Sanofi Adds Diabetes Drug With Provention Bio Deal

Sanofi’s SNY announced acquisition of Provention Bio adds new diabetes drug Tzield to Sanofi’s entrenched cardiometabolic platform. However, we don’t see the nearly $3 billion deal as significantly affecting Sanofi’s fair value estimate or wide moat.

We believe the deal largely centered on Provention Bio’s type 1 diabetes-delaying drug Tzield. With a price point of close to $200,000 and over 60,000 people being diagnosed each year in the U.S. (according to the JDRF), the market potential for the drug is very large. Also, the drug was shown to delay progression to stage 3 type 1 diabetes from stage 2 by close to two years. We believe this efficacy will support enough market share gains to enable peak annual sales of Tzield of close to $1 billion annually. However, we believe the sales ramp-up of the drug will be slower, as the physician community will likely need heavy education and marketing given the uniqueness of the drug and the new mechanism of action (CD3-directed antibody). Additionally, with the drug just gaining approval in the U.S. in November 2022, we expect reimbursement challenges due to the high price point, which may slow the near-term launch trajectory.