over 3 years ago • 2 mins
You didn’t hear it from us, but French pharmaceutical giant Sanofi agreed to buy US biotech Principia Biopharma for $3.4 billion on Monday 💊
Sanofi’s a pretty traditional pharma outfit, so its purchase of Principia should help push it toward more innovative therapies – for multiple sclerosis, say, or a variety of autoimmune complaints – which might lift earnings growth.
Most of the world’s big pharma and biotech companies are squarely focused on producing and trialing vaccines to defeat the coronavirus pandemic 🦠 But since analysts reckon a successful drug might not be the financial blockbuster investors had hoped for, healthcare companies have had to keep their eyes peeled for other potentially growth-boosting opportunities too.
Sanofi will pay Principia’s stockholders $100 in cash for each share they own. That’s only 10% more than Principia’s stock was worth on Friday, but its investors are probably doing okay: it’d already risen almost 66% this year prior to another jump on Monday. Sanofi’s shares, meanwhile, rose almost 2%. That’s surprising considering a company’s shares usually fall when it announces an acquisition – perhaps because investors worry it may have paid too much – and even more surprising considering Sanofi is paying 34 times Principia's predicted revenue in three years’ time 🤔 Still, investors might think this deal is a shrewd one: the successful development of new, more innovative drugs under Sanofi’s ownership could more than justify the big spend.
Sanofi’s deal is the second-biggest pharmaceutical acquisition this year (second only to Gilead Sciences’ $5 billion cancer-related purchase) and follows its purchase of Synthorx for $2.5 billion back in December 📆 And it might not be done yet: some analysts reckon Sanofi’s likely to spend $50 billion on acquisitions after it sold off its stake in another biotech company earlier this year.
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