

As part of the sale agreement, Regeneron will repurchase 9.8 million shares or US$5 billion in common stock from Sanofi at the offering price less the underwriting discount, as previously announced.

In connection with the offering, the underwriters have been granted an option to purchase up to 1.2 million additional Regeneron shares at the price payable by the underwriters in the offering, exercisable within the next 30 days.

If the option is fully exercised, the offering and repurchase will together result in gross proceeds to Sanofi of US$11.7 billion and the sale of Sanofi’s entire holding in Regeneron, excluding 400,000 Regeneron shares that Sanofi will continue to retain ‘in support of the ongoing collaboration with Regeneron’.

Sanofi currently holds approximately 23.2 million shares of Regeneron’s common stock, representing approximately 20.6% ownership.

According to the press release, Sanofi expects to use the net proceeds of the offering and the repurchase to further execute on its strategy to drive innovation and growth.

Paul Hudson, Chief Executive Officer, Sanofi, said that the decision to divest Sanofi’s holdings was ‘fully aligned’ and made in consultation with Regeneron. He added that the collaboration between both companies ‘has been one of the most productive in the industry’, not only in creating significant commercial value, but in the development of ‘important medicines for patients’.

Sanofi and Regeneron first collaborated in 2003, with Sanofi purchasing a shareholding in Regeneron a year later. The long-standing clinical and commercial collaboration has yielded five approved treatments to date with additional candidates currently in clinical development.

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Sanofi maintains 2020 earnings growth forecast at 5%

Sanofi will discontinue accounting for its ownership in Regeneron’s common shares under the equity method, following completion of the proposed public offering and share repurchase.

In lieu of this accounting change, Sanofi expects its earnings per share (EPS) to grow by approximately 5% in 2020 at a constant exchange rate, compared to 2019’s restated business EPS of €5.64. This is in line with Sanofi’s 2020 business EPS growth guidance.

The public offering is occurring simultaneously in the United States and internationally through underwriters led by BofA Securities and Goldman Sachs, together with Barclays, BNP Paribas, Citigroup, J.P. Morgan, Morgan Stanley as joint book-running managers.

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