Genzyme in “Tough Spot” with Icahn Proxy Challenge—CEO Termeer Courting Key Shareholders

5/13/10

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Termeer and three others on the board.

Icahn often clashes with the leaders of biotech companies where he owns stock. At Cambridge, MA-based Biogen Idec (NASDAQ:BIIB), for instance, Icahn won two board seats last year with the election of his associates Alex Denner and Richard Mulligan to the company’s board of directors. In January, Biogen CEO James Mullen, whose leadership Icahn has criticized, revealed his decision to step down as chief executive and a member of the board in June.

Genzyme’s Termeer has more detractors than just Icahn. David Katz, the chief investment officer of New York City-based Matrix Asset Advisors, told Bloomberg News last month that Genzyme’s long-time CEO should be replaced. Katz added that he planned to vote his firm’s 242,000 shares of Genzyme stock for Icahn and his slate of nominees.

Still more shareholders have filed lawsuits against Genzyme and its leaders. The legal complaints accuse certain company executives and directors of withholding information about manufacturing issues in Allston, misleading shareholders about the timing of approval for the Pompe disease drug alglucosidase alpha (Lumizyme), and using insider information to sell their company stock before bad news became public.

“We have a number of major institutional investors who are on our side,” says Denner, a fund manager for Icahn, who is one of Icahn’s nominees for Genzyme’s board. Other than Matrix, however, Denner declined to identify his slate’s institutional supporters.

Termeer is proving to be a formidable adversary to Icahn. His plans to meet with top shareholders over the next month indicate that he’s fighting for their support of Genzyme’s slate of directors. Genzyme has already garnered the backing of Ralph Whitworth, a principal at San Diego-based Relational Investors, which controlled 4 percent of Genzyme’s stock at the end of 2009.

Previously a vocal critic of Genzyme’s management himself, Whitworth was elected to the board last month and is now criticizing the chief remaining critic, Icahn. “We don’t begrudge investors their appropriate influence, but I do scratch my head and wonder why Carl would want to do this,” Whitworth told the Boston Globe this week. “It just seems a little duplicative of efforts that are underway. I assume he just wants [to exert] more pressure.”

Even as Termeer goes on his road show to talk with investors, there is little doubt Icahn will be courting many of the same folks. Next month’s board election could well turn out to be a referendum on which group makes the better case for how to best extricate Genzyme from its tough spot. We’ll follow the action leading up to June 16.

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