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After seven months of public bickering over an appropriate sale price, the NY Time reports today that Sanofi Aventis may have hammered out a deal that would enable the French drug maker to acquire the world’s largest orphan drug manufacturer Genzyme for $19 billion. According to the report, Sanofi will acquire Genzyme for a $74 per share which is up from it previous offer of $69 per share.

Most analysts and the Genzyme management team felt that the previous $69 per share offer was too low and that the tipping price would be in the mid 70s. This made sense even to outsiders like me because Eli Lilly purchased ImClone, a company with only one approved product on the market, for $70 per share several years ago. Genzyme has multiple FDA-approved products with a strong late stage drug development pipeline. Not surprisingly, Sanofi tendered a low initial stock price purchase offer to give itself flexibility when it decided to enter into serious negotiations.

Despite the long drawn out and tiresome melodrama, the deal is a good one for Sanofi, a company that desperately needs to bolster its biotechnology pipeline and also for Genzyme which has been rocked by biomanufacturing and quality problems for the past couple of years.

Now that this deal is imminent, does anyone have an idea about which biotechnology company may be the next takeover target?

Until next time..

Good Luck and Good Job Hunting!!!!!!!!

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The buzz at the JP Morgan Healthcare Conference that is taking place in San Francisco this week is that Sanofi-Aventis and Genzyme are close to inking a deal. As you may recall, Sanofi made an unsolicited offer last summer to buy the troubled orphan drug manufacturer. Sanofi offered to purchase Genzyme for $69 per share but the offer was summarily rejected as “too low” by Henri Termeer, Genzyme’s embattled CEO who has been running the company for over 20 years since its inception.

The very public and often acrimonious haggling over the purchase price has become legion in some investment banking and bioventure circles. Nevertheless, most industry and financial analysts predict that Sanofi will prevail and ultimately acquire Genzyme possibly for a share price in the low to mid $70s.  Sanofi desperately needs Genzyme to get into the biotechnology fracas; a field that it seemingly chose to largely ignore for the past 20 years--go figure!  Consequently, it is likely that Sanofi will eventually give Genzyme everything it wants to consummate the deal

Yet, despite progress being reported from the conference, Termeer and Sanofi Aventis CEO Chris Viehbacher haven’t met face-to-face to discuss the terms of a possible deal. However, Viehbacher did mention that Sanofi was “still committed” to purchasing Genzyme.

Stay tuned for the next installment of the saga.

Until next time...

Good Luck and Good Job Hunting!!!!!!!!

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Yesterday, Genzyme announced it would cut about 1,000 jobs worldwide as part of a restructuring plan. In addition, company spokespersons indicated that the company may outsource some of the eliminated permanent position and impose a hiring freeze. As part of its restructuring plan, the company plans on eliminating about 10 percent of its 12,800-employee workforce by 2012. It is unclear how many of the 4,500 US employees will lose their jobs.

In addition to the job cuts, the company announced that it had agreed to sell its diagnostic testing unit (reproductive and genetic testing) to Laboratory Corp of America for $925 million in cash. Henri Termeer, Genzyme’s beleaguered CEO also announced that the company’s other two units, molecular diagnostics and pharmaceutical ingredient manufacturing on also on the block and will be sold.

While Termeer insists that the job cuts and sale of non-core business units has nothing to do with Sanofi-Aventis’ attempt to purchase the company, many analysts believe that these measures are being taken to induce Sanofi to sweeten its $69 per share takeover bid. The additional monies garnered from the layoffs and division sales, will allow Genzyme to strengthen its stock position and bolster its cash reserves to defend against a possible hostile takeover attempt by Sanofi. 

The demise of Genzyme, once one of the most highly regarded and ethical biotechnology company in the world is directly linked to manufacturing problems at its Boston-based facility. The ongoing and protracted quality problems at the plant resulted in a consent decree by the US FDA and penalties totaling about $175 million. As most quality experts will tell you, systemic quality control and assurance issues generally stem from a lack of commitment to quality by senior management; in this case Termeer! 

Despite repeated request for his resignation, Termeer, who has run Genzyme for the past 25 years or so, has steadfastly refused to relinquish his post. Instead of stepping down to save the company, Termeer has chosen to “take the ship” down with him; the sure sign of an out-of-touch CEO who apparently was willing to sacrifice the reputation and worth of a company for entirely self-serving reasons.

Until next time...

Good Luck and Good Job Hunting

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The Boston Globe reported today that this morning Henri Termeer, the embattled CEO of Cambridge, MA based Genzyme acknowledged for the first time that company was indeed up for sale. However, he was quick to point out that the $69 per share or $18.8 billion takeover bid from Sanofi Aventis was insufficient.

