Sanofi Increases Production Capacity Through Strategic Collaboration

On January 2nd, I wrote a bullish article on Sanofi (NYSE:SNY), with a thesis stating that the company's extensive pipeline and promising portfolio of marketed assets were compelling reasons to accumulate shares. However, I also factored in the underlying risk to a Sanofi investment, since, after all, the company is one of many expected to suffer from patent SNY and lackluster performance (see previous article for more details).

For Sanofi, these issues have continued to exacerbate top-line pressure, prompting concern about its future prospects. But after Sanofi announced it entered into a strategic manufacturing collaboration with Boehringer Ingelheim to support potential upcoming product launches, there is more evidence to support my claim that Sanofi has excellent long-term growth prospects. As a result, I reiterate my bull thesis.

Some key highlights from Sanofi's latest announcement are as follows:

• Sanofi...has entered into a strategic agreement with Boehringer Ingelheim for the manufacture of therapeutic monoclonal antibodies to reinforce Sanofi's manufacturing capacity to support upcoming product launches. Today, 72 percent of Sanofi's Research and Development projects are in biologics, nearly half of which are monoclonal antibodies (mAbs).

• Under the terms of the agreement, Sanofi will have access to Boehringer Ingelheim's capabilities in Biberach an der Riss, Germany to transfer and manufacture therapeutic mAbs. Initial product transfers will begin in early 2015. Financial terms were not disclosed.

• This collaboration reinforces Sanofi's commitment to [its] strong biologics pipeline and will enable [it] to take the necessary steps to provide access to high quality therapeutic monoclonal antibodies to meet the needs of patients.

This is a positive development for Sanofi. With 72 percent of Sanofi's projects in biologics, the company needed additional production capacity - especially considering the potential near-term product launches of alirocumab, dupilumab, and sarilumab. Thus, tapping into Boehringer Ingelheim's plant in Germany certainly fills this need. Sanofi should transfer some of its important biologic assets to the plant early this year. This is a common trend we are seeing among Sanofi's various competitors, as Amgen, Bristol Meyers Squibb and AstraZeneca all announced expensive projects to expand biologics production capacity. At this juncture, therefore, I see no reason to amend my bullish opinion of Sanofi.