Sanofi finally unloads an embattled R&D site in $270M Evotec deal

Sanofi ($SNY) is shipping more than 200 researchers to German outsourcing firm Evotec as it finally gets out of a French R&D site whose fate led to a squabble with the local government, reaching a compromise the company believes will leave all sides appeased.

Consummating a deal announced in December, Sanofi is handing over its Toulouse research outpost to Evotec and promising to pay the company €250 million ($270 million) over 5 years to bankroll R&D at the site. The move brings to an end an acrimonious saga for Sanofi following the company's repeated attempts to shut down the operation and slash its payroll, efforts met with stiff resistance by France's socialist government under President François Hollande.

Now, Sanofi has secured the support of three major labor unions for the Evotec hand-off, "resulting from a constructive social dialog," the company said in a statement. With the site expected to transfer over by March 31, Sanofi R&D President Elias Zerhouni said Evotec presents "a major opportunity" for the operation and its employees.

Olivier Brandicourt

Meanwhile, Sanofi has been working to reshape its global R&D footprint with an eye on efficiency, last month cutting about 100 researchers and significantly dialing back its work in oncology. At the same time, the company has entered into a few ambitious partnerships with biotech startups at work on novel technologies, teaming up with Warp Drive Bio, Voyager Therapeutics and Alnylam ($ALNY). Former Bayer healthcare chief Olivier Brandicourt is slated to take the reins as CEO next month, and he'll inherit a make-or-break pipeline light on late-stage assets but with plenty of early-stage promise.

And beyond providing a landing place for the Toulouse site, the Evotec deal is designed to jump-start innovation, as well. Under the agreement, Evotec will do the early-stage heavy lifting on a slew of Sanofi's discovery-stage compounds, mostly in oncology, advancing them to preclinical development. At that point, Sanofi will have the option to take over each project or, with Evotec's help, find an outside partner to join the effort.

And Sanofi is buying big into Evotec's business model, which relies in part on screening its clients' disease targets against a sizable library of chemical compounds. As per the partnership, Sanofi is handing its own compound library en masse to Evotec, creating a combined pool of roughly 1.7 million potential drugs. The pair plan to make their library available to Evotec's clients and partners, with Sanofi getting an undisclosed cut of any hits that become treatments in an arrangement the company says is groundbreaking.

The setup follows similar moves by Biogen Idec ($BIIB) and Merck KGaA, each of which brought in Quintiles ($Q), the world's largest CRO, to take a seat at its R&D decision-making table in a capacity that far outpaces the standard sponsor-contractor relationship.

- read the statement

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