By Lorenzo Mirone, Riccardo Colombo, Federico de Rosa ( Bocconi University) and Roshni Padhi, Winston Shum, Moh Jin Yin ( Stanford University)
Overview of the deal
Implied Equity Value:
Total Transaction Size: 1.45 bn$
Closed date: First half of 2021
Target advisor: JP Morgan
Sanofi, the French pharma company born from the merger between Sanofi-Synthelabo and Aventis, has agreed to acquire Kymab, a UK-based clinical-stage biopharmaceutical company, which is concentrating on the development of fully human monoclonal antibodies with a focus on immune-mediated diseases and immuno-oncology therapeutics, for approximately $1.1 billion and up to $350 million if some milestones are reached after the closing. This acquisition will give the French company the possibility to have full global rights to KY1005, a human monoclonal antibody with new mechanism of action, in order to take care of a long series of diseases and disorders. Since Paul Hudson became CEO of the company in 2019, it’s the fourth deal completed. In fact his strategy is to push Sanofi into the market for treatments for immune disorders, as it is considered one of the faster growing sectors in the medical industry.
“The Kymab acquisition adds KY1005 to our dynamic pipeline, a potential first-in-class treatment for a range of immune and inflammatory diseases. The novel mechanism of action may provide treatment for patients with suboptimal responses to available therapies,” said Paul Hudson, Sanofi Chief Executive Officer.
Company Details: (Acquirer - Sanofi)
Sanofi is a global life sciences company with three core business units: speciality care, vaccines, and general medicines. They focus on both prevention and treatment of diseases ranging from multiple sclerosis to diabetes and now COVID.
Founded in 2004, headquartered in Paris, France
CEO: Paul Hudson
Number of employees: 100,000+
Market Cap: $115.89B (as of 03/06/2021)
LTM Revenue: $44.03B
LTM EBITDA: $12.82B
LTM EV/Revenue: 2.90x
LTM EV/EBITDA: 9.96x
Company Details: (Target - Kymab)
With $200M in equity financing (pre-acquisition), Kymab is a biotechnology company that develops antibody-based drugs. They focus on four key areas: immuno-oncology, inflammation, hematology, and infectious disease.
Founded in 2010, headquartered in Cambridge, UK
CEO: Simon Sturge
Number of employees: ~200
Projections and Assumptions
Sanofi’s acquisition of Kymab will lead to it having complete global rights to KY1005, a form of human monoclonal antibody which has a novel mechanism of action. According to Sanofi’s media release, KY1005 binds to OX40-Ligand and has been shown to work on a severe form of eczema called atopic dermatitis, with the potential to treat a much wider range of inflammatory diseases and mediated diseases. Beyond that, Kymab’s IntelliSelect Transgenic platform, one of the most comprehensive antibody platforms around, will ensure Sanofi has the highest chance of uncovering drug candidates quickly and effectively.
As a whole, the transaction, coming after Sanofi agreed to purchase US biotech company Principia Biopharma for US$3.4 billion, cements Sanofi’s rising presence in the immunological diseases sector. This is in line, too, with the company’s pivot towards therapies targeting the immune system, as it aims to develop a pipeline of medicines that will deliver it a piece of the $100 billion-a-year cancer drug market. The deal will additionally better position Sanofi to offer new therapies to patients who presently have suboptimal responses to available treatments.
The obvious benefits include the adding of Kymab’s monoclonal antibody, KY1005, to the pipeline of Sanofi, but there are also several benefits to this acquisition for both companies in the long-term. For Sanofi, KY1005 isn’t the only antibody that has potential growth in the immunology and type 2 inflammatory diseases sector of Sanofi’s business. Sanofi is currently partnered with Regeneron to discover more methods to reduce type 2 inflammatory diseases such as eczema; the addition of Kymab could complement this partnership with Regeneron to discover new and innovative ways to tackle type 2 inflammatory diseases in the future. Sanofi also now has access to Kymab’s IntelliSelect platform, which has data on fully human antibodies and can determine the drugs with the best characteristics for the relevant diseases. These will help Sanofi increase efficiency in finding new drugs to help inflammatory diseases, both for current drugs like KY1005 and future drugs and antibodies such as the KY1044, which is participating in phase I/II trials. Finally, the acquisition of Kymab has an upfront payment of $1.1 billion, and the remaining $350 million depend solely on Kymab’s performance post-acquisition, which pushes Kymab to become successful and produce better results based on the milestones that Sanofi and Kymab agreed to both in the short-run and long-run. Not only does this push Kymab to obtain good results, in the long-run, Kymab can use the wide range of resources and connections that Sanofi has. The resources now available to Kymab can be demonstrated through the partnership between Regeneron and Sanofi, two big Pharma companies across two continents, allowing Kymab to fasten expansion efforts and the influence of their drugs around the world both for current drugs and new drugs in the future.
Risks and Uncertainties
Although the premises are good and the newly acquired rights seem to be a promising investment for Sanofi, we cannot avoid mentioning such transaction also brings a few risks and uncertainties. Regulatory approvals could get in the way of the parts aiming at completing the acquisition due the first half of the year. This could affect both the terms of the transaction and the proposed timeline. Looking at the longer term, a lot could go wrong in Sanofi’s plan to market the human monoclonal antibodies developed by Kymab and currently at clinical-stage, with risks mainly associated to future competition and the last stages of the drug development process. Uncertainties also relate to possible regulatory actions by authorities such as the FDA or the EMA, which could hinder the marketing process due to unexpected additional obligations.
Other sensitive issues include the future development of therapeutic alternatives and their eventual approval, as well as their possible commercial success; Sanofi's intention to continue its external growth path by completing related transactions; and its ability to do so by expanding and growing, subject to obtaining regulatory approvals. In addition, there are general risk factors, such as changes in exchange rates and interest rates, as well as volatile economic and market conditions. Lastly, there is the impact that COVID-19 will have on these two companies and their respective customers, suppliers, vendors and other business partners and on the global economy as a whole. Although these risks represent a substantial list, they are not intended to be exhaustive.