Over the past few days, Sanofi Aventis’ CEO Christopher A. Viehbacher turned up the heat on Termeer; forcing him to possibly take Sanofi’s latest offer directly to Genzyme shareholders. While Termeer acknowledged that the company was for sale, he hinted that other companies may join the bidding war to get the $75 per share price that the Genzyme board is seeking. 

The Sanofi Aventis-Genzyme situation is beginning to resemble the Bristol Myers Squibb (BMS)-ImClone standoff of two years ago. As you may recall, Jim Cornelius—BMS CEO at the time—publicly and repeatedly offered a “low-ball” price ($62 per share) to purchase ImClone despite admonishments from Carl Icahn, ImClone’s Chairman. As negotiations stalled, Icahn told Cornelius that there were other suitors who were willing to pay a higher price to acquire ImClone. Surprisingly, rather than continuing to negotiate in good faith, Cornelius decided to call Icahn’s “bluff.” In less than a week, Eli Lilly purchased ImClone for $70 per share ($6.5 billion); the price that Ichan had previously and publicly asked for to purchase the company.

Many of you already know that Icahn holds a substantial minority Genzyme stock position and is represented by two current Genzyme board members. That said, if I were Sanofi’s Viehbacher, I would proceed with extreme caution in future negotiations. Like him or not, Icahn is a financial genius and second-to-none negotiating M&A deals. 

Maybe Viehbacher ought to contact Cornelius for advice? Oh yeah...Cornelius retired as CEO earlier this year but he is still Chairman of the BMS Board of Directors. Maybe it is worth a call?

Stay tuned for new developments as the saga continues.

Until next time...

Good Luck and Good Job Hunting!!!!!

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The New York Times reported today that French drug maker Sanofi Aventis has made a bid to purchase beleaguered orphan drug manufacturer Genzyme. According to the report, Sanofi approached Genzyme about two weeks ago about a possible sale. Sanofi is currently waiting for a response from Genzyme. If Genzyme rebuffs the takeover bid, persons close to the deal said that Sanofi may possibly try to acquire Genzyme via a hostile takeover bid.

Sanofi is facing revenue losses because many of its blockbuster products including the anti-clotting agents Plavix and Lovenox will or have lost patent protection. Plavix's patent expiry will occur in 2001 whereas Lovenox has already lost patent protection ( yesterday the FDA approved a generic version of the drug). Further, Sanofi, unlike most major pharmaceutical companies, is glaringly deficient in biotechnology products and has long been known to be seeking a quick entry into the biotech market. To that end, the Genzyme bid makes complete strategic sense to bolster sales and secure Sanofi's future.

Genzyme is the fifth largest biotechnology company in the world. Sales of it orphan drugs to treat Gaucher’s, Fabry and Pompe disease annually exceed $3.0 billion in sales even though they are used to treat small numbers of patients (<20,000).

Genzyme’s value has plummeted in the past year because of manufacturing problems and is currently operating under a US Food and Drug Administration consent decree after being fined $175 million by the agency. Many shareholders have called for the dismissal of Henri Termeer, Genzyme’s CEO for the past 25 years. To date, Termeer has refused to step down even though Genzyme’s stock continues to under perform. News of a possible takeover caused Genzyme’s stock price to soar; gaining more than 15 per cent on Friday to $62.50.

I believe that Sanofi is approaching Genzyme at the right time. Recently, Genzyme reached an agreement with Carl Icahn, who owns a substantially amount of stock, to prevent a proxy battle to reshape Genzyme’s board and oust Termeer. Also, another major shareholder, Ralph Whitworth, is unhappy with recent events at the company. Sanofi’s acquisition of Genzyme would provide a quick entry into the biotechnology and orphan drug markets and also appease shareholders like Icahn and Whitworth if the deal is rich enough. Also, Sanofi’s manufacturing experience would help Genzyme overcome its problems in that area.

Stay tuned for updates.

Until next time...

Good Luck and Good Job Hunting!!!!!!!!

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After weeks of bad press regarding manufacturing problems and a narrowly-averted proxy contest, Genzyme today announced that its experimental drug for multiple sclerosis, alemtuzumab, received fast track approval status from the US Food and Drug Administration (FDA).

Alemtuzumab (marketed as Campath, MabCampath or Campath-1H) is a monoclonal antibody used in the treatment of chronic lymphocytic leukemia (CLL), cutaneous T-cell lymphoma (CTCL) and T-cell lymphoma. Alemtuzumab targets CD52, a protein present on the surface of mature lymphocytes, but not on the stem cells from which these lymphocytes are derived.

