Grifols to sue Gotham City Research for financial and reputational damage

Grifols is to take legal action against the hedge fund Gotham City Research for the "significant damage caused" to the Catalan pharmaceutical company's finances and reputation. 

In a statement sent to Spain's National Securities Market Commission (CNMV) on Wednesday morning, Grifols also justified taking the hedge fund to court for "causing great concern" to its patients and donors, as well as to its stakeholders. 

Grifols assured that its board of directors "fully supports" the current CEO and executive chairperson of the company, Thomas Glanzmann, and reiterated that all the transactions in question were "unanimously approved" by the board. 

Shares in the Barcelona-based multinational closed with losses of 26.91% on Tuesday after a report from Gotham City Research accused it of "manipulating reported debt and [earnings] to artificially reduce reported leverage." 

Accusations addressed

Grifols addressed several of Gotham City Research's accusations in its statement to the CNMV.  

Regarding the purchase of plasma centers at supposedly inflated prices, the company said that cost reflected "not only the price of the assets but also their ability to generate profits." 

It is "difficult to understand if you don't have the right information," the statement said. 

Grifols reiterated its commitment to acquiring "already mature" centers and claimed that the fee paid per liter was in line with market rates and reports from third parties. 

With respect to the payment of €124.1m to the US firm ImmunoTek, Grifols explained that it was an advance payment towards the construction and development of twenty new centers and that it was included correctly in its annual accounts. 

The contract and accounts were audited and reflected in the company's books, it added. 

The Catalan company also said that the agreement with ImmunoTek stipulates that the American firm will be responsible for erecting the buildings and developing them, and that Grifols has the option to acquire them three years after operations begin.

Therefore, Grifols "will not be obliged to fund the centers' launch or the plasma obtained during the first two years." 

Shares "uninvestable"

The Gotham City Research report published on Tuesday said that Grifols' shares were "uninvestable, likely zero," and argued that if their estimate of the drugmaker's true leverage was correct, it would face "notably higher financing costs." 

The hedge fund said it believes that Grifols' debt is closer to 10x-13x, rather than the reported leverage of 6x. 

Grifols defends integrity 

Grifols defended its "transparency, integrity and ethical conduct" in a statement on Tuesday following the allegations. 

"We categorically deny and reject any accusation of accounting practices or erroneous information in our consolidated financial statements," the company said. 

In another statement published later on Tuesday, Grifols said that "the only thing" that Gotham City Research intended with its report was to "lower the share price to make a profit."