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The Sanofi logo seen outside the company's headquarters in Paris on March 27, 2020.

FRANCK FIFE/AFP/Getty Images

Sanofi SA’s chief executive Paul Hudson is dipping into coffers filled by recent disposals to buy U.S.-based Principia Biopharma Inc. for US$3.7-billion as he fills his medicine cabinet with speciality drug prospects from smaller companies.

The acquisition, announced by the two companies on Monday, gives the French drugmaker Principia’s pipeline in autoimmune diseases. They include a drug aimed at the rare but painful skin condition pemphigus and another against multiple sclerosis that the two companies have partnered on since 2017.

Sanofi is paying US$100 per share in cash for the U.S. firm, a premium of 10 per cent to Principia’s closing price on Aug. 14, and hopes for a fourth-quarter completion.

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With Mr. Hudson at the helm Sanofi, which raised US$11.7-billion by unloading a stake in Regeneron Pharmaceuticals Inc. in May, is following a game plan he deployed when he led Novartis’s drugs division: Deploying cash to add bolt-on targets to expand in treatment areas where medicines typically command high prices.

The transaction is Hudson’s second big bolt-on purchase since becoming CEO last year, having paid US$2.5-billion in December for Synthorx, which is developing immuno-oncology treatments.

Principia’s most-advanced candidate, rilzabrutinib, is in Phase 3 trials against pemphigus, which can cause blisters or pus-filled bumps on the skin and mucous membranes and is caused when the immune system mistakenly makes antibodies that attack the body.

Phase 3 trials are on tap to use another drug candidate for multiple forms of multiple sclerosis.

“This acquisition advances our ongoing R&D transformation to accelerate development of the most promising medicines,” Mr. Hudson said in a statement.

In buying Principia’s rilzabrutinib for pemphigus and potentially other autoimmune diseases, Mr. Hudson aims to challenge Roche, whose Rituxan since 2018 has secured U.S. and European approvals against pemphigus, which historically was treated with high doses of corticosteroids.

Sanofi shares edged up 0.2 per cent, bucking a slight fall in France’s CAC-40 index, as analysts viewed the deal as positive. Sanofi shares are down 5 per cent this year, less than a third of the CAC-40′s 17-per-cent drop.

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The deal “fits within the strategy of deploying firepower across numerous bolt-on deals,” wrote brokerage Jefferies, which rates Sanofi a “buy.”

Evercore is the financial advisor to Sanofi on the deal. Centerview Partners LLC and BofA Securities are advising Principia.

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