* Sanofi to take 7.2% stake in U.S. biotech specialist
* French drugmaker working on two COVID-19 vaccines (Writes through, adds detail, context)
By Sudip Kar-Gupta
PARIS, June 23 (Reuters) - French drugmaker Sanofi has agreed a potential $2 billion deal with U.S. biotech company Translate Bio to make vaccines, expanding their collaboration in development of an inoculation against COVID-19.
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.
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.
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.
The group is also working on another COVID-19 vaccine with Britain's GlaxoSmithKline, targeting approval in the first half of next year.
Translate Bio, meanwhile, will receive an upfront payment of $425 million, 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 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 Writing by Matthias Blamont Editing by David Goodman