Dri Healthcare Trust T.DHT.UN

RBC

[retiredcf]

Sooner or later, these positive developments are going to translate into a higher SP. GLTA

March 13, 2023

DRI Healthcare Trust
Sanofi's acquisition of Provention Bio likely to aid Tzield ramp-up

TSX: DHT-U | CAD 7.28 | Outperform | Price Target CAD 16.00

Sentiment: Positive

Our view: We view the announced acquisition of Provention Bio by Sanofi as positive for Tzield ramp-up. In our view, Sanofi's acquisition of Provention Bio at a significant equity premium (+273%), reflects the strong underlying opportunity in Tzield. DRI expects the Tzield royalty transaction to close this week and it is not impacted by Sanofi's acquisition of Provention Bio. We estimate an IRR of ~16% on the Tzield royalty transaction announced by DRI last week based on a conservative ramp-up of Tzield vs. consensus, for the currently approved indication (here). We note that in a scenario with approvals in other indications and geographies, the estimated IRR on this transaction would be greater than 20%, based on consensus estimates. After Sanofi's acquisition of Provention Bio, we expect increased promotional intensity behind the Tzield launch by Sanofi and as such, see upside risks to our Tzield royalty receipt forecasts. The data readout of the Ph.III PROTECT trial will be important as it relates to expanding the patient population. We note that Sanofi's decision to acquire Provention Bio ahead of the Ph.III data read-out (top line results expected in H2/23) may suggest that Sanofi has some degree of confidence on a positive Ph.III data read-out.

Sanofi to acquire Provention Bio. This morning (3/13), Sanofi announced the acquisition of Provention Bio for $25.00 per share (+273% premium to last close of $6.70), representing an equity value of ~$2.9B. Sanofi plans to fund the acquisition with available cash resources and expects the acquisition to close in Q2/23. In October 2022, Provention Bio entered into a co-promotion agreement with Sanofi U.S. for the launch of Tzield. The co-promotion agreement was set to expire on 31-Dec-2023. Provention also received $20MM in non-refundable payment, granting Sanofi an exclusive right of first negotiation (ROFN) to in-license Tzield globally for T1D. In Feb-2023, under the previously announced purchase agreement, Sanofi purchased 2.7MM Provention Bio shares at $12.90 per share for an aggregate investment of $35MM.

Details on Tzield. Tzield (teplizumab-mzwv) is a biologic drug indicated to delay the onset of stage 3 type 1 diabetes (T1D) in adults and pediatric patients aged 8 years and older who have stage 2 (at-risk) T1D. Tzield is currently the only approved preventative treatment indicated for stage 2 T1D patients. The drug is administered by intravenous infusion once daily for 14 consecutive days. Clinical trial data demonstrated the treatment effect of Tzield in delaying T1D diagnosis in at-risk relatives of T1D patients for a median time of ~2 years. Tzield is also in late-stage clinical development for the treatment of pediatric and adolescent patients that are newly diagnosed with clinical T1D (Stage 3). A Phase 3 trial, PROTECT, is currently underway and top line results are expected in H2/2023. Additional opportunities for Tzield include re-dosing and formulations as well as new therapeutic indications. Tzield is protected by patent and regulatory exclusivity until the end of 2034.