Regeneron (REGN) to Buy Back Part of Its Stake Held by Sanofi
Regeneron Pharmaceuticals, Inc. REGN announced that it has initiated an underwritten public secondary offering of its common stock, whereby its long-standing partner Sanofi SNY will offload its stake in the former raising close to $7.3 billion (as calculated on the closing price of $569.91 on May 22).
We note that Regeneron’s share price has surged 51.8% in the year so far compared with 7.9% growth for the industry.
However, shares are trading down following this announcement.
The surge in the share price has most likely prompted Sanofi to divest the stake as it looks to focus on lucrative avenues such as oncology.
As of now, Sanofi holds approximately 23.2 million Regeneron shares and plans to sell approximately 12.8 million shares in an underwritten public offering. Sanofi also expects to grant the underwriters a 30-day option to purchase an additional 10% of the shares provided in the base offer.
Regeneron will also repurchase approximately $5 billion of common stock directly from Sanofi, following the close of the secondary offering. The purchase will be funded with a combination of $3.5 billion of cash in hand and $1.5 billion of fully-committed bridge financing from Goldman Sachs Bank USA.
Consequently, Sanofi will have disposed of all of its shares, other than 400,000 shares it intends to retain.
The above-mentioned proceedings will not impact the ongoing collaboration between Regeneron and Sanofi. The companies have collaborations for quite a few drugs — Dupixent, Libtayo, Praluent and Kevzara. Both have had a successful and long-standing clinical and commercial collaboration, dating back to 2003. Meanwhile, Regeneron also has a collaboration agreement with Bayer BAYRY for its lead drug, Eylea.
Regeneron has had a great year so far, soaring high and pioneering the race for a possible coronavirus treatment along with other biotechs like Gilead Sciences, Inc. GILD. Regeneron is advancing REGN-COV2, a novel investigational antibody cocktail treatment designed to prevent and treat the SARS-CoV-2 virus. Last month, the company moved its leading neutralizing antibodies into pre-clinical and clinical-scale cell production lines and plans to begin clinical studies in June 2020.
Regeneron and Sanofi are also evaluating Kevzara for COVID-19. In April 2020, Regeneron provided an update on the adaptively-designed phase II/III U.S. study evaluating Kevzara in patients hospitalized with COVID-19 infection. An Independent Data Monitoring Committee recommended continuing the ongoing phase III trial only in the more advanced "critical" group with the 400 mg dose of Kevzara and discontinuing the study in the less advanced severe group, based on initial phase II results.
Regeneron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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