Genzyme makes big money off uncommon diseases. The company's product portfolio focuses on treatments for rare genetic disorders, as well as kidney disease and cancer. One of its main products, Cerezyme, is a leading (and pricey) treatment for Gaucher disease, a rare enzyme-deficiency condition. Founded in 1981, Genzyme has treatments for other enzyme disorders including Fabry disease and Pompe disease. In addition, the company develops gene-based cancer treatment products, renal care and immunological therapies, organ transplant drugs, and orthopedic biosurgery products. The company was acquired by Sanofi for some $20.1 billion in 2011.
Sanofi significantly expanded its presence in the biotech industry, as well as in the US market, through the hard-fought purchase. After a months-long bidding saga that started with an initial offer from Sanofi of about $18.5 billion, which Genzyme soundly rejected as undervaluing the company, Genzyme finally accepted Sanofi's offer of $20.1 billion in cash in early 2011. The acquisition marked the end of Genzyme's 30 years as an independent drug maker. However, the company has kept its name and maintains its presence in Cambridge, Massachusetts, as the new central headquarters for Sanofi's rare disease program. Henri Termeer resigned as Genzyme's CEO upon the deal's closure, with Sanofi CEO Christopher Viehbacher taking the reins during the integration period. In late 2011 COO David Meeker was promoted to CEO, and reporting to Viehbacher.
Though the company was long adamant about maintaining its independence, recent FDA and manufacturing troubles had made Genzyme a more vulnerable acquisition target. One of the components of the deal that helped bridge the gap between what Sanofi wanted to offer for the ailing company and what Genzyme felt it was worth was the use of a contingent-value right (CVR). The CVR allows for later payments of up to $3.8 billion to shareholders based on the future performance of some of Genzyme's assets (primarily the success of its R&D program for multiple sclerosis treatment Lemtrada and whether its manufacturing facilities return to certain production levels in 2011).
Genzyme's products have traditionally been sold to healthcare professionals in some 100 countries through a specialized marketing force and wholesale distributors. Genzyme's primary geographic market has been the US, accounting for about half of the company's revenues. Cerezyme, the first FDA approved biotech treatment for Gaucher disease, is one of the most expensive drugs in the world and has for years been Genzyme's top-selling product, accounting for about 20% of global sales in 2010. Genzyme has worked avidly in recent years to diversify its product line to reduce dependence on the radical therapy, in case competition increases or other factors cause the drug to decrease in profitability over the long term.
The company's fears were realized in 2009 when a rash of difficulties at one of its main US manufacturing plants in Allston, Massachusetts, caused a shortage in Cerezyme, crimping annual sales of the drug (which fell from $1.2 billion in 2008 to just under $800 million in 2009, and about $720 billion in 2010) and making room for competitors to elbow their way into the market. Genetic disorder drug Fabrazyme for Fabry disease also experienced supply constraints due to the plant troubles. Genzyme worked to reverse the shortage by moving some manufacturing operations to its Ireland facility and correcting contamination issues at the plant. In early 2010 the company also struck a deal through which Hospira took over some manufacturing functions for Genzyme's products on a contract basis.
The company had already been working to expand capacity at its manufacturing facilities in Belgium and Ireland, and it stepped up those efforts in response to troubles at the US facilities. In addition, Genzyme is nearing completion on a new biotech plant in Framingham, Massachusetts, scheduled to open in the second half of 2011.
Increasing sales of Genzyme's newer therapies, including kidney treatment Renvela and cancer drug Mozobil, have helped offset losses from the manufacturing troubles. Sales of Pompe disease treatment Myozyme are being expanded into new global markets, and in 2010 the company launched a next-generation version of Myozyme called Lumizyme. In 2009 it introduced Synvisc-One, an enhanced version of the Biosurgery division's osteoarthritis treatment, in the US market. Genzyme has also been expanding its cancer treatment products in recent years, primarily through acquisitions; in 2009 it acquired full development and commercialization rights for leukemia drug Campath from former partner Bayer.
As a subsidiary of Sanofi, Genzyme will continue to conduct R&D efforts on new biotech products. At the time of the purchase, Genzyme's R&D organization was focused on bringing late-stage development candidates to market, as well as on expanding applications for existing drugs such as pediatric leukemia treatment Clolar. The company's development pipeline included therapies for the treatment of multiple sclerosis, cystic fibrosis, and cancer tumors, as well as new rare disease treatments. Genzyme also had active collaborations with companies such as Isis Pharmaceuticals (on cholesterol treatment mipomersen) and Osiris Therapeutics (on cell therapeutics for immune system disorders).
Prior to Genzyme's acquisition by Sanofi, activist investor Carl Icahn had the company in defensive mode several times. After an earlier buy-up and selloff of Genzyme's stock, Icahn began buying up shares in 2009. Icahn's fresh investment came at a vulnerable time for the company -- its plant contamination issues had prompted FDA investigations and fines and caused a dip in Genzyme's stock price. In early 2010, with all of its board seats up for re-election, Icahn began pressing hard to nab four of the positions through a proxy battle. After the company made several attempts to buffer itself from a board takeover, including the appointment of Ralph Whitworth (leader of another activist minority shareholder, Relational Investors, which had been pushing Genzyme to divest noncore assets) and Dennis Fenton (a former Amgen executive) to the board, Genzyme and Icahn reached an agreement in mid-2010 that ended the proxy fight by allowing Icahn to take control of two board seats.
To please said shareholders, Genzyme began enacting restructuring and cost-cutting measures, including the exploration of strategic options for noncore assets. For instance, in late 2010, the company sold its Genzyme Genetics (now Integrated Genetics -- reproductive and oncology testing) unit to LabCorp for some $925 million; at the same time it announced plans to reduce its workforce by about 10% by the end of 2011. Then, in early 2011, it completed the sale of Genzyme Diagnostics (clinical testing) to Japan's Sekisui Chemical for $265 million; the unit was renamed Sekisui Diagnostics. Genzyme also sold its active pharmaceutical ingredients business, Genzyme Pharmaceuticals, to International Chemical Investors Group for an undisclosed price; that unit was renamed Corden Pharma Switzerland.