Regeneron To Repurchase $5 Billion Stake From Sanofi

U.S. biotech company Regeneron Pharmaceuticals, Inc (REGN) said on Monday that it will repurchase $5 billion of common stock held by France’s Sanofi.

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The biotech firm said that the offering will have no impact on its ongoing collaboration with Sanofi formed in 2003. Regeneron will fund the purchase with a combination of $3.5 billion of cash on hand and $1.5 billion of fully-committed bridge financing from Goldman Sachs Bank USA.

“Sanofi and Regeneron’s collaboration has been one of the most productive in the industry, creating significant value for both companies but more importantly, resulting in five important medicines for patients,”said Sanofi CEO Paul Hudson.“The decision to divest our holdings is consistent with our efforts to enhance value creation for our shareholders.”

The French drugmaker, which owns about 23.2 million of Regeneron shares, or a 20.6% stake intends to sell about 12.8 million shares in a public secondary offering. Sanofi will grant the underwriters a 30-day option to purchase an additional 10% of the shares offered in the base offering.

Following the offering and Regeneron’s $5 billion share repurchase, Sanofi will have disposed of all of its shares, other than 400,000 shares it intends to retain. Regeneron will not get any of the share sale proceeds of the offering.

Shares in biotech colossus Regeneron have surged 53% year-to-date as investors grow more confident in its experimental antibody cocktail for COVID-19. At the beginning of May, Regeneron said that it seeks to make clinical data for its antibody cocktail available within a month or two after starting the studies and scale up its manufacturing to produce 200,000 doses per month by the end of the summer.

After hosting a fireside chat with Regeneron President George Yancopoulos this month, five-star analyst Christopher Raymond at Piper Sandler maintained a Buy rating on the stock with a $600 price target, saying he is “incrementally positive” on the stock.

The analyst added that he now has a better sense of the clinical path forward for the company’s COVID-19 antibody cocktail and is “not just comfortable but impressed with the level of scientific rigor that seems to have gone into this program”.

Raymond believes the cocktail could be a meaningful part of the Regeneron commercial story for some time.

What does the rest of the Street have to say? The 20 analysts that have published a recent review are divided between 10 Buy ratings and 10 Hold ratings adding up to a Moderate Buy consensus. In view of the stock’s recent rally, the analysts’ $551 average price target is less optimistic than Raymond’s indicating 3.3% downside potential in the coming 12 months. (See Regeneron stock analysis on TipRanks).