Sanofi goes all in on Principia, paying $3.7B to take full control of late-phase MS asset

Sanofi has struck a deal to buy its partner Principia Biopharma for $3.7 billion in cash. The takeover will give Sanofi full ownership of a BTK inhibitor it moved into a raft of phase 3 multiple sclerosis trials earlier this year.

In April, Sanofi presented phase 2 data linking the drug, SAR442168, to relative reductions in new lesions of 85% or more. The data emboldened Sanofi to start four phase 3 trials in different groups of multiple sclerosis patients and, it has now become clear, to use a chunk of its biotech buying budget to take full control of the asset.

Sanofi is set to pay $100 a share to acquire Principia. The $3.7 billion takeover will free Sanofi from potential payments to Principia linked to its exclusive global license on SAR442168. Sanofi said the takeover will also make SAR442168 commercialization “more efficient” and expand development of the drug to “other central nervous system diseases and therapeutic areas.”

Principia is developing other clinical-phase BTK inhibitors that Sanofi will acquire in the takeover. The pipeline features another oral BTK inhibitor that is in phase 3, pemphigus prospect rilzabrutinib, and a topical agent for immune-mediated diseases that is back in phase 1 development. 

SAR442168 is the big prize, though. Analysts at Jefferies tip the drug to generate peak global sales of $2 billion, provided it succeeds in phase 3.

The candidate was the subject of a short attack by Sahm Adrangi's Kerrisdale Capital, which argued Principia’s pipeline is “worthless” and SAR442168 has “a mode of action that seems irrelevant to the etiology of MS”

Sanofi has taken a different view on the potential of SAR442168. In other cases, the phase 2 data would have provided a good indication of which view is likely to win out. However, with Kerrisdale stating the phase 2 “seems almost designed to be confusing and inconclusive” ahead of the readout, its position could withstand the publication of data that Sanofi framed as positive.

Observers outside of Sanofi also saw positives in the phase 2 data. Analysts at Jefferies spoke to a multiple sclerosis expert who pointed to “robust dose-response and perhaps greater impact on MRI lesions” seen in the SAR442168 trial to argue Sanofi’s drug may have an edge over a rival candidate in development at Merck KGaA. The expert, unlike Kerrisdale, was also broadly positive on the idea of using BTK inhibitors to treat multiple sclerosis.

“As oral drugs targeting B-cells, a multiple sclerosis expert we spoke to felt BTKi may prove to be convenient alternatives to anti-CD20s, with possible benefits of also modulating innate immunity and penetrating the CNS to slow neurodegeneration,” analysts at Jefferies wrote in a note to investors. 

Reports of Sanofi’s interest in using some of its $50 billion M&A war chest to buy Principia emerged last month. Investors took the reports seriously enough to drive Principia’s share price up by around 50% since the start of July. Having generated around $10 billion through the sale of Regeneron stock, Sanofi CEO Paul Hudson is equipped to follow up the Principia buyout with more bolt-on acquisitions.