Genzyme Oks $2B Buyback, Mulls Options For 3 Units

From Associated Press (May 6, 2010)

CAMBRIDGE, Mass. -- Biotechnology company Genzyme Corp. said Thursday its board of directors approved a $2 billion stock buyback program and the company said it will explore strategic alternatives for three businesses.

Under the buyback plan, $1 billion of stock will be repurchased in the near term and financed with debt. The additional $1 billion will be repurchased over the next 12 months. Genzyme has about 266.3 million shares outstanding.

The company said it plans to pursue strategic alternatives for its genetic testing, diagnostic products, and pharmaceutical intermediates businesses. Options could include divestiture, spin-out, or management buy-out.

The buyback plan and potential sale of several units follows a first-quarter loss as the company reels from manufacturing problems at its plant in the Allston neighborhood of Boston.

Viral contamination and other problems the plant forced Genzyme to shut down production for about three months in 2009. Later in the year, the FDA discovered particles of trash in some of the company's drugs. The production problems cut off full production of the drugs Cerezyme and Fabrazyme, which treat rare hereditary illnesses.

Genzyme had to pay a $175 million government fine in the first quarter, and the company is seeking approval to open a new facility in Framingham, Mass. Still, Genzyme said in April that for the next two to three months, it still will only be able to ship enough Cerezyme to meet half of global demand.

The company also said it wouldn't be able to ship more than 30 percent of Fabrazyme demand through the third quarter, which will continue to depress sales. The company's new Framingham manufacturing plant isn't expected to be approved until late 2011.

Cerezyme is a treatment for Gaucher disease, an enzyme disorder that can cause liver and neurological problems. Fabrazyme treats Fabry disease, which is caused by the buildup of a particular type of fat in the body's cells.

Genzyme has been restructuring its management over the course of the year. Since the manufacturing problems surfaced, the company named a new president of global manufacturing and corporate operations, along with a senior vice president of global product quality. It also contracted out manufacturing for some of its key products.

In March the company named David Meeker to the newly created position of chief operating officer.

In April, the company elected Ralph Whitworth to the board of directors as part of a deal with Relational Investors LLC. Whitworth is the principal and co-founder of Relational, which is a $6 billion private investment fund and one of Genzyme's largest shareholders.

The company also said it was committed to nominating an additional independent director to the board.

The board addition comes as activist investor Carl Icahn attempts to gain control of the board.

Genzyme's annual meeting is scheduled for June 16.

Shares of Genzyme rose 53 cents to $53.56 in afternoon trading. Over the past year, shares have traded between $47.09 and $63.47.

 

Posted: May 2010


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