Genzyme to buy back $2 billion in stock

By Todd Wallack, Globe Staff

Genzyme Corp. said today it will buy back $2 billion worth of stock and consider selling or spinning off some non-core businesses in an effort to boost its share price and appease frustrated investors.

The Cambridge biotechnology company, which is holding its annual briefing for financial analysts and major investors this afternoon at the Seaport Hotel, said it plans to buy back $1 billion of the stock in "the near term" financed with debt and purchase another $1 billion in the next 12 months. The company's total stock value is about $14 billion.

The state's largest biotechnology company also said it also hired investment bankers Credit Suisse and Goldman Sachs & Co. to "seek strategic alternatives" for several businesses it owns, including genetic testing, diagnostics and a pharmaceutical unit.

"As we evaluated our company to create a mix of businesses that will deliver sustainable growth and stronger returns on invested capital, it became clear that these businesses do not fit within this strategy," said Genzyme chief executive Henri Termeer.

The moves come at a time when Genzyme is facing significant pressure from activist shareholders to make changes, following a series of problems at its Allston manufacturing plant that have squeezed supplies of two key drugs to treat rare genetic disorders and prompted the US Food and Drug Administration to threaten to fine the company for safety violations. Genzyme recently told investors it expects to pay at least $175 million in penalties.

Billionaire investor Carl Icahn, who owns nearly 5 percent of Genzyme shares, has asked shareholders to replace Termeer and three other directors with himself and three of Icahn's associates at Genzyme's annual shareholder meeting next month.

Genzyme recently struck a deal with another dissident shareholder, Ralph Whitworth, principal and cofounder of Relational Investors. It agreed to make Whitworth a director and give him a say in appointing another director, in return for his support of Genzyme's slate of directors at the shareholder meeting.

The genetic testing business, which has nine laboratories and is one of the largest providers of reproductive and cancer testing in the United States, had $371 million in revenue last year.

Termeer said the business was profitable, but would require significant investment in the future that could detract from its main business lines.

Genzyme said the diagnostics unit, which makes cholesterol testing kits and other products for diagnostic companies, labs and doctors' offices, had $167 million in sales last year.

The company is also considering selling its pharmaceuticals unit, which includes a manufacturing plant in Liestal, Switzerland, and produces materials for drug companies.

Genzyme said it has already identified potential partners for the three businesses and received some unsolicited queries about the units. The company said it "expects transaction to be completed this year."

Genzyme shares rose 1.6 percent to $53.60 in mid-day trading shortly after the announcement