A Company formed to provide pharmacy benefits management (PBM) services issued convertible promissory notes to a third party in accordance with a note purchase agreement. The third party had the option of converting the entire principal balance of the notes to equity any time prior to the notes maturity date, but never did.
The Company attempted several times to settle the notes, but the third party refused to accept payment and release its liens on the Company’s assets impacting the Company’s ability to borrow and grow its business.
PBM companies manage prescription drug spending for a large portion of the insured population through the administration of pharmacy benefit programs for self-insured employers, managed care organizations, government entities, insurance carriers and other payors, including third-party administrators, labor unions, and health and welfare plans. PBM companies function as intermediaries between the pharmaceutical companies that manufacture and market drugs, the physicians that prescribe the drugs, and the retail pharmacies that dispense them.
The Company also provides services under the 340B program, which is a federal program that requires drug manufacturers to provide outpatient drugs at significantly reduced prices to government and non-profit entities that serve the nation’s most vulnerable patient populations.
Work included an historical analysis of the Company’s financial performance before the maturity date, a review of related party transactions, and calculations of the Company’s implied equity value considering various approaches and necessary discounts for lack of control and marketability based on generally accepted valuation methodology. Additional work included identifying the ethical obligations of Certified Public Accountants.
Scott Bayley issued an expert report and a supplemental rebuttal report which assisted the trier of fact in granting the Company’s motion for summary judgment.