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Icahn buys into Genzyme

Regulatory filing suggests biotech could be a target

Carl Icahn reported his investment firm owns 1.5 million shares of Genzyme Corp. Carl Icahn reported his investment firm owns 1.5 million shares of Genzyme Corp. (Chip East/Bloomberg News/file)
Email|Print| Text size + By Todd Wallack
Globe Staff / November 15, 2007

Carl Icahn, the billionaire investor who recently helped put Biogen Idec Inc. in play, has taken a stake in another major Cambridge biotech - Genzyme Corp.

Icahn's investment firm, Icahn Capital Management LP, reported it owned 1.5 million shares of Genzyme stock as of Sept. 30, or less than 1 percent of the company, in a filing with the Securities and Exchange Commission yesterday. At the time, the shares were worth $94 million.

The filing raises the possibility that Genzyme could be next on Icahn's list of business targets. The 71-year-old billionaire frequently buys stock in companies he considers undervalued, then pushes them to make major changes or sell themselves to boost their stock price. Over the years, Icahn has targeted some of the biggest names in corporate America, including Motorola, Blockbuster, and TWA.

It's too early to know exactly what Icahn has in mind for Genzyme, one of the world's biggest biotech companies with a market value of close to $19 billion and more than 9,000 employees. The company, led by industry veteran Henri Termeer, is known for producing powerful treatments for rare disorders, such as Gaucher's disease and Pompe disease.

Icahn hasn't publicly stated whether he plans to increase his stake in the company or push for any changes. And he didn't return a call seeking comment last night.

Genzyme spokeswoman Caren Arnstein said the company was aware of Icahn's investment, but generally doesn't comment on actions by specific shareholders.

"Genzyme's management is focused on building value for all of our shareholders," Arnstein said.

However, Icahn's disclosure yesterday immediately sparked speculation that he could push Genzyme to sell. In after-hours trading, Genzyme shares rose more than 2 percent to $72.40, up $1.64.

In recent months, Icahn has successfully targeted other major biotechs.

In April, MedImmune, one of the nation's largest biotechs, agreed to sell itself to drug maker AstraZeneca PLC for $15.6 billion, after Icahn threatened to launch a shareholder fight to force a sale. The deal came three months after Icahn first disclosed he had purchased 1 percent of the company.

And a month ago, Biogen Idec, the state's largest biotech, revealed plans to consider outside offers for the company, after prodding from Icahn.

Few people noticed when Icahn initially bought less than 1 percent of Biogen's shares last summer.

But Biogen Idec shares soared after Icahn asked federal regulators for permission to take a larger stake in the company in August. And last month, Biogen said it would look into selling the company after receiving several expressions of interest, including one from Icahn.

Genzyme's shares have already been buoyed by speculation in recent months that it could be acquired. Shares have climbed 9 percent over the past 52 weeks, better than the S&P 500's 6 percent gain during the same period.

"There's certainly a lot that someone might find attractive" about Genzyme, Brian Abrahams, an analyst at CIBC World Markets Corp., told Bloomberg News yesterday. "They have solid growth. There are certainly a lot of attractive qualities to a large pharma investor."

Many pharmaceutical companies have shown interest in buying biotechs to replenish their product pipelines as patent protections on their traditional blockbuster medicines expire. Some drug companies are also trying to improve their ability to develop so-called biologic drugs, which are created from living organisms, one of Genzyme's strengths.

But until recently, drug companies have mostly focused on purchasing smaller biotechs with experimental drugs, rather than major companies like Biogen Idec and MedImmune that already have products on the market with billions of dollars in sales.

In the third quarter alone, Genzyme reported $960 million in revenue and net income of $159 million.

Genzyme's Arnstein said the company has recorded 20 percent annual compounded growth in earnings over the past decade and expects comparable growth in the next five years.

In yesterday's SEC filing, Icahn also confirmed reports that he had increased his stake in Biogen Idec. As of the end of September, Icahn reported holding 8.8 million shares, or about 3 percent of the company, up from 2.7 million shares in a previous filing. Icahn's company is based in White Plains, N.Y.

Analysts said Biogen Idec could sell for as much as $30 billion, which would give Icahn a hefty profit. But Biogen Idec's shares have waned in the last month on concern that drug makers might find the company too pricey and might not buy the company after all.

Todd Wallack can be reached at twallack@globe.com.

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