For those of you who may not know, FDA grants fast track status to experimental drug candidates that are designed to treat serious diseases, and may be superior to current treatments. Fast track status includes an expedited review and additional collaboration between Genzyme and the and the agency and allows Genzyme to submit portions of the alemtuzumab BLA as they are completed, rather than waiting to submit the completed application when testing is finished.

Until next time..

Good Luck and Good Job Hunting!!!

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Genzyme announced yesterday that it had reached an agreement with Carl Icahn to settle their very public and bitter proxy battle. As you may recall, Icahn, who controls approximately 4.9% of shares in Genzyme, sought to replace Henri A. Termeer, Genzyme’s embattled long-time CEO and three other company directors.

Under the terms of the agreement, Icahn will withdraw his slate of four nominees for the Genzyme board of directors and vote his shares in favor of two company nominees. Also, the Genzyme board will appoint two Icahn nominees Steven Burakoff, MD and Eric Ende, MD to serve as directors immediately following the company June 16, 2010 annual shareholders meeting. Dr. Burakoff is Professor of Medicine, Hematology and Medical Oncology at the Mount Sinai School of Medicine and Director of the Tisch Cancer Institute at the Mount Sinai Medical Center. Dr. Ende, a participant in the Icahn funds’ proxy solicitation, is a former biotechnology analyst with Merrill Lynch & Co. Inc.

This isn’t the first time that Icahn has threatened a proxy fight to get his nominees elected to the board of directors at companies where he controls a small but significant amount of outstanding shares of stock.  Previously, he attempted to wrest control of the Biogen and ImClone and Enzon Pharmaceuticals board of directors. While his attempt to commandeer the Biogen board failed, he was successful at ImClone, the maker of the anti-colon cancer drug Erbitux that he sold to Eli Lilly in 2008 for ca. $6.1 billion. In Enzon’s case, the CEO resigned about six months after accommodating Icahn’s demands.

It is patently obvious that biotechnology company executives don’t want Icahn to gain control of their companies. This is because once Icahn gains control of the companies he sells them to the highest bidder. While this may make sense to a financial guy like Carl, it doesn’t sit well with company executives who understand that they will likely lose their jobs once a company is sold! 

Although Carl’s public proxy contest strategy usually gets him most of what he wants, I am not sure that it is in the best interests of company stock price and shareholder. Publicly airing a company’s dirty laundry tends to reduce shareholder confidence and may push its stock price lower than necessary. I think that it may be in a company’s best interest to quietly negotiate with Icahn behind the scenes rather than take the fight to the public. In the end, Icahn invariably wins and the management team that is under fire may look less competent or weaker than it actually is. Biogen ultimately won but Enzon and Genzyme lost the public opinion battle.

Until next time...

Good Luck and Good Job Hunting!!!!!!!!

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Beleaguered orphan drug manufacturer Genzyme responded to Carl Icahn’s attempt to remove current board members through a proxy fight by issuing a statement announcing a $2.0 billion stock buyback program. Also, the company announced that it would sell or spin off its underperforming genetic testing, diagnostics and pharmaceutical ingredient manufacturing divisions. Both initiatives were announced in an attempt to fend off Icahn’s current assault on the company.

Genzyme spokespersons stated that the company will repurchase $1.0 billion worth of stock in the near term and finance it with debt. An addition $1.0 billion of stock will be purchased over the next year, Genzyme said. While financial analyst believe that the announcement will please shareholders, it is unlikely to ward off the Icahn plan to wrest control of the company away from embattled CEO Henri Termeer.

Until next time..

Good Luck and Good Job Hunting!!!!!!

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Carl Icahn, who controls about 4.9% of the outstanding shares of Genzyme’s stock, is trying to get himself and three persons loyal to him elected to the Genzyme board of directors via a proxy fight. 

Icahn has publicly stated that embattled Genzyme CEO, Henri Termeer must go after running the company for the past 25 years. Icahn contends that Termeer has made many bad decisions during his tenure and the recent highly publicized manufacturing problems at the company are causing Genzyme’s stock to plummet.

Icahn’s slate of proposed board members include himself, Dr. Richard C. Mulligan, a molecular biologist at Harvard Medical School, Dr. Alexander J. Denner an Icahn confidant and Dr. Stephen J. Burakoff, Director of the Tish Cancer Center at Mount Sinai School of Medicine in New York. If elected the Icahn slate will replace Mr. Termeer, are Connie Mack III, a former United States senator; Richard F. Syron, the former chief executive of Freddie Mac and of Thermo Electron, a scientific instrument company; and Charles L. Cooney, a professor of chemical and biochemical engineering at the Massachusetts Institute of Technology.

