Sanofi Overpays for Bioverativ

As Sanofi faces earnings pressure from biosmilar Lantus competition, the Bioverativ acquisition helps support earnings, as the deal is expected to be immediately accretive to core earnings and expected geographical expansion holds the potential to increase the growth outlook for Bioverativ’s drugs. Sanofi expects the deal to bolster 2019 earnings by 5%, which looks reasonable (however, the overpayment for the acquisition doesn’t show up in core earnings, as amortization expenses are typically excluded from core earnings). Further, Bioverativ has not yet launched its key drugs Eloctate (hemophilia A) and Alprolix (hemophilia B) in Latin America, South America, China, and India, where we believe Sanofi can leverage its global infrastructure to accelerate our 10% 5-year compound annual growth estimate for Bioverativ on a stand-alone basis.

Sanofi gains a strong foothold in the hemophilia market with Bioverativ, setting up the potential for Sanofi’s pipeline drug fitusiran, but new competition from Roche is concerning for Bioverativ’s portfolio in the near term and fitusiran’s long-term potential.

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