Icahn Wants to Join Genzyme’s Board, Bring Others (Update3)

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Bloomberg

Icahn Wants to Join Genzyme’s Board, Bring Others (Update3)

February 22, 2010, 4:19 PM EST

By Elizabeth Lopatto

Feb. 22 (Bloomberg) -- Billionaire investor Carl Icahn plans to nominate himself and three associates to the board of Genzyme Corp., the biotechnology company forced to halt production because of factory contamination.

Icahn told Cambridge, Massachusetts-based Genzyme he will seek four seats on the nine-member board at the shareholders meeting on May 20, the company said today in a statement. All nine posts are up for election.

Genzyme shares fell 22 percent in the last 12 months as the company struggled with drug shortages stemming from a virus contamination at its main manufacturing plant in Boston. The company’s 2009 revenue shrank 2 percent to $4.5 billion because of the shortages, raising pressure from investors.

“That Icahn wants to join suggests to me that he’s likely to be less patient,” Geoffrey Porges, an analyst for Sanford Bernstein & Co., said today in a telephone interview. “I expected a move, and I felt this was a compelling opportunity, but I didn’t expect the move to be this aggressive.”

The nominees are Icahn; Alexander Denner, managing director for Icahn Partners LP and board member of Biogen Idec Inc.; Richard Mulligan, a Biogen board member and former director of ImClone Systems Inc., which is now owned by Eli Lilly & Co.; and Steven Burakoff, the director of the Tisch Cancer Institute at Mt. Sinai Medical Center.

Constructive Dialogue

“We welcome a constructive dialogue with Mr. Icahn,” said Henri Termeer, Genzyme’s chief executive officer, in a statement today. Genzyme’s nominations for the board will come out in March, company spokesman Bo Piela said in a telephone interview.

     Genzyme rose 7 cents to $56.04 at 4:01 p.m. New York time in Nasdaq Stock Market composite trading.

Icahn Capital LP more than doubled its Genzyme stake to 4.8 million shares from 1.5 million shares during the fourth quarter, according to a Feb. 12 regulatory filing. Icahn is the company’s 16th-largest investor.

Another activist investor, Ralph Whitworth of Relational Investors, reached an agreement with Genzyme, deferring the firm’s request for board representation. Under the accord, Relational will support Genzyme’s nominees and proposals in 2010 and Genzyme will appoint Whitworth to the board if Relational requests representation.

Investor Dissatisfaction

Whitworth’s cooperation with Genzyme management “doesn’t make the proxy more difficult,” Porges said. “Investor dissatisfaction is high. The stock’s at the level it was five years ago, and for a growth company, that’s pretty disappointing,”

     The shares traded at $56.30 on Feb. 18, 2005, less than a percent from today’s price.

Icahn is also waging his third proxy battle with Biogen, a Cambridge, Massachusetts-based maker of multiple sclerosis medicines.

Viral contamination at Genzyme’s Allston Landing plant closed the facility, creating shortages of best-selling Cerezyme. Drugs made in the facility were also found to be tainted with steel fragments, non-latex rubber, and fiber-like materials. U.S. regulators didn’t approve Lumizyme, a drug for Pompe disease, because of the factory’s impurities.

Also today, Icahn’s associate Denner was named to head the executive committee for Enzon Pharmaceuticals Inc., after the company’s chief executive officer Jeffrey Buchalter resigned, effective immediately. Mulligan, and Rolf Classon, chairman of the board of Auxilium Pharmaceuticals Inc, will join Denner on the committee.

Another Enzon shareholder, DellaCamera Capital Management LLC, filed with the Securities and Exchange Commission to remove Buchalter in April 2009. DellaCamera owned 3.6 million shares, or 7.9 percent of the company, as of Dec. 10. Buchalter hadn’t “prudently managed” the company’s expenditures, which were “far too high,” DellaCamera said in the filing. Buchalter had been CEO since Dec. 22, 2004.

     Enzon fell 14 cents, or 1.5 percent, to $9.28 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

--Editors: Bruce Rule, Andrew Pollack

To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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