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French Drug Maker Increases Stake in U.S. Biotech

Written By Brian Hicks

Posted February 13, 2013

Sanofi SA (EPA: SAN), the French drug manufacturer, presently owns 15.82 million shares (or 16.7 percent) of Regeneron Pharmaceuticals Inc. (NASDAQ: REGN), an American biotech company. However, it has the right to increase that to 30 percent, and that’s exactly what it is doing.

Sanofi and Regeneron are involved a ten year partnership as they work to develop treatments for cholesterol and rheumatoid arthritis.

The companies individually revealed the plans for Sanofi’s increased involvement on Monday, causing shares to go up for both

Bloomberg quotes Sanofi:

“We are very happy with the relationship with Regeneron, but we needed this technical filing to get freedom to operate,” the company said.

Sanofi will buy up more Regeneron shares on the open market, and U.S. profits from any medication the two develop jointly will be divided evenly.

It works to the U.S. biotech’s benefit, as Sanofi wholly funds the developmental expenses for drugs. However, since Regeneron’s stock has gone up more than fourfold in the past two years, an open merger at this point would be quite expensive for Sanofi.

The question remains whether Sanofi is just raising its stake in Regeneron or perhaps angling for full ownership.

Bloomberg reports:

“I think this is a sign that they (Sanofi) are taking more interest in the company,” said Deutsche Bank analyst Robyn Karnauskas. “I don’t think investors should immediately conclude that an acquisition is coming soon.”

Two drugs from the two companies—combating cholesterol and inflammation—are currently in trials and could potentially prove to be $1 billion-a-year earners once approved.

Regeneron rose 2.8 percent after the announcement Monday and Sanofi was up 3.4 percent in Paris. Sanofi was up another 1.23% at close on Wednesday.