Icahn Tries to Replace 4 Directors at Genzyme 06/05/2010

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Ghislaine SURREL

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Icahn Tries to Replace 4 Directors at Genzyme

May 6, 2010, 1:10 am

The investor Carl C. Icahn wants to remove Genzyme’s chief executive, Henri A. Termeer, from the board of the company, according to a new proxy statement filed by Mr. Icahn, Andrew Pollack reports in The New York Times.

Mr. Icahn, as previously reported, is seeking to have himself and three associates elected to Genzyme’s 10-person board at the annual meeting in June.

But the proxy statement, filed with the Securities and Exchange Commission on Tuesday, is the first time Mr. Icahn has specified which four of the existing Genzyme directors he wants his slate to replace. Perhaps not surprisingly, Mr. Termeer is among them.

Genzyme, one of the nation’s oldest and largest biotechnology companies, has been struggling to assuage investors unhappy over manufacturing problems that have caused nearly yearlong shortages of two of the company’s most important and profitable drugs.

Some investors have also criticized management for diversifying into businesses not closely enough related to Genzyme’s main drug business, including genetic testing laboratories. They have said some of the businesses do not earn a sufficient return on investment.

Mr. Termeer, who has been the chief executive for a quarter of a century, is expected to address some of those criticisms at a four-hour meeting for analysts in Boston on Thursday. In recent days, he has hinted that Genzyme might be amenable to divesting some businesses.

In the proxy statement, Mr. Icahn, who controls about 4.9 percent of Genzyme’s shares, said the manufacturing system at Genzyme was “broken” and that change in the board was needed to fix it.

Mr. Icahn cannot nominate an entire slate of 10 without all the nominees agreeing. But he is seeking shareholder proxies to vote for his slate of four and six of the company’s nominees.

Bo Piela, a spokesman for Genzyme, said the company had no comment specifically on Mr. Icahn’s effort to remove Mr. Termeer from the board.

But, he said, Mr. Termeer and the company’s other nominees “are highly experienced and bring the right credentials for the job,” while “none of the Icahn nominees have the relevant manufacturing or operational experience that we need.”

Genzyme also argues that two of Mr. Icahn’s nominees, Alexander J. Denner and Richard C. Mulligan, are directors of a rival biotechnology company, Biogen Idec. That could pose a problem, Genzyme says, because Biogen is a major supplier of drugs for multiple sclerosis, a disease on which Genzyme’s biggest drug development effort is currently focused.

“There is no way to predict how a competitor reacts if you allow him to sit in the room with you,” Mr. Termeer said in a recent interview. “This is not a workable proposition.”

Mr. Icahn’s proxy filing said that having Dr. Denner and Dr. Mulligan sit on both boards would not violate antitrust laws because the companies had only “de minimis” overlap in terms of drugs sold in 2009. The statement also said the two directors would recuse themselves from certain matters if necessary.

Dr. Denner is Mr. Icahn’s right-hand man on biotechnology, and Dr. Mulligan is a professor of genetics at Harvard Medical School. Mr. Icahn’s fourth nominee is Dr. Stephen J. Burakoff, director of the Tisch Cancer Institute at Mount Sinai Medical Center in New York.

The directors Mr. Icahn hopes to replace, besides Mr. Termeer, are Connie Mack III, a former United States senator; Richard F. Syron, the former chief executive of Freddie Mac and of Thermo Electron, a scientific instrument company; and Charles L. Cooney, a professor of chemical and biochemical engineering at the Massachusetts Institute of Technology.

On its Web site, Genzyme praises Dr. Cooney as a board member with needed expertise in manufacturing.

http://dealbook.blogs.nytimes.com/2010/05/06/icahn-tries-to-replace-4-directors-at-genzyme/

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