Regeneron Pharmaceuticals' share prices dropped by nearly 5% on Thursday after it announced plans to buy the global rights to the cancer drug Libtayo from Sanofi SA. Regeneron agreed to give Sanofi an upfront payment of $900 million as part of the deal.
Regeneron jointly developed and marketed the drug as part of a collaboration agreement in 2015. Both companies had marketed Libtayo in the United States, with Sanofi holding the right to sell it outside the country. Profits generated outside the United States were split equally between the two companies.
The FDA has approved Libtayo for the treatment of certain skin and lung cancers. However, Regeneron is experimenting with Libtayo using 18 different drug combinations. Regeneron is banking on Libtayo to become a formidable competition to Merck's (MRK) blockbuster Keytruda cancer drug for a share of the market. Both drugs work by inhibiting specific proteins in the immune system.
Sanofi will get $900 million in upfront payments from Regeneron as part of the deal. Sanofi will also get an 11% royalty on Libtayo's global net sales, as well as up to $200 million in regulatory and sales milestones. The transaction is set to be finalized in the third quarter of this year.
Regeneron would have sole rights to develop and commercialize Libtayo under the new conditions. The drug is also being considered for use in the treatment of advanced non-small-cell lung cancer (NSCLC) in conjunction with chemotherapy in the United States and the European Union. The agreement follows Regeneron's purchase of nearly $5 billion in Sanofi stock in 2020.
The two companies also agreed to an expedited payback of an antibody co-development arrangement in addition to the Libtayo deal. Regeneron will pay Sanofi 20% of earnings, up from 10% before, in order to accelerate Regeneron's reimbursement of Sanofi-funded development expenditures.
Regeneron's chief executive officer, Leonard Schleifer, said the deal is a "major step" towards the company's goal of being the leading provider of oncology treatments. Despite its positive outlook, most investors weren't on board with the plan.
Regeneron's shares fell 4.3% to 630.70 per share. Sanofi shares increased slightly to 53.44 per share. IBD Digital gave Regeneron's stock a Relative Strength Rating of 90, putting it in the top 10% of all stocks for 12-month performance. The stock also has an excellent Composite Rating of 92 out of a maximum of 99. According to IBD Digital, Regeneron shares exceed 92% of all equities in terms of fundamental and technical performance.
