Опубликовано 12.06.2017 по предмету Английский язык от Гость >> <<

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The investing world is riddled with conflicts of interest that can surprise even the most sophisticated investor. Learning that lesson the hard way are holders of an instrument issued in 2011 when Sanofi, the giant French pharmaceutical company, took over Genzyme, a biotech concern based in Cambridge, Mass.
These instruments, known as contingent value rights, are popular among health care companies that do a lot of merging and acquiring. Contingent value rights entitle holders to future payments if the acquired company meets certain operational hurdles within a specified postmerger period. The payments are over and above what shareholders in the acquired company receive in the buyout.
Pharmaceutical investors often demand contingent value rights from an acquirer when they believe a drug in their company’s pipeline will generate significant future earnings. Acquirers usually agree because it helps hold down the cost of a deal and spreads the risk.
In 2011, Sanofi acquired Genzyme for $20 billion. At the time, Genzyme was conducting clinical trials of a promising multiple sclerosis treatment called Lemtrada.
A Genzyme manufacturing facility in Boston in 2010. CreditBrian Snyder/Reuters
Genzyme’s shareholders didn’t think Sanofi’s $20 billion offer reflected Lemtrada’s upside. So Sanofi agreed to issue one contingent value right for every Genzyme share in the buyout. The rights gave their holders an additional $3.8 billion if Lemtrada cleared certain hurdles. These included gaining approval by the Food and Drug Administration by March 31, 2014, and reaching specific sales targets within certain time frames.
At the time of the merger, Genzyme estimated that each contingent value right was worth $5.58. It recommended shareholders approve the deal, and they did.
Under the agreement, Sanofi would make “diligent efforts” to shepherd Lemtrada through the F.D.A. approval process and promote it as it would any drug. This set out a higher standard than Sanofi would have faced under an agreement to make only a “reasonable effort” with the drug.
The agreement also required Sanofi to “ignore any cost of potential milestone payments in working to gain regulatory approval and commercialize Lemtrada,” according to a lawsuit filed on Nov. 9 in federal court in New York.
Here is where the conflict comes in. During this period, Sanofi was developing its own multiple sclerosis drug, Aubagio, which would compete with Lemtrada.
Sanofi, therefore, had a choice. It could do what it had promised Genzyme’s shareholders: work diligently to secure F.D.A. approval of Lemtrada and market the drug. But success in these efforts had a downside: the additional $3.8 billion in payments to Genzyme rights holders.
Aubagio, by contrast, had no such downside. If Sanofi focused on developing and promoting Aubagio, it would generate profits that required no expensive payments to rights holders.
Sanofi took the second tack, investors charged in the lawsuit. In the complaint, the American Stock Transfer & Trust Company, the trustee representing the Genzyme rights holders, contended that Sanofi failed to fulfill its obligations under the deal. As a result, investors have not received at least $708 million they were owed, the suit said.

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