As many of you may know, Icahn, who is always referred to as an “activist investor” is no stranger to proxy fights or controversy. Previously, he attempted to oust members of the Biogen-IDEC board of directors—an underperforming company according to Icahn—and more recently, publicly out-maneuvered and humiliated Bristol-Myers Squibb (BMS) CEO Jim Cornelius by selling ImClone—a long-time BMS co-marketing partner of the blockbuster colorectal cancer drug Erbitux— to Eli Lilly.

Over the years, I have been a staunch critic of Icahn. However, I am beginning to realize that there is a “method to his madness” and surprisingly, things always seem to change for the better at companies that are on his radar screen. Like him or not, Icahn demands performance from the companies that he invests in and will relentlessly work on behalf of himself and other shareholders to get the ROI that he expects.

Until next time,

Good Luck and Good Job Hunting!!!!!!!

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Genzyme announced yesterday that it expects to be fined roughly $175 million in fines and penalties related to the manufacturing troubles at its Allston Landing, MA manufacturing plant that resulted in severe shortages of two of its best selling products, Cerezyme (Gaucher disease) and Fabrazyme (Fabry disease) 

The fines and penalties are part of a consent decree that the US Food and Drug Administration (FDA) intends to levy against the company for the manufacturing infractions. A substantial portion of the penalties included a disgorgement settlement, a process that allows FDA to collect a certain percentage of the sales of products made at the troubled Genzyme production facility.

According to an article in today’s New York Times business section, Genzyme representatives said that patients using Cerezyme would continue getting half a dose for two or three more months. It previously said full supplies would be restored May.

Patients who use Fabrazyme would continue to be allocated a third of their usual dose at least through the third quarter. The company had previously hoped to resolve the Fabrazyme shortage in the third quarter.

The highly publicized manufacturing problems at Genzyme, has shaken both physician and patient confidence in the company’s ability to safely manufacture and supply sufficient quantities of Cerezyme and Fabrazyme; two orphan drugs designed to treat patients with debilitating genetically-inherited diseases. 

Several physicians and patients who were previously loyal and ardent supporters of Genzyme, have indicated that they may switch to recently approved and new treatments being developed by Genzyme’s competitors that include Shire.

The lack of commitment to quality manufacturing by Genzyme executives has seriously tarnished the image of a once highly respected and reputable orphan drug developer.

Until next time…

Good Luck and Good Job Hunting!!!!!

Until next time…

Good Luck and Good Job Hunting!!!!!!!   

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The recent manufacturing woes of orphan drug manufacturer Genzyme have been well documented and widely publicized. These problems resulted in massive shortages of some of its top selling drugs Cerezyme (Gaucher disease) and Fabrazyme (Fabry disease) causing many of the patients who depend on these drugs to maintain their quality of life to go without reduced or no treatments for months. 

Because both drugs were approved by the US Food and Drug Administration (FDA) as orphan drugs they enjoy seven years of market exclusivity from the date of regulatory approval which prohibits other companies from seeking approval and selling similar drugs in the US. Consequently, Genzyme is the only commercially-available source for the drugs. Genzyme’s ongoing biomanufacturing created massive shortages of both drugs last summer. Because of this, FDA allowed two other companies, Shire and Protolix Biotherapeutics (both have treatments for Gaucher (Protalix) and Fabry (Shire) disease in late stage clinical development), to make their drugs available (at no charge) to patients prior to regulatory approval. This was a relatively rare and bold move by the agency. But, to be fair, they had little choice because so many patients were suffering.  

In case you may be wondering there are approximately 1500 Cerezyme users and fewer than 1000 Fabrazyme users in the US. Despite the small numbers of patients, the cost of the treatments are extraordinarily high; costing patients as much as $200,000 per year for treatment.

According to an article in today’s NY Times as many a 15 percent of American Cerezyme users have switched to a different drug. Fewer patients with Fabry disease have switched mostly because Shire’s drug for Fabry disease Replagal was less widely available. The almost year-long shortages of both drugs have seriously tarnished Genzyme’s reputation. And previously loyal patients are questioning their almost decade long allegiance to the company. This, coupled with a 26 per cent decline in Genzyme’s stock price last year suggest that Genzyme’s standing as one of the top five biotechnology companies in the world may be in serious jeopardy. 

Despite calls for his resignation (and an attempt by Carl Icahn to wrest control of the company), CEO Henri A. Termeer, who has led Genzyme for over 20 years has vowed not to resign. While manufacturing problems are not uncommon in the biotechnology industry, the severity and ongoing nature of the manufacturing problems at Genzyme’s Allston Landing, MA production facility are unacceptable; especially for a company that specializes and prides itself in developing treatment for orphan disease indications. The FDA recently announced that it would fine Genzyme and place its manufacturing operations under a consent degree for an indefinite period of time.

