Did Sanofi drag its feet on Lemtrada to shortchange Genzyme shareholders?

Back in 2011, when Sanofi ($SNY) acquired Genzyme for about $20 billion, it promised the company's shareholders up to $3.8 billion more tied to the then-in-development multiple sclerosis treatment Lemtrada. Things went awry in 2013 when the FDA rejected the therapy, but a new shareholder lawsuit claims that's just what Sanofi wanted.

American Stock Transfer & Trust, a trustee for the Lemtrada rights holders, is accusing Sanofi of knowingly filing an inadequate FDA application, improperly designing a postmarket safety study and then sandbagging sales of the MS therapy, all to get out of paying former Genzyme shareholders about $708 million in total.

The FDA's 2013 rejection of Lemtrada centered on what regulators said was a flawed Phase III design that failed to show a benefit outweighing the treatment's serious safety risks. Sanofi first said it planned to appeal the decision but later decided to gather more data, finally resubmitting Lemtrada in May 2014. The treatment won approval in November 2014 as a third option for MS patients, and, as analysts expected, market uptake has been slow.

But aggrieved Genzyme shareholders say that saga is less a portrait of mishandled drug development and more the evidence of a purposeful dereliction of duty. According to the lawsuit, Sanofi had every motivation to skip out on the Lemtrada milestones, which would only kick in if the intravenous treatment won approval by March 2014 and brought in at least $400 million a year.

"Sanofi took those potential milestone payments into account in evaluating Lemtrada's profitability, embarked on a slow path to FDA approval and departed from its own drug commercialization patterns and those of others in the industry," according to the complaint, which demands at least $236 million in damages.

The lawsuit claims Sanofi deliberately ignored the FDA's feedback about Lemtrada's trial design, leading to its initial rejection. Then, the company failed to establish Lemtrada's safety with a well-designed study, according to the trustee, which is to blame for the treatment's third-line indication. And finally Sanofi deliberately favored Aubagio, an oral MS treatment approved in 2012, over Lemtrada in its marketing, the lawsuit claims, neglecting to properly promote the newer therapy in an effort to shortchange Genzyme shareholders.

Making matters worse, the long-in-development Lemtrada is slated to lose patent protection in 2017, meaning Sanofi will almost certainly never have to pay any of the promised milestones, according to the trustee.

Sanofi has said it is aware of the complaint but does not comment on pending litigation.

- read the lawsuit (PDF)