By Mathilde Heibig, Pierre Six, and Jingying Liu (HEC Paris), Athean Myat, Ana Almeida, Angelina Gart, Coby Lai, Michelle Liu, and Carden Olsen (Cornell University)
Photo: CDC (Unsplash)
Overview of the deal
Acquirer: Sanofi
Target: Provention Bio
Implied Equity Value: $25 per share (273% premium)
Total Transaction Size: $2.9bn
Announced date: March 13th, 2023
Expected close date: Mid 2023
Target advisor: Bank of America Securities Inc and Centerview Partners LLC (Financial), Ropes & Gray LLP (Legal)
Acquirer advisor: PJT Partners (Financial), Weil, Gotshal & Manges LLP (Legal)
Sanofi has agreed to acquire Provention Bio in an all-cash deal worth $2.9 billion, adding a new drug asset to the firm’s portfolio in General Medicines. The deal will bolster Sanofi’s work on Tzield, a U.S.-approved type 1 diabetes therapy, and strengthen its drug pipeline following development setbacks.
Giving Sanofi full ownership of Tzield will enable the historic drug-leader firm to maintain itself on the forefront of medical research. Tzield is the first drug indicated to delay the onset of the third and final stage of type 1 diabetes in adults and children aged 8 years and older with stage 2 type 1 diabetes for some of the approximately 65,000 people diagnosed every year. This transaction further drives Sanofi’s strategic shift towards products with a differentiated profile.
Upon announcement of the deal, Provention’s share price rose 14 percent to $43.65, giving Provention a market value of $1.8 billion. The particularly high 273% premium involved in the deal, due to many bid offers, reflects how fierce the competition is in the drug industry.
By coupling Provention Bio’s transformative innovation with Sanofi’s expertise, we aim to bring life-changing benefits to people at risk of developing Stage 3 type 1 diabetes. Given our existing partnership and complementary work in the diabetes and immunology spaces, we foresee a seamless integration and execution.” - Olivier Charmeil, Executive Vice President, General Medicines (Sanofi)
Company Details (Acquirer - Sanofi)
Sanofi is a French multinational healthcare company engaged in manufacturing and marketing of therapeutic solutions, research and development and over-the-counter medications. Its main segments are pharmaceuticals, vaccines and consumer healthcare, covering oncology, diabetes, cardiovascular, immunology and inflammation, rare diseases, rare blood disorders and neurology. Formerly known as Sanofi-Aventis, the company changed its name to Sanofi in May 2021.
Founded in 1973, headquartered in Paris, France
CEO: Paul Hudson
Number of employees: 91,573
Market Cap: $119.5bn (as of 19/03/2023)
EV: $129.0bn
LTM Revenue: $48.5bn
LTM EBITDA: $11.9bn
LTM EV/Revenue: 2.7x
LTM EV/EBITDA: 10.8x
Company Details (Target - Provention Bio)
Provention Bio is a US Based pharmaceutical company with a pipeline focused on autoimmune treatments. Its most advanced treatment is Teplizumab, an FDA-approved product that treats Type 1 diabetes. Its other product currently undergoing testing is Ordesekimab, which treats Celiac disease.
Founded in 2016, headquartered in Red Bank, New Jersey (USA)
CEO: Ashleigh Palmer
Number of employees: 82
Market Cap: $2.2bn (as of 22/3/2023)
EV: $2.0 billion
LTM Revenue: $2.8mn
LTM EBITDA: ($113.3mn)
LTM EV/Revenue: n.m.
LTM EV/EBITDA: n.m.
Projections and Assumptions
Short-term consequences
Sanofi is to pay for this transaction with its available cash resources. This is made possible by Sanofi’s significant unused cash reserves following its failed attempt to buy Horizon Therapeutics in 2022. This deal would therefore not pose a significant threat to Sanofi’s financial health in the short run.
The fact that Sanofi is willing to spend so much so quickly on this deal suggests that the asset could be highly coveted. It is fair to assume that another big pharmaceutical company could make an offer to Provention in the near future.
Tzield was green lighted in the US in November. Sanofi has invested over $20mn in cash in advance into early negotiation rights to potentially launch the product outside of the US once the company has ownership of it. It is therefore possible that Tzield could be commercialised in other countries quite rapidly after the closing of the deal.
This deal will rapidly and significantly strengthen Sanofi’s position in the diabetes market. It will allow the company to be more on par with its competitors without having to invest in R&D and after having exited the market for a few years. The medicine is indeed already top in sales. The co-promotion agreement that Sanofi signed with Provention in 2022 has also already served to ease the company back in the market.
Long-term Upsides
Sanofi's acquisition of Provention Bio has several long-term upsides for the company, including the addition of Provention's pipeline of innovative therapies for autoimmune diseases. These therapies have the potential to transform the treatment of a multitude of diseases and improve patient outcomes. Specifically, Sanofi will be better equipped to aid those who are at risk of developing Stage 3 type 1 diabetes and better able to leverage its global reach and commercialization capabilities to bring these treatments to patients worldwide, which could significantly increase its revenue streams.
Another upside of the acquisition is that it strengthens Sanofi's position in the growing field of immunology. As the prevalence of autoimmune diseases continues to rise globally, the market demands effective and innovative treatments. Sanofi's acquisition of Provention Bio positions the company at the forefront of this field, as they will obtain Provention Bio's pipeline, including clinical-stage product candidates that have been proven effective.
Furthermore, Sanofi's acquisition of Provention Bio will also provide the company access to Provention's cutting-edge technology and research capabilities. These additions could potentially lead to the development of new and innovative therapies for a wide range of diseases beyond autoimmune disorders. Overall, Sanofi's acquisition of Provention Bio represents a significant strategic move that could position the company for long-term growth and success in the biopharmaceutical industry.
Risks and Uncertainties
The largest risk Sanofi faces during the transaction is Provention Bio's long-term product viability. Provention's balance sheet primarily consists of cash and equivalents used to fund clinical trials for Teplizumab, Ordesekimab, and other assets in its pipeline. These trials will be completed in the second half of 2023 to 2024, which is after Sanofi closes the deal. If these trials do not translate to profitable new products for Sanofi, the firm would lose most of the deal's value.
There is also a possibility that Provention Bio may encounter challenges in executing its business plans, including meeting its regulatory milestones and timelines, clinical development plans, and successfully launching its product candidates. Such challenges may arise due to various reasons, some of which may be beyond Provention's control. For instance, Provention Bio’s financial and other resources may be limited, there may be competition, and manufacturing limitations may not be anticipated or resolved promptly or at all. Regulatory, court, and agency decisions, such as those made by the United States Patent and Trademark Office regarding patents that cover its product candidates, may also pose risks. Additionally, noncompliance with FDA regulations is a potential concern.
"Under our co-promotion agreement, our companies have made significant progress educating healthcare providers and increasing patient access during the initial U.S. commercial launch of TZIELD." - Ashleigh Palmer, CEO and Co-Founder (Provention Bio)
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