FDA says nada to Lemtrada; will Sanofi be willing to invest in additional trials?

Sanofi ($SNY) intends to appeal the FDA's denial of Lemtrada, its multiple sclerosis drug that was a key reason it paid $20.1 billion to buy Genzyme two years ago. But the question burning in the mind of one analyst is whether the French company will invest more money in the drug, given that after three more years of trials it will be far behind competitors.

Eric Le Berrigaud, an analyst at Bryan Garnier in Paris, said he was not optimistic about an appeal, according to Bloomberg. "The key question now is whether they will commit to financing new trials in a scenario in which they would be delayed by three years in entering a very crowded market in 2018 to 2019," Le Berrigaud said.

The FDA said the drugmaker has not shown that the benefits of the drug outweigh its risks, Sanofi announced today. The company disagrees and indicated it would appeal the FDA's decision. MS is such a difficult disease that sufferers will tolerate some risk for relief, but the side effects of Lemtrada include the chance of cancer and autoimmune and thyroid diseases.

Before the decision, Lemtrada had been forecast to have peak sales of about $700 million a year, $400 million of that from the U.S., Reuters reports. But even if new trials could put the FDA's mind at ease, Lemtrada is given intravenously, making it a more difficult sell against new pills, like the hot seller Tecfidera from Biogen ($BIIB) and Sanofi's own pill Aubagio, which the FDA approved in September and which has blockbuster potential.

Lemtrada has been approved in Europe, but even there it has run into pricing problems. The cost-effectiveness gatekeeper in the U.K. this month asked Sanofi for more data before considering recommending the drug to the National Health System for use.

The FDA decision looks to be bad news for Genzyme shareholders regardless of the path that Sanofi takes. They were slated to get additional payments of up to $14 a share by the end of 2020 if the drug hit certain milestones, Reuters reports. Those contingent value rights, or CVRs ($GCVRZ), fell 62% last month when an FDA report threw cold water on Lemtrada's chances ahead of the FDA decision. This morning they dropped about 70% to a mere 25 cents a share

- here's the release
- read the Bloomberg story
- get more from Reuters

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