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Sanofi's latest drug, Lemtrada created for treating multiple sclerosis (MS) has failed to gain U.S. approval. According to the Food and Drug Administration (FDA), clinical trials involving Lemtrada did not show that the drug's benefits outweighed the "serious adverse effects."

This setback could potentially undermine Sanofi's recent takeover of Genzyme, a biotech company. The takeover had cost the French drug manufacturing company $20 billion. The drug was at the center of the takeover. Without U.S. approval, Genzyme's shareholders could be entitled to future payments due to contingent value rights (CVRs). Based on these rights and whether or not goals are met, the shareholders could get up to $14 a share.

"Genzyme's takeover was about catching up in biologics, having a greater footprint in the United States, and largely for Lemtrada," said Eric Le Berrigaud, an analyst at Bryan Garnier & Co reported by Reuters. "This is unquestionably a setback, as without a U.S. market such a product doesn't have the same potential."

Before Sanofi sought approval for Lemtrada, the FDA had asked Sanofi to conduct more clinical trials but with different designs and methods. However, the company did not agree with the FDA's suggestions. According to the Wall Street Journal, the FDA's rejection did not come as a surprise. When the drug was reviewed in November, there were concerns over its safety. The drug was tied to increasing the risk of cancer, diabetes and autoimmune diseases.

"We are extremely disappointed with the outcome of the review and the implications for patients in the U.S. suffering with multiple sclerosis who remain in need of alternative therapies to manage a devastating disease," said Genzyme President and Chief Executive David Meeker.

Sanofi plans on seeking approval for Lemtrada in other countries. The company also plans on appealing the FDA's decision.