Sanofi deepens its Evotec ties with a $330M diabetes deal

Sanofi's Philip Larsen

Sanofi ($SNY) is expanding its relationship with close partner Evotec, signing a deal worth up to $330 million to collaborate on cell-replacement therapies for diabetes.

Under the agreement, the two companies will work together to turn human stem cells into beta cells, which produce insulin in the pancreas to regulate blood sugar. Beta cell function is either impaired or destroyed in both types of diabetes, and Sanofi and Evotec believe a functional cell-replacement therapy could eliminate the need for insulin injections for the world's more than 387 million diabetics.

To get the project rolling, Sanofi is paying its partner €3 million ($3.3 million) up front and promising as much as €300 million ($328 million) more tied to development and regulatory milestones over the coming years. In addition to their work on a replacement therapy, the pair plans to use the human beta cells they generate to discover small-molecule and biological therapies that might boost insulin production in the body.

The collaboration builds on a cross-cutting alliance between Sanofi and Evotec outlined late last year, through which the pharma giant is paying its partner at least €250 million over 5 years to handle much of the heavy lifting in its early-stage pipeline. Through that arrangement, Evotec is tasked with advancing a host of discovery-stage Sanofi candidates toward preclinical development, at which point the French drugmaker will have the option of either taking over each project or finding an outside outfit to buy in. For its trouble, Evotec inherited a long-embattled Sanofi R&D site in France, bringing aboard about 200 new researchers.

The latest deal exists outside the pair's ongoing discovery work but will expand upon the relationship they've cemented over the past few months of close collaboration, Sanofi said.

"Combining Sanofi's and Evotec's beta cell and stem cell expertise in drug discovery and development will enable optimal exploitation of the potential of stem cell derived human beta cells for therapy and drug screening in diabetes," Sanofi diabetes research head Dr. Philip Larsen said in a statement. "We are excited about the prospects of this collaboration as both companies provide highly complementary expertise to translate human stem cell technologies into highly innovative new products."

Evotec, headquartered in Germany, splits its business into two halves: EVT Execute, which operates like a CRO, and EVT Innovate, which outlicenses internally developed candidates. The former half largely pays the bills, thanks to risk-sharing deals with the likes of Bayer, Johnson & Johnson ($JNJ) and Roche ($RHHBY), but Evotec has taken strides to build up its in-house efforts through acquisitions and licensing agreements.

- read the statement (PDF)

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