Sanofi has a $50B biotech buyout budget, with Principia top of the list: report

Still augmenting its R&D and trying to drive innovation internally, French Big Pharma Sanofi is preparing to spend billions on biotechs to help further this cause.

This is according to anonymous “people with knowledge of the matter” talking to Bloomberg, who say the focus is on snapping up biotechs and assets in multiple sclerosis and immune disorders,

Chief among its targets is CNS and immunology biotech Principia Biopharma, with which the pharma already has a partnership. Cue its shares jumping as high as 13% Thursday, July 16, on the rumors. However, it's uncertain whether “the deliberations will lead to a transaction, according to the people,” Bloomberg reports.

It has previously mused that Sanofi could have a $50 billion war chest for these deals since its uncoupling from Regeneron.

RELATED: Sanofi plans to unload a $13B Regeneron stake. Is a rare disease buyout next?

Principia was the subject of the ire of Sahm Adrangi's Kerrisdale Capital, which in January trained its sights on the biotech, arguing the pipeline of the Sanofi partner is “worthless.” The short seller thinks Principia’s approach to the treatment of autoimmune diseases is “misguided” and likely to lead to clinical failures.

Principia’s pipeline is built upon the idea of using BTK inhibitors to curb B-cell attacks against healthy tissues. BTK inhibitors have already established themselves in the treatment of B-cell malignancies, driving interest in whether they work in autoimmune diseases driven by the same cell type.

Kerrisdale said the broader concept of using BTK inhibitors to treat autoimmune diseases was flawed. The analysis details the failed attempts of companies including Bristol Myers Squibb, Gilead and Roche to develop BTK inhibitors for use in autoimmune diseases. The failures led Kerrisdale to conclude BTK inhibitors are ineffective in autoimmune diseases as they fail to reduce the existing B-cell populations that attack healthy tissues in sufferers.

It also addressed Principia’s prospects in multiple sclerosis. As Kerrisdale saw it, Principia’s Sanofi-partnered multiple sclerosis drug has “a mode of action that seems irrelevant to the etiology of MS,” again citing the failure to tackle existing B cells to explain its reasoning.

But a few weeks after the attack, its MS drug passed a phase 2, rallying its shares. After these data, Sanofi’s CEO Paul Hudson said it could grab half of the $20 billion market for multiple sclerosis drugs.