By Sudip Kar-Gupta and Manas Mishra
PARIS (Reuters) - French drugmaker Sanofi <SASY.PA> has agreed a potential $2 billion vaccines deal with Translate Bio <TBIO.O>, expanding their collaboration in development of an inoculation against COVID-19 and sending the U.S. biotech company's shares soaring.
The deal strengthens Sanofi's credentials in a market engaged in a frantic race to find a safe and effective vaccine against the coronavirus disease that has killed more than 472,000 worldwide.
The companies said they would expand their partnership to develop a wide range of mRNA vaccines. The mRNA (messenger ribonucleic acid) technology, an area of Translate Bio expertise, instructs human cells to make specific proteins that produce an immune response to a disease.
Translate Bio's Nasdaq-listed shares jumped 66% on the news before receding slightly to stand at $22.91 at 1509 GMT, up 41% on the day and 190% this year. Shares in Sanofi were flat at 93 euros.
The deal will give Sanofi about 7.2% of Translate Bio and exclusive worldwide rights to develop, manufacture and sell infectious disease vaccines using the U.S. company's technology.
It also provides further validation of the mRNA approach for potential vaccines and treatments, which is also being pursued by biotech groups including BioNTech <BNTX.O>, Moderna <MRNA.O> and unlisted Curevac.
GRAPHIC: U.S. biotech shares soar - https://fingfx.thomsonreuters.com/gfx/mkt/jznvnzeyzvl/biotech.PNG
Sanofi expects its mRNA COVID-19 vaccine candidate to enter clinical trials by the end of the year and, if successful, gain regulatory approval in the second half of 2021.
In a statement sent before a virtual research and development event taking on Tuesday, Sanofi said it would be able to supply annual capacity of between 90 million and 360 million doses.
"We are at pre-clinical trials. What we do not know at this point is what the dose for the vaccine will be," Translate Bio Chief Executive Ronald Renaud told Reuters.
"We will test a range of doses, and whatever gives us the best immunogenecity and neutralising data, combined with best safety, will be the dose we take forward."
Sanofi is also working on another COVID-19 vaccine with Britain's GlaxoSmithKline <GSK.L>, targeting approval in the first half of next year.
Translate Bio will receive a $425 million upfront payment from Sanofi, comprising $300 million in cash and a common stock investment of $125 million through a private placement at $25.59 per share - a 57.6% premium to Monday's closing price of $16.24.
The U.S. biotech specialist will also be eligible for further potential milestone and other payments of up to $1.9 billion, the companies said.
The deal makes Sanofi its fourth-largest shareholder, Refinitiv data shows.
Sanofi last month sold most of its 20.6% stake in U.S. partner Regeneron <REGN.O> for more than $11 billion and said it would use the money for innovation and general growth, with financial sources telling Reuters they expected the group to engage in a series of smaller deals rather than a large acquisition.
(Reporting by Sudip Kar-Gupta and Manas Mishra; Additional reporting by Ludwig Burger; Writing by Matthias Blamont; Editing by David Goodman)