Icahn Making His Move On Genzyme

2/22/10

Carl Icahn is now officially making moves on the Boston area’s two biggest biotech companies. After boosting his stake in the slumping Cambridge, MA-based firm Genzyme, Icahn is now seeking representation on its board, according to the company. Icahn has been making similar plays for control at Genzyme’s neighbor, Biogen Idec, for years.

Icahn has nominated four candidates, including himself, for election to Genzyme’s (NASDAQ:GENZ) board of directors at its annual meeting, slated for May 20. His nominees include portfolio manager Alex Denner and Harvard Medical School professor Richard Mulligan—both of whom won seats on Biogen’s (NASDAQ:BIIB) board last year—as well as Steven Burakoff, a professor at Mount Sinai School of Medicine.

Genzyme, one of the largest biotech firms in the world, is ripe for a proxy battle like the one that could break out if the biotech fights Icahn’s nominees, whom the company said in today’s announcement it would evaluate. All nine of the firm’s board seats are up for re-election this spring, opening the door for Icahn to seize control of a significant share of the struggling company’s board of directors. Genzyme plans to announce its own nominees for the nine board seats in March, said company spokesman Bo Piela.

“This is a pretty straight forward filing on [Icahn's] part,” Piela said. “He has not yet made his intentions known.”

It’s true Icahn hasn’t outlined specific changes he’d like to make at Genzyme, yet the company has been taking steps to make changes of its own after a tough 2009. Genzyme’s sales slipped from $4.61 billion in 2008 to $4.52 billion last year, during which contamination at the firm’s Allston Landing plant in Boston caused supply shortages of two of its key enzyme-replacement therapies. These and other troubles at the company have made Genzyme and its chairman and CEO Henri Termeer the target of much criticism.

“Our actions demonstrate that we are open and responsive to shareholder input, and we welcome a constructive dialogue with Mr. Icahn,” said Termeer, in a statement.

Icahn appears to have a hunter’s instinct for troubled biotechs. He’s boosted his stake in Genzyme stock from 1.5 million shares to 4.8 million shares, as of December 31. This follows his success in gaining two board seats last year at Biogen, the world’s largest maker of multiple sclerosis drugs, which he has criticized for underperforming its peers in the biotech industry. Last month he nominated three new candidates for Biogen’s board. Icahn and Eastbourne Capital Management succeeded last year in gaining two board seats at San Diego-based Amylin Pharmaceuticals, forcing out the firm’s chairman and an independent director.

Genzyme has already cut a deal with another major investor, Relational Investors, to defer Relational’s request for a board seat under condition that the company improve its performance. We’ll stay alert for any demands that Icahn brings to the embattled biotech.

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