- Sanofi agreed to pay former shareholders of the acquired company Genzyme $315 million to settle claims that the French pharma deliberately slowed development of a multiple sclerosis drug to avoid additional compensation based on regulatory and sales milestones.
- The Genzyme shareholders were due a minimum of $708 million and as much as $3.8 billion based on how quickly the drug, Lemtrada, achieved Food and Drug Administration approval and reached certain annual sales goals, the plaintiffs argued.
- Sanofi promised the payouts through a mechanism called a "contingent value right" in order to resolve a dispute over the future value of Lemtrada as it sought to complete the $20.1 billion buyout of Genzyme in 2011.
Contingent value rights, or CVRs, are a tool sometimes used in acquisitions to iron out the differing views on the value of certain assets.
When Sanofi bought Genzyme, Lemtrada (alemtuzumab) was still in development and wouldn't get European approval until 2013 and FDA approval until 2014. Genzyme shareholders got one tradable CVR for every share of Genzyme they owned.
That FDA approval missed the CVR target date by more than eight months, denying the former Genzyme shareholders a $1 per share payout to add to the $74 they received for the original acquisition.
In addition, Sanofi subsequently notified CVR holders that they missed an initial sales target of $400 million annually and would miss subsequent sales targets. That would have added up to $12 a share.
In 2015, the American Stock Transfer & Trust Company, the trustee of the CVRs, filed a lawsuit claiming breach of contract. The suit claimed Sanofi filed a poor application to the FDA that triggered an initial rejection — leading to the missed approval deadline — and then failed to support Lemtrada commercially so it would miss sales targets.
The $315 million payout settles the claims, and the CVRs will now be removed from stock exchanges and extinguished. UMB Bank has replaced American Stock Transfer and Trust as the trustee.
Lemtrada sales hit 223 million euros ($248 million) for the first nine months of 2019, down 28% from the same period in 2018, Sanofi reported today.
That was not a focus of Sanofi's earnings, which showed sales of the asthma and eczema treatment Dupixent (dupilumab) met investor expectations at 570 million euros in the third quarter, reflecting growth of 142% for the quarter.
However, sales of cholesterol-lowering drug Praluent (alirocumab) shrank 12% in the third quarter when compared to 2018, to 61 million euros. Over the first nine months of 2019, Praluent sales held mostly steady compared to 2018, totaling 183 million euros.