Why the Sanofi and Translate Bio Vaccine Pact Is Win-Win

Health and Healthcare

Published: June 23, 2020 10:07 am

Last Updated: June 23, 2020 1:14 pm

Sanofi S.A. (NASDAQ: SNY) and Translate Bio Inc. (NASDAQ: TBIO) are making waves in the fight against the novel coronavirus as the two have agreed to expand their existing 2018 collaboration and license agreement to develop messenger RNA (mRNA) vaccines for infectious diseases.

Under the collaboration, Translate Bio is using its mRNA platform to discover, design and manufacture vaccine candidates and Sanofi is providing its deep vaccine expertise to advance vaccine candidates into and through further development. At the same time, Translate Bio will transfer technology and processes to allow Sanofi Pasteur to develop and manufacture mRNA vaccines for infectious diseases.

As for the financials of this agreement, Translate Bio will receive a total upfront payment of $425 million, consisting of a $300 million cash payment and a private placement common stock investment of $125 million at $25.59 per share. That represents a 50% premium to the 20-day moving average.

Also, Translate Bio is eligible for potential future milestones and other payments up to $1.9 billion, including $450 million of milestones under the 2018 agreement. Approximately $360 million of the cash is expected over the next several years, inclusive of COVID-19 vaccine development milestones.

Even more, Translate Bio is also eligible to receive tiered royalty payments based on worldwide sales of the developed vaccines. Sanofi will pay for all costs during the collaboration term.

What Sanofi gets out of this agreement is exclusive worldwide rights for the infectious disease vaccines developed.

Overall, not a bad deal for either side.

Translate Bio stock traded up about 60% to $25.99 on Tuesday, in a 52-week range of $6.80 to $26.50. The consensus price target is $20.33.

Sanofi was up fractionally at $52.75. It has a 52-week range of $6.80 to $26.50 and a consensus price target of $56.63.