By Denise Roland 

Sanofi SA has agreed to buy cancer biotech company Synthorx Inc. for $2.5 billion, the first big move by new Chief Executive Paul Hudson to reinvigorate the sprawling French health care giant.

The company has a long history in cancer-drug development but has fallen behind in the latest rush to develop immunotherapies, or drugs that help the immune system fight tumors. Its acquisition of Synthorx is a bet that it can make up that ground.

Synthorx, based in La Jolla, Calif., is developing a drug that aims to boost the immune system's response to cancer. The drug is in the early phase of human testing in a range of cancers, both on its own and in combination with existing cancer immunotherapies. Sanofi on Monday said it would pay $68 a share in cash for Synthorx, a 172% premium to the smaller company's closing share price Friday.

"This acquisition fits perfectly with our strategy to build a portfolio of high-quality assets and to lead with innovation," said Mr. Hudson, who is set to provide an eagerly awaited strategy update to investors Tuesday.

Mr. Hudson, a former Novartis AG executive who became Sanofi CEO in September, has said he wants to create a sense of urgency and prioritization at the company. The deal shows that cancer treatment will be one of those priorities.

Sanofi is one of the most diversified companies in the industry, spanning branded prescription drugs, vaccines and over-the-counter treatments. Within branded drugs, it produces medicines ranging from insulin for diabetes to specialty medicines for rare diseases.

Analysts expect Mr. Hudson to slim the company down. That could mean jettisoning its over-the-counter medicine business, the analysts say, a move that would follow other industry giants like Pfizer Inc., GlaxoSmithKline PLC and Novartis.

They also expect him to narrow its drug-development pipeline. That is likely to mean more investment in rare or specialty diseases like cancer, and less in broad disease areas, like Sanofi's large but dwindling diabetes franchise.

Sanofi makes Lantus, the most heavily prescribed insulin brand in the U.S. But amid patient uproar about the price of insulin, and tough actions from insurers and pharmacy-benefit managers to drive down the price, revenue from the lifesaving drug has fallen in recent years.

Its top rivals in diabetes, Novo Nordisk A/S and Eli Lilly & Co., have responded to those pressures by investing heavily in new classes of diabetes medicine. But Sanofi's attempts to do so have flopped.

Cancer treatment, meanwhile, holds far greater appeal. The area has enjoyed a run of recent scientific breakthroughs, a permissive regulatory system that allows for smaller and faster clinical trials, and the ability to charge higher prices.

Those factors have attracted many companies into the field. The number of cancer drugs in late-stage clinical trials surged more than 60% to 710 between 2007 and 2017, according to IQVIA, a health-care data provider.

Write to Denise Roland at Denise.Roland@wsj.com

 

(END) Dow Jones Newswires

December 09, 2019 06:01 ET (11:01 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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