Sanofi plans to acquire U.S. vaccine company Dynavax for $2.2 billion, ramping up its adult vaccine portfolio.

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French pharmaceutical giant Sanofi has agreed to acquire US vaccine company Dynavax for approximately $2.2 billion in an effort to expand its vaccine business, which currently centers on flu vaccines. Meanwhile, its experimental drug for multiple sclerosis has unexpectedly been rejected by the US Food and Drug Administration (FDA).

On December 24, according to Bloomberg, Sanofi will acquire the California-based Emeryville company for $15.50 per share in cash. Just minutes before the acquisition announcement, Sanofi announced that the FDA had unexpectedly rejected its experimental multiple sclerosis drug, tolebrutinib.

Sanofi's US shares jumped nearly 38% in pre-market trading. So far this year, Sanofi's shares in France have dropped about 12%. To address the potential decline in revenue as its core product Dupixent faces patent expiration, CEO Paul Hudson is actively investing in R&D and pursuing acquisitions to open up new revenue streams for the company.

Strategic Expansion of Vaccine Business

With the acquisition of Dynavax, Sanofi will obtain an already approved hepatitis B vaccine in the US, as well as an experimental shingles vaccine currently in early human trials. The company stated that this will strengthen its market position in adult immunization. Sanofi’s vaccine and immunization portfolio covers a wide range of diseases including influenza, respiratory syncytial virus, meningitis, and pertussis.

The commercial potential of the shingles vaccine has already been validated by the market, with competitor GlaxoSmithKline seeing significant revenue growth from their product. In addition, research indicates this vaccine may be associated with reduced incidence of dementia.

Alongside these vaccines, Dynavax's experimental vaccine pipeline also includes candidates for Lyme disease and plague. The company’s history dates back to the 1990s (it operated under a different name in its early years) and completed a public listing in 2004.

Global Vaccine Market Faces Challenges

Despite difficulties in the global vaccine market, Sanofi has decided to proceed with the acquisition. The company's flu vaccine sales declined last quarter, price competition has intensified in Europe, and vaccination rates in the United States have dropped. Robert F. Kennedy Jr., Secretary of Health and Human Services, is overturning longstanding vaccine guidelines, though many changes are focused mainly on childhood vaccines.

Sanofi’s Chief Financial Officer Francois-Xavier Roger stated at the latest earnings conference that global vaccination rates are declining. He said:

"This may be related to people's fatigue towards vaccination following the COVID-19 pandemic. In addition, people may also have some negative sentiment overall toward vaccines."

FDA Rejection Deals Major Blow to Drug Expectations

The FDA's refusal to approve tolebrutinib for market launch is a major blow to Sanofi. Bloomberg Industry Research had previously projected the annual peak sales of the drug could reach $17 billion. The development journey has been fraught with challenges—earlier trials revealed risks of liver damage—and the rejection has further deepened concerns.

Currently, Sanofi is actively searching for new sources of revenue to mitigate the potential crisis of falling income once its blockbuster drug Dupixent loses patent protection.

Jefferies analyst Michael Leuchten noted in a report that given Sanofi’s massive investment in tolebrutinib’s development, the setback could prompt market doubts about management's judgment and credibility. Sanofi’s head of R&D, Houman Ashrafian, stated in a press release that the company is "deeply disappointed" by the FDA’s decision and called the outcome “a significant and far-reaching shift compared to previous FDA feedback.”

J.P. Morgan analyst Richard Vosser further analyzed: “The likelihood of tolebrutinib gaining US approval has now significantly diminished.” He also noted, however, that given the many challenges encountered in the drug’s development, the market has "largely already priced in its potential value."

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