Genzyme representatives now contend full supplies of Cerezyme will be available after May 1 and those for Fabrazyme possible in the third quarter of this year.

While so-called “copycat” or “me too” drugs developed by pharmaceutical companies tend to be vilified by consumers and patient advocacy groups, the agency prefers to approve more than one treatment option for a given disease indication in case one medication doesn’t deliver the intended therapeutic benefits or induces untoward adverse events. Unfortunately, the seven years of market exclusivity awarded to orphan drugs manufacturers that garner regulatory approval for their products prohibits this. The biomanufacturing fiasco at Genzyme suggests that it may be time to reexamine the Orphan Drug Act and modify some of the financial and regulatory terms that were included to induce drug companies to develop new treatments for orphan disease indications.

Until next time…

Good Luck and Good Job Hunting!!!!!!!

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Carl Ichan, the billionaire, activist investor notified Genzyme that he will seek shareholder approval to seat four handpicked directors including himself to be appointed to the company’s board of directors in an attempt to remove embattled Chairman and CEO Henri Termeer who has led the company for the past 25 years.

The move was widely anticipated by industry analysts because Icahn own one percent of outstanding shares of Genzyme’s stock.  Icahn and other large shareholders believe the company would be better off under new leadership. Termeer has publicly stated that he has no intention of resigning.

Until recently, Genzyme’s standing and reputation in the biopharmaceutical and orphan drug industry was second-to-none. However, the company’s inability to quickly correct ongoing manufacturing problems at its biomanufacturing facilities for the past year has been extremely embarrassing and costly. Sloppy manufacturing and quality control problems this past year led to major shortages of two main products, Cerezyme and Fabrazyme. Consequently, in 2009 sales revenues dropped and company earnings were almost flat. Further, Genzyme shares lost 26% of their value in 2009, sinking to a five-year low.

Icahn is no stranger to hostile corporate takeovers and company sales. In spring of 2008, he unsuccessfully tried to gain control of the Biogen/Idec board to force the sale of the company (Ichan owns 5.6% of Biogen/Idec’s outstanding shares). Later that year, Icahn engineered the sale of ImClone to Eli Lilly for $7.0 billion; after getting into a very public and often acrimonious fight with Bristol-Myers Squibb CEO Jim Cornelius who tendered a “low-ball offer” (according to Icahn) to purchase ImClone.

According to my calculations, Icahn is batting .500 for his recent corporate takeover attempts. Do you think he will be able to go 2-for-3? I bet Henri Termeer is hoping that he can’t!

Until next time...

Good Luck and Good Job Hunting!!!!!!!!!!

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While Genzyme has begun to address its manufacturing woes and its CEO and top leadership have managed to keep their jobs, the specter of a possible forced sale of the company has emerged. This is because Carl Icahn, the billionaire, activist investor with a history of forcing the sale of financially-challenged and underperforming public biopharmaceutical companies like ImClone and MedImmune, owns 1 percent of the outstanding shares of Genzyme.

Speculation is rife that Icahn and Ralph Whitworth, a founder of Relational Investors which owns 4 percent of Genzyme’s stock, may force the company to put itself up for sale. While many experts contend that this may not be in the best financial interests of Icahn and Whitworth (or other institutional investors), the threat may allow both men to get themselves or their representatives on Genzyme’s board. This would allow them to control the direction of the company and better position the company (the fifth largest biotechnology company in the world) for future sale. Henri Termeer, Genzyme’s embattle CEO, said he has had no contact with Icahn.

Investors have not been pleased with Genzyme’s current management team’s decision to plow profits from its orphan disease business into R&D activities that have been unsuccessful. According to a recent Citigroup financial report, the company may have squandered over $1.0 billion (throughout its history) by investing into unprofitable, non-core research areas including kidney disease diagnostics and surgical products. Conventional wisdom suggests that if Icahn and Whitworth gain control of the Genzyme board that they could sell off Genzyme’s unprofitable kidney disease and surgical lines which would allow management to focus on orphan diseases drug development and allow the company to fix its recent highly publicized manufacturing problems.  Relational’s Whitworth hinted that this is one scenario that he may be interested in pursuing. To date, Icahn has been uncharacteristically mute on a possible takeover attempt.

Stayed tuned for more details.

Until next time....

Good Luck and Good Job Hunting!!!!!! (try Genzyme, they are probably looking for a few good biomanufacturing executives and managers)  

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