What Might Sanofi SA (ADR) (NYSE:SNY) Mean For Flexion Therapeutics (NASDAQ:FLXN)?

Flexion Therapeutics (NASDAQ:FLXN) is one of the days biggest movers as we head into the end of the week, with the company benefiting from as yet unconfirmed reports that the company is set to be acquired by  big pharma. We reiterate that these are as yet unsubstantiated claims, and as many readers will be aware, these sorts of reports often prove baseless, but as readers will also know, the claims alone are generally enough to get things moving (as we’ve seen here), so truthful or not, they are a relevant input from a pricing perspective.

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With this in mind, here’s a look at what the reports are hinting at, who is involved, and what each party stands to gain from any transaction.

So, we’ve mentioned Flexion. For those not familiar with Flexion, it’s a development stage biotechnology entity that’s working on the development of a lead asset called Zilretta. Zilretta is a drug designed to treat osteoarthritis of the knee. This is the most common form of arthritis, and it is often described as a sort of wear and tear condition. Basically, the cartilage in the knee deteriorates and this translates to the painful rubbing together of the bones in the knee joint. In the US alone, there are around 14 million sufferers, and many of these find the current standard of care treatments either insufficient in reducing and alleviating pain, or just no good altogether. There’s a big unmet need for an alternative therapy, and it’s this unmet need that Flexion is trying to fill with Zilretta. The drug isn’t really anything revolutionary, it’s an extended release formulation of an already approved drug called triamcinolone acetonide, which is used currently as an inflammatory and pain management drug in a variety of formulations. Flexion has taken this drug, mixed it with what’s called a poly lactic-co-glycolic acid (PLGA) matrix, and packaged it in a Zilretta shaped bundle.

The company put its through its paces as part of a pretty rigorous development program, and it performed pretty well. It’s a 505(b)(2) application, which expedites things a little, and the company submitted an NDA back in December. The FDA accepted the submission, and put a PDUFA date on the drug of October 6, this year.

So that’s where things stand, what are all the rumors?

Well, apparently, big pharma is circling to pick up an exposure to the Zilretta asset. It’s not too much of a surprise – this could be a blockbuster drug – but that there looks to be activity ahead of the FDA making its decision is interesting. These companies don’t just pick up an asset like this without properly investigating its potential for approval, and if the rumors are to be believed that someone wants to buy Flexion ahead of PDUFA, then it suggests said someone has decided that the drug is going to get approved, and we can assume that they’ve made this decision on the back of some very resource heavy due diligence.

So who is the reported suitor?

As we’ve said, this is as yet unsubstantiated, but the word is that the interested party right now is Sanofi SA (ADR) (NYSE:SNY), and that Sanofi is looking to pay in excess of $1 billion for Flexion and (by proxy) Zilretta.

Prior to the rumors hitting press, Flexion was priced at a little less than $20 a share, for a market capitalization somewhere in the region of $600 million. Subsequent to the reports that Sanofi is looking to swoop in and pick up the company, and likely on the back of the suggestions that the former is willing to pay more than $1 billion for the latter, Flexion’s market capitalization has soared. The company now trades for a little over $26 a piece, equating to a market cap of close to $840 million.

So that’s more than $200 million in value appreciation, essentially overnight, on the back of a report in the financial press that someone is interested in the company and its assets.

That’s biotech for you.

We’re going to wait and see how things play out from here before forming a bias on the stock. We’ll keep readers posted.

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