Will CEO Termeer Survive Genzyme’s Woes? (GENZ, PLX, SHPGY, PFE)
Genzyme Corporation (NASDAQ: GENZ) has been one of the top biotech companies in history. Its drug pipeline and then its drug portfolio have helped lead it to exponential rewards for shareholders through time. But nothing lasts forever, and management often has to pay the price. The calls for the ouster of Henri A. Termeer as Chairman, President and Chief Executive Officer have started gathering some speed here in recent days and weeks. Despite all-time highs being briefly hit in 2008, the stock had really been range-bound already for most of the 2005 to 2008 period. Calling for a CEO to be fired is not something that can only be based upon share price alone. But the recent quality control issues have added significant fuel to the fire here. CEO Henri Termeer may end up on the pyre of the witch burning.
There is one issue to consider as far as what may happen in the ongoing management shuffles in Corporate America. Termeer has been CEO of Genzyme for 25 years, and it is not as though an old CEO gets run over by the peasant riots at the first sign of trouble in a company. Old CEOs can usually withstand many revolts. Still, it is very possible that Henri Termeer could be stripped of one title rather than be marched out entirely. If that occurs, he would lose the President or CEO role, or both… and still potentially maintain the Chairman position. This is a thought that is far from new. As far as our own call, Genzyme has been a part of CEO WATCH since 2009 and the FDA action this week made this come up front and center.
As far as a background of the issues in 2009… A rare virus shut down production of its lucrative and life saving, then came foreign products in its liquid drugs. The company now has more competition from Protalix BioTherapeutics, Inc. (AMEX: PLX), Shire plc (NASDAQ: SHPGY), and Pfizer Inc. (NYSE: PFE). The recent woes at Genzyme have allowed for these competitors to have perhaps a stronger footing than what might have been expected.
Mike Huckman of CNBC interviewed him in late-2009, and Termeer did not give a very compelling argument from a personal view. It seemed not so solid of a defense at the time, but it is possible that this is the difference of interpreting foreign accents and expressions (or lack thereof) versus from what many larger-than-life American CEOs often exhibit.
TheStreet.com named Termeer as the worst biotech CEO of the year in 2009. Bernstein has pondered that a towel is needing to be thrown in with a major restructuring.
The company has Carl Icahn attacking it, big time. Every new Genzyme woe may be a win for Carl Icahn as he tries to get the company to nominate Icahn and three others to the board of directors. It seems as though Icahn would then be able to install new management and ultimately sell the company as we saw with ImClone.
Bloomberg’s Business Week publication noted, “Billionaire investor Carl Icahn’s bid to win four board seats at Genzyme Corp. and push for a sale won investor support today after the company said U.S. regulators would re-inspect a contaminated plant and levy fines.” More there on that…
In February, Fierce Biotech reported on a showdown of shareholders and Vermeer.
Termeer is not deemed a lap dog. He is not expected to go quietly. The big issue is not just that the FDA will put a new monitor in place at the Allston facility. Genzyme will now have to pay government fines. Some have said “big fines.” Based upon today’s 7.6% drop to $51.13, this is still a $13.6 billion company by market cap. It also has over $1.1 billion in cash, short-term equivalents, and marketable securities. So a ‘big fine’ may only be a line-item event. That will be known in time and we do not want to speculate what that fine may be.
Before this week we were above 50-50 on Termeer’s ouster. We do not have a 100% ouster bias yet, but it seems that Termeer’s odds of staying versus at least a partial ouster have come down under the 50-50 mark.
JON C. OGG
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