Why Regeneron Pharmaceuticals Shares Spiked

Is this meaningful or just another movement?

Sean Williams
Sean Williams
Feb 11, 2013 at 1:24PM
Health Care

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotech company Regeneron Pharmaceuticals (NASDAQ:REGN) shot higher by as much as 10% after Sanofi (NASDAQ:SNY) announced its intent to boost its stake in Regeneron by purchasing shares on the open market.

So what: According to Reuters, Sanofi currently owns 16.7% of Regeneron's stock and, in an email correspondence, noted that it may be willing to increase its stake up to 30%. Because of an agreement between the two companies in 2007, Sanofi is prohibited from acquiring more than 30% of all outstanding shares. Regeneron and Sanofi both developed the now FDA and EU-approved Zaltrap for aggressive cases of colorectal cancer and are working on multiple other clinical studies.

Now what: With Sanofi intending to increase its stake in Regeneron, the rumor mill will again swirl that a buyout offer could be coming; however, that appears highly unlikely given Regeneron's already lofty valuation due to the success of its wet age-related macular degeneration drug, Eylea. In addition, Regeneron comes with the extra baggage of having Bayer as its partner for Eylea, meaning that a buyout of Regeneron likely wouldn't be simple. Today's purchase is a golf clap for Regeneron, but it'll need Eylea to do its talking if it hopes to maintain its current valuation.

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