Genzyme Annual Meeting Remarkably Mundane, Despite Rocky Year

6/16/10

Cambridge, MA-based Genzyme’s annual meeting was over in about an hour, and although the company took some hard questions from a shareholder about an internal investigation into insider trading and other matters, it appears that chairman and CEO Henri Termeer and the rest of the company’s directors were easily re-elected to serve on the board of directors.

Genzyme’s (NASDAQ:GENZ) annual meeting at a conference center in Somerville, MA, was remarkably mundane given what has happened in the past 12 months. Almost exactly a year ago, a viral contamination struck its drug manufacturing plant in the Allston section of Boston, which led to a shortage of two drugs that are important to patients and the company’s bottom line. The costly mistake gave some serious ammunition to Genzyme’s critics including billionaire investor Carl Icahn. Yet Termeer, who built Genzyme into a biotech powerhouse over the past 25 years as CEO, was able to hold onto his job and reach a settlement with Icahn one week before the annual meeting.

Just as a reminder, Icahn was initially seeking four seats on the board of directors, and specifically wanted Termeer and three other directors to be ousted. Last week Icahn agreed to end his proxy fight and back Genzyme’s nominees to the board, in return for getting two of his associates added to the board of directors. Today, Termeer took questions about the proxy battle, the manufacturing woes, and why he decided to make the agreement with Icahn.

One of Icahn’s charges against Termeer’s leadership was that Genzyme’s manufacturing system was “broken.” Today, no one from the Icahn slate voiced any objections at the meeting.

“We now move on,” Termeer said, standing at the podium during the annual meeting. “This proxy fight focused us in many areas… where we need to pay attention because it can never happen again.”

As a result of the proxy battle, Genzyme’s board will add Icahn associates Eric Ende and Steven Burakoff to the company’s board of directors. And with the addition of Genzyme’s appointee Dennis Fenton, a former Amgen executive, the board will grow from 10 members to 13 members.

Though the proxy challenge was quashed well ahead of the annual meeting, Genzyme officials were criticized for their handling of an internal review of alleged insider trading among top management and some directors. Thomas DesRosier, the company’s chief legal officer, said that three independent directors of Genzyme’s board are investigating the issue and that investigation is ongoing.

Ray Rogers, who was representing shares owned by the International Brotherhood of Electrical Workers Pension Fund, questioned the independence of the Genzyme directors who are investigating the matter, given that they are serving on the same board as the directors under investigation. “That’s not independent,” Rogers said. “That’s a farce.”

When the internal investigation is through, Genzyme’s DesRosier said, the investigator’s final report is expected be turned in to the court.

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