Sanofi revamps R&D with $1.2-2.2 billion Covance deal
PARIS (Reuters) - Sanofi-Aventis , which is seeking to buy U.S. biotech firm Genzyme to boost its drug portfolio, signed a major R&D outsourcing deal with Covance on Thursday in an attempt to improve returns.
The U.S. contract research group, which will become Sanofi's research and development (R&D) partner and take over some of its European operations, will earn between $1.2 billion and $2.2 billion under the 10-year deal.
The alliance is the latest example of Big Pharma's drive to improve returns in R&D, where the flow of profitable new medicines has been dismal across the industry for several years, despite record levels of investment.
Under the deal Sanofi is selling its French site at Porcheville and British site at Alnwick to Covance for approximately $25 million. Covance has agreed to maintain employment at these facilities for at least the next five years.
The agreement, which is expected to close before the year-end, is a further example of Chief Executive Chris Viehbacher's attempt to improve profitability at Sanofi.
Faced with the loss of patent protection on some of its biggest-selling medicines, Viehbacher has pledged to radically shake up R&D operations at the Paris-based company, while at the same time scouting for smart acquisitions to boost growth.
The French group has offered $18.5 billion for Genzyme, which specializes in rare disease treatments. The U.S. company has so far rejected the approach.
"This alliance with Covance will help us preserve hundreds of valuable jobs in Porcheville and Alnwick while driving our R&D efficiency," Sanofi's research head Marc Cluzel said in a statement.
Shares in Covance, which struck a similar $1.6 billion outsourcing deal with Eli Lilly in 2008, were 2 percent higher in German trading . Sanofi stock was down 1.3 percent by 1040 GMT, underperforming a flat European drugs sector .
DIABETES DRUG
Separately, Sanofi reported further promising results for a key experimental diabetes drug ahead of an investor seminar on diabetes and oncology in Paris, starting at 1200 GMT.
Tests in Asia showed type 2 diabetes drug lixisenatide significantly improved glycemic control when used once a day in combination with basal insulin, the drugmaker said.
The study also confirmed there were no safety concerns with lixisenatide in patients with type 2 diabetes. Sanofi had already unveiled positive study results for the drug when used as monotherapy on September 20.
Sanofi is seeking to broaden its diabetes offering, which includes blockbuster insulin Lantus, and has set up a diabetes division to become more competitive in the fight against a disease whose incidence is rising worldwide as more and more people become overweight.
Lixisenatide belongs to the GLP-1 class of drugs that stimulate insulin release when glucose levels become too high. If it wins marketing approval it will compete with Novo Nordisk's Victoza and Amylin and Eli Lilly's Byetta.
Analysts at Ambrian Partners said they expected lixisenatide, which was licensed from unlisted Zealand Pharma, to be filed for regulatory approval in late 2011 or early 2012.
(Additional reporting by Ben Hirschler in London and Mansi Dutta in Bangalore; Editing by Greg Mahlich)