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Genzyme Contingent Value Right: Count The Patients And Crunch The Numbers

Ruerd Heeg profile picture
Ruerd Heeg
3.38K Followers

The Genzyme Contingent Value Right (NASDAQ:GCVRZ) is a bet on the approval and subsequent sales of a drug against MS, alemtuzumab or Lemtrada. See for details my first SA article and Chris DeMuth's GCVRZ forum. The drug is sold by Sanofi (NASDAQ:SNY) and has been approved in the EU, Canada and Australia. Unfortunately the FDA disputes the efficacy based on concerns with respect to the trial design. See also my previous article.

Recently the FDA sent Genzyme a Complete Response Letter (CRL) in which they stated that the FDA needs to see the results of an additional trial before approving alemtuzumab. As a result I think it is unlikely that the drug will ever be approved by the FDA. This means that it is less likely that the sales milestones will be met. The question is, of course, how much less likely. With a proper assessment one can earn a lot of money since the CVR costs about $0.37 and pays out $2 if the first sales milestone will be achieved.

Consequences of the FDA CRL

Sadly for the MS patients in the US, the FDA opinion on alemtuzumab is internationally an exception. The FDA implicitly says in its CRL that the results of the phase III trials could be attributed to the placebo effect. It also denies the significance of more objectively measured data from MRI scans. As I pointed out in a comment on my previous article, MRI data from the phase III trials shows statistically significant differences with the control group and is thus contradicting the FDA opinion. So the arguments for not approving alemtuzumab are very weak. But, when the FDA does not approve a medicine this usually gives a blow to the sales outside the US as well. That may be the case here, which is one of the risks of this investment. However, I think it

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Ruerd Heeg profile picture
3.38K Followers
As a mathematician (Ph.D.) I use 7 quantitative strategies with statistically extremely high returns. I select these cheap companies with software comparing thousands of global stocks on value metrics, liquidity, quality metrics, and momentum. I focus on global nanocaps and net-nets. Check Turning Rough Stones: turningroughstones.substack.com

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