Shares of Provention Bio PRVB were up 260% on Mar 13 after the company announced that it has signed a definitive agreement with Sanofi SNY. Provention would be acquired by Sanofi for $25 per share in cash, amounting to $2.90 billion.

A commercial-stage pharmaceutical company, PRVB is engaged in developing new therapies targeting life-threatening immune-meditated diseases. Provention has only marketed drug in its portfolio Tzield (teplizumab), which the FDA approved last November as the first and only treatment that can delay the onset of stage 3 type 1 diabetes (T1D) in adults and pediatric patients aged eight years and older having stage 2 T1D.

The acquisition deal made by Sanofi stems from a previously signed co-promotion deal for Tzield signed between Provention Bio and Sanofi in October 2022.Per the terms of the agreement, Sanofi will commit commercial resources for Tzield in the United States. Provention will reimburse field force-related expenses that Sanofi will incur in connection with commercializing Tzield under the agreement. Sanofi also holds the exclusive right of the first negotiation to in-license Tzield globally for T1D.

The transaction, expected to be completed by second-quarter 2023, is subject to customary closing conditions and clearance from the regulatory authorities. The transaction will be funded by Sanofi from its existing cash resources.

In the year so far, shares of Provention Bio have surged 128.0% against the industry’s 9.2% fall.

Image Source: Zacks Investment Research

With no other approved marketed drugs, Provention Bio is highly dependent on Tzield product sales for growth. An acquisition by a big pharma giant like Sanofi, which has high reserves of cash flow, would allow the company to advance the development of its pipeline, including label expansion studies for Tzield.

Once the acquisition is completed, Sanofi will add Tzield to its market portfolio. Sanofi believes the deal to be a strategic fit for its existing business, taking into consideration its expertise in the field of diabetes. Recently, Sanofi has been facing criticism from investors who have been very skeptical over its current pipeline of drugs. The deal will strengthen its existing diabetes business, which is facing intense competition. Sales of Sanofi’s global diabetes franchise have been declining since the past 4-5 years.

Teplizumab was originally developed by MacroGenics MGNX. The drug was acquired by Provention Bio from MacroGenics pursuant to an asset purchase agreement in 2018. Following the FDA approval for Tzield in Stage 3 T1D, Provention made an upfront payment of $60 million to MacroGenics.