Regeneron Pharmaceuticals Jumps As Sanofi’s Plans To Boost Its Stake

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The stock value of Regeneron Pharmaceuticals Inc (NASDAQ:REGN) climbed by almost three percent to $170 per share Monday afternoon, after Sanofi SA (ADR) (NYSE:SNY), the largest drug manufacturer in France revealed its plan to boost its stake in the company through open market purchases and direct purchases from shareholders.

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According the press statement of Regeneron Pharmaceuticals, the French drug manufacturer made its decision under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).

Sanofi SA is the largest shareholder of Regeneron Pharmaceuticals Inc (NASDAQ:REGN) with a 17 percent stake in the company. Under its 2007 investor agreement, the French drug manufacturer is allowed to increase its position in Regenoron to 30 percent.

Jean-Marc Podvin, a spokesperson for Sanofi SA (ADR) (NYSE:SNY) told Bloomberg in an e-email, “We are very happy with the relationship with Regeneron, but needed this technical filing to get freedom to operate. Sanofi has the right to increase its shareholding. It may increase its holding over time subject to market conditions and within the terms of our partnership agreement.”

On the other hand, Robert W. Baird & Co analyst, Chris Raymond commended that Sanofi’s decision indicated optimism and recommended an outperform rating for Regeneron Pharmaceuticals Inc. (NASDAQ:REGN). “There is definitely a signal here that they’re optimistic. They has to know it triggers this kind of response, so you wouldn’t take a step lightly,” Raymon said.

The report from Bloomberg said that Sanofi’s decision to increase its holdings in Regeneron indicates its positive expectation over their collaborative efforts in the development of SAR236553 or REGN727, a drug designed to lower bad cholesterol by targeting an enzyme known as PCSK9.

“We’re not building our company for a sale. What distinguishes us is we’ve always cared about the long-term,” said Len Schleifer, CEO of Regeneron Pharmaceuticals, when describing the company last January.

Most recently, Sanofi and Regeneron announced that the European Commission (EC) approved the marketing of ZALTRAP in the European Union member countries. ZALTRAP is intended to treat adult patients suffering from metastatic colorectal cancer.

Based on SNY’s historical ownership of REGN, analysts at RBC believe SNY’s notification to buy more REGN shares is likely to maintain the level of its ownership against a growing number of shares outstanding for REGN. To show some recent examples:In Nov. 2007, SNY bought 12M shares in connection with its collaboration with REGN, representing a ~19% stake. In ~Q4 2010, SNY bought additional ~1M REGN shares, increasing its ownership to 15.8M (from 14.8M prev), representing an 18% stake. With no additional REGN purchase since Q4 2010, SNY’s stake stands at 16.8% as of end-Q3 2012. Had SNY not bought additional shares in 2010, its current stake would have been 15.6%.

The shares of Sanofi SA (NYSE:SNY) increased by almost 4 percent to $48.07 per share as of this writing.

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