In a case that has drawn significant media coverage, Sidley helped litigation counsel, Paul Weiss, secure a major victory for global healthcare group Fresenius SE & Co. when the Delaware Court of Chancery ruled that Fresenius was justified in canceling its $4.75 billion acquisition of specialty generics pharmaceutical manufacturer Akorn, Inc. The ruling is the first-ever affirmation of the termination of a merger agreement in a Delaware court based on a “Material Adverse Effect” (MAE).
After entering into the merger agreement with Akorn, Fresenius received anonymous letters alleging data integrity issues involving several products at various facilities. Vice Chancellor J. Travis Laster found that Akorn effectively did nothing to investigate the allegations. “Fresenius, by contrast, conducted a real investigation. Fresenius turned to the FDA Enforcement and Compliance Group at Sidley Austin LLP.”
The Sidley team, working with technical experts, visited multiple Akorn facilities to interview employees and forensically analyze data. Vice Chancellor Laster found that Nathan Sheers, the Sidley lawyer leading the investigative team, persuasively testified at trial about the “appropriately professional” investigation and its conclusion that “FDA would consider all of the products that were made in those facilities adulterated.” The lead technical expert supporting the Sidley team, who also testified at trial, was found by Vice Chancellor Laster “to be among the most credible witnesses I have seen in court.”
The court upheld Fresenius’s termination of the merger agreement: “Fresenius’s investigation uncovered serious and pervasive data integrity problems that rendered Akorn’s representations about its regulatory compliance sufficiently inaccurate that the deviation between Akorn’s actual condition and its as-represented condition would reasonably be expected to result in a Material Adverse Effect.”
The Sidley investigative team, comprising lawyers from the firm’s Food, Drug and Medical Device Compliance and Enforcement practice, was led by partners Nathan Sheers and Jeffrey Senger, in Washington, D.C., and associates Hilary Hoffman in New York, and Marina Romani and Faraz Siddiqui in Washington, D.C. The investigative team was supported by Sidley’s litigation group as the matter proceeded to trial. The Litigation team was led by Robert Keeling and included Kyle Fiet, Kristen Knapp, Ray Mangum, Ava Guo, Michael Buschbacher, Matt Letten and Heather Irwin, all in Washington, D.C. or New York. William Sarraille and Trevor Wear, who have long represented Fresenius Kabi in healthcare matters, oversee the client relationship.