Sanofi Reaches $3.68B Deal to Buy Principia and Partnered MS Drug

Xconomy Europe — 

[Updated, 4:36 p.m.] Sanofi, which has worked with Principia Biopharma for the past three years to develop a new multiple sclerosis treatment that penetrates into the brain, is set to buy its partner in a $3.68 billion deal to advance the development of that drug and other autoimmune compounds in the pipeline.

Under financial terms announced Monday, Sanofi (NYSE: SNY) will pay $100 cash for each share of Principia (NASDAQ: PRNB). That offer represents a 10.2 percent premium to the South San Francisco-based company’s closing stock price Friday. [Story updated throughout with details from Sanofi’s conference call.]

Shares of Principia opened Monday at $99.25 and stayed around that level for the rest of the day. Shares had already risen sharply in July as the company became the subject of acquisition rumors. Sanofi’s stock price closed Monday at $51.35 per share, up 2 percent from Friday’s closing price.

Principia’s drug candidates block Bruton’s tyrosine kinase (BTK), a protein that plays a role in the development of a type of immune cell called a B cell. These cells multiply in brains of MS patients, and they’re thought to play a role in regulating the immune responses that spark neuroinflammation. By blocking BTK, Principia and Sanofi hope to stop inflammation and tissue destruction related to MS. The partnered MS drug candidate, PRN2246/SAR442168 (shortened to ’168), is designed to penetrate the blood-brain barrier to hit its B cell targets.

The Principia small molecule is being developed for the primary progressive form of MS, the most severe type of the disease. Targeting B cells to treat MS was validated by the 2017 approval of Roche drug ocrelizumab (Ocrevus), the first to clear the regulatory bar for primary progressive MS. That antibody drug targets CD20, a protein expressed on the surface of B cells. Merck KGaA is developing a BTK-blocking MS drug, evobrutinib, in patients who have the relapsing form of the disease. The German company has advanced its small molecule to Phase 3 testing.

The 2017 collaboration on ’168 paid Principia $40 million up front and put the biotech in line for up to $765 million in milestone payments, plus royalties from sales if it reaches the market. According to Principia’s 2019 annual report, the company had received $55 million in milestone payments so far. That deal covered development of the drug for applications in MS. Speaking on a conference call to discuss the acquisition, John Reed, Sanofi’s executive vice president and head of global R&D, said that buying Principia will allow Sanofi to take BTK inhibition beyond MS. For example, he noted that BTK plays a role in the activity of microglia, immune cells that are currently targets for neuroinflammatory and neurodegenerative disease drug research.

“It is exciting to now really look more broadly about where we might take this brain-penetrant molecule,” Reed said. “We haven’t yet declared specifically where we would go in the CNS area. But as [was] astutely pointed out, there is quite a bit of rationale for moving beyond MS into other indications in the CNS.”

The acquisition announcement follows the enrollment in June of the first patient in a Phase 3 study of ’168. Sanofi plans to run four pivotal clinical trials across the spectrum of MS types. Those studies follow Phase 2b data reported in February showing that the drug reduced signs of MS as measured by an MRI. The company also said that the drug reduced signs of a type of brain lesion associated with MS. The studies are testing the ‘168 against a placebo, not against ocrelizumab. Speaking on the conference call, Bill Sibold, Sanofi’s executive vice president of specialty care, said that regulators signed off on that clinical trial design.

“The efficacy seen in [primary progressive MS] with Ocrevus was not so significant so there’s plenty of room, huge unmet need still there,” he said. “We really like our profile and are excited about studying it in that population.”

In the acquisition announcement, Sanofi CEO Paul Hudson said that full ownership of ’168 “removes complexities for this priority development program and simplifies future commercialization.” Furthermore, the deal enables Sanofi to expand development of ’168 to other CNS diseases.

Sanofi also gains the most advanced wholly owned Principia BTK inhibitor, rilzabrutinib, which is in Phase 3 development as a treatment for moderate-to-severe pemphigus, a rare autoimmune disease that causes sores and blisters on the skin and mucous membranes. That compound is expected to begin a separate late-stage study by the end of this year in thrombocytopenia, a condition in which low platelet levels in the blood put a patient at risk for bleeding. It’s also in Phase 2 development for IgG4-related disease, which causes chronic inflammation and scarring in organs. A third Principia BTK inhibitor, a topical compound called PRN473, is in Phase 1 development as a potential treatment for diseases driven by immune cells in the skin.

In a research note, SVB Leerink analyst Geoffrey Porges wrote that the deal makes sense for Sanofi, as it gets full control of ‘168. If that Principia drug reaches the market and matches the commercial success of other oral MS therapies, such as Biogen drug dimethyl fumarate (Tecfidera) and fingolimod (Gilenya) from Novartis (NYSE: NVS), Sanofi would be responsible for $4 billion in milestone and royalty payments for MS applications alone. By acquiring its partner, Sanofi gets to test ‘168 for other applications beyond MS, and it adds to its pipeline other BTK inhibitors that also have blockbuster potential. Porges does not expect that another bidder will step in due to Sanofi’s privileged information about ‘168.

Sanofi says it will finance the Principia acquisition with cash on hand. The boards of directors of both companies have approved the deal. Sanofi expects to complete the transaction in the fourth quarter of this year. If Principia receives a superior offer or decides to walk away from the deal, it would owe Sanofi a $128.8 million termination fee, according to a securities filing.

Image: iStock/Eraxion


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