Stop the Presses: Hapless Biotech Genzyme May Actually Be Doing Something Right

Last Updated Apr 9, 2010 4:42 PM EDT

Genzyme (GENZ), the biotech company that until recently couldn't tie its own shoelaces, may be turning the corner and could even prevail in its fight against billionaire activist investor Carl Icahn. It's provided details on the virus infection at its Allston, Mass., plant (something similar happened in Ireland) and has detailed a plan to fix the problems and a new set of managers to get it done.

At the same time, Icahn made the misstep of nominating a conflicted set of directors in his bid to control Genzyme's board. Icahn believes Genzyme's missteps at Allston have dragged down the company's stock, and he's the man to stop the rot.

The confluence of the two events makes Genzyme's management look less like a bunch of problem children in need of adult supervision and more like a squad of battlers who could live without the distraction of an Icahn proxy fight.

When the company hosted a conference call with Wall Street to give details on how it was to clean up its act, it was interrupted by technical difficulties. It could have been just the latest stumble by an increasingly hapless company.

But, in fact, the call marked a potential turning point for the company. Genzyme made the case that it actually knows what it is doing in terms of de-infecting its factory and fixing its manufacturing. Check out its slide show and the transcript that goes with it. Have you ever seen a battered drug company be this transparent about its problems?

The presentation was the first detailed look at what's actually going on inside the company since the virus infection. They even gave a briefing on the virus itself: It's a calicivirus, a single-stranded, non-enveloped RNA virus, 27 to 40 nanometers in diameter, or about a millionth of an inch. Infection of Genzyme's cell growth line caused a dropoff in cell metabolism. (They got sick, in other words.) Genzyme has also installed three new executives to manage the turnaround.

As for Icahn, if he wins he'll have directors sitting on the boards of both Genzyme and Biogen (BIIB). The companies market competing blood cancer drugs (Campath and Fludara from Genzyme and Rituxan from Biogen). Icahn has so far had nothing to say about that -- which doesn't look good because regardless of Genzyme's faults the company makes a good point: Investors shouldn't want directors with conflicts of interest.

Contrast all this with another troubled company, Sequenom (SQNM). That outfit has essentially kept its troubles a secret and is asking investors for their blind faith. (Similarly, the Chiron flu vaccine shortage of 2004 wasn't really explained until an FDA report about it was released in 2006.)

Could it be that CEO Henri Termeer might actually still be the man for the job?


Image by Flickr user Robert Scoble, CC.