Genzyme manufactures orphan drugs that target rare genetic diseases. In July 2010, Sanofi-aventis offered to acquire Genzyme
Question:
2011, Genzyme accepted a revised offer of $74 per share in cash plus a contingent value right (CVR) worth up to $14 per share depending on the sales of Lemtrada and other milestones. (Sources: “Sanofi steps up Genzyme pursuit,” Financial Times, August 29, 2010; Genzyme Corporation media release, “Sanofi-aventis to Acquire Genzyme for $74.00 in cash per share plus contingent value right,” February 16, 2011.)
(a) Explain the asymmetry of information between Sanofi and Genzyme.
(b) How could the CVR resolve the asymmetry of information? Compare Sanofi’s valuation of the CVR with Genzyme’s valuation.
(c) Could the asymmetry be resolved directly by Sanofi inspecting Genzyme’s accounts and facilities?
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe