Genzyme Boss Henri Termeer Not Ready To Sell to Sanofi, Ride Into the Sunset, Sources Say
Henri Termeer has invested most of his professional life building Cambridge, MA-based Genzyme (NASDAQ:GENZ) into a global biotech powerhouse, and it could all come to an unceremonious end if French drug giant Sanofi-Aventis (NYSE:SNY) succeeds in its efforts to acquire the company. Yet people close to the Genzyme CEO tell Xconomy that Termeer has plenty of unfinished business, and isn’t nearly ready to leave.
Termeer, who joined Genzyme in 1983 as president and became chief executive in 1985, is credited with leading the company’s evolution from a Boston startup into a multibillion-dollar global enterprise with about 12,000 employees. But over the past year and a half, his sterling record at the company has been tarnished by the viral contamination found at its Allston Landing plant last June and the resulting shortages of its therapies for genetic diseases. A growing chorus of critics, including the powerful activist investor Carl Icahn, has called Termeer’s leadership into question.
Nevertheless, Termeer, 64, has shown few signs that he’s ready to call it quits. Termeer, who is the firm’s chairman, and the rest of Genzyme’s board last month rejected Sanofi’s unsolicited offer to acquire the company for $18.5 billion. This month, Genzyme announced that it is selling its genetic testing unit and cutting 1,000 workers to improve the company’s bottom line and future prospects.
Though Termeer has told the media that he’s open to selling the company, some observers have their doubts. ”Henri does not want to sell the company. Henri never would want to sell the company. He’ll fight it tooth and nail to the extent that he can,” said a former Genzyme executive who asked not to be named. “He has to officially act in the shareholders’ best interest. The trouble is that his view of the shareholders’ best interest is probably not the same as what some of the shareholders think are their best interest.”
Genzyme declined a request to interview Termeer for this story.
He certainly isn’t the first CEO willing to put up a fight to keep his company independent. But Termeer is somewhat unique among biotech chief executives, many of whom build their companies to be sold or dream of the day when a large drug maker will come along with a multibillion-dollar buyout bid.
“I’ve known Henri for many years, and he neverthought about Genzyme as a company that was built to be sold,” said a former Genzyme unit president, who worked for Termeer at the company for over a decade. “He built the company to survive and be a stand-alone biotech organization.”
Genzyme, though known as the world’s largest maker of drugs for rare genetic diseases, has for most of its 29-year history been a diversified life sciences company with multiple businesses. Analysts have criticized the company for hanging on to business units outside of therapeutics because they are not as profitable. Yet Termeer had defended the diversification of the company as important to its stability, the former Genzyme unit president said. The diversification strategy is one of the ways Genzyme has stood out from its biotech peers, many of whom rely on just one drug or a small handful of related products.
Termeer’s legacy, which was cemented well before the recent manufacturing troubles, is based on his vision and Genzyme’s leadership in developing drugs for rare diseases that had been previously ignored by the pharmaceutical industry. Genzyme’s drug imiglucerase (Cerezyme) for the genetic disorder Gaucher’s disease treats an illness that affects fewer than 10,000 Americans. But it has become the company’s biggest money-maker because it commands a price of about $200,000 per patient annually.
“He’s revolutionized the way people look at rare genetic disorders,” said Bob Coughlin, the president and CEO of the Massachusetts Biotechnology Council, the state’s leading industry group for life sciences businesses. (Coughlin’s son has cystic fibrosis, an inherited genetic disease.) “Henri figured out a way to make it work.”
Yet it might have been a sign of Termeer’s loosening grip on the reins of Genzyme, in the wake of the problems in Allston and the proxy fight with Icahn, that the CEO laid out plans in May to sell three of the firm’s non-therapeutics business units, giving up some of the firm’s diversification. After agreeing to sell the genetic testing unit to Burlington, NC-based Laboratory Corporation of America (NYSE:LH) for $925 million this month, Genzyme still has its diagnostics and pharmaceutical intermediaries businesses on the block.
There are also varying opinions on whether Termeer or Icahn won their high-profile proxy skirmish, which ended with an agreement in June that gave Icahn two seats on Genzyme’s board of directors. However, Icahn agreed to back Termeer and the company’s slate for re-election to the board of directors. So when the CEO presided over Genzyme’s annual shareholders meeting in June, he did so in the confident manner of a patriarch in full control.
“I think [Termeer] actually showed his skills during the proxy battle and he actually kind of won that,” said the former Genzyme executive. “He knuckled down, went on the road, talked to all the shareholders, and actually negotiated adding people to the board under the right circumstances for him.”
It’s fair to ask what more Termeer hopes to accomplish at Genzyme, which had 2009 revenue of $4.5 billion and has drugs in its pipeline such as alemtuzumab for multiple sclerosis that offer the promise of future business growth. Former Genzyme executives say Termeer is taking full responsibility for the manufacturing snafus in Allston and wants to lead the company through the process of fixing the problems—which includes bringing its operations there into compliance with FDA standards after turning over to the agency $175 million in profits from drugs made at the plant.
“Henri wants to stay long enough to fix all the problems at Genzyme so he can go out on a really high note,” the former Genzyme executive said.
If Genzyme is sold, Termeer stands to make a fortune. His more than 4.1 million shares of the firm’s stock as of April 9 were worth $292.8 million based on the $71.20 closing price today. In addition, his contract with the company includes a change-of-control clause that would pay him what is likely to be well north of $20 million in the form of a cash payment, stock award, and other benefits if the company is bought. Yet Termeer seems unmoved by such financial incentives to sell the company.
A prize-winning geneticist and biotech pioneer in the Boston area described Genzyme’s CEO as someone who sees no limit to the company’s potential.
“I think he believes that the Genzyme organization, with his leadership, is capable of doing even more important things in the next decade and growing value in the next decade for his stockholders,” said the renowned geneticist, who asked not to be named.
The Dutch-born CEO is known for his tight control of decisions made at Genzyme, even to a fault. So, naturally, there have been questions about how well the firm would function in his absence.
“Everybody who’s dealt with Genzyme or knows much about Genzyme knows that the ultimate decision always came to Henri’s desk,” the biologist said. “He is central to the decision making at Genzyme. In the public’s eye, Genzyme lost some of its performance credibility with this infection in its production facility. When you’re running an organization the size of Genzyme, you really can’t take your eye off anything.”
It’s no secret that Termeer strives for perfection. In a May 2008 profile in Boston Magazine, Termeer said, “I like perfection and courage and innovation.” Termeer’s statement makes it sound like leaving Genzyme before it completely moves beyond the deficiencies in Allston would be a disappointing end to his long tenure at the firm. But if Sanofi or some other suitor succeeds in taking over Genzyme, as many people expect to happen, Termeer will most likely leave the company before he feels that his work there is done.
“I think he wants that challenge,” the geneticist said, “but that’s not what he’s been presented with.”