Genzyme Corporation operates as a biotechnology company worldwide. It focuses on rare genetic disease disorders, renal diseases, orthopedics, cancers, transplant and immune diseases, and diagnostic and predictive testing areas. Its leading drugs are Cerezyme, Fabrazyme, Myozyme, Aldurazyme, Elaprase, Renagel and Renvela, and many others. It has about 7,000 employees. The current Chairman, President, & CEO is Henri A. Termeer. The company was founded in 1981 and is based in Cambridge, Massachusetts.
Currently, Sanofi-Aventis, another pharmaceutical company, has been trying to acquire Genzyme without much success. Initially, the offer was $18.5 billion ($69 a share) which was a 38% premium to what Genzyme was trading before the offer which happened in July. Genzyme rejected the offer as inadequate. The stock is currently trading at $72.32 on Monday 10/25/10 close to reflect anticipation that some Sanofi may increase its offer or other suitors may emerge with better price.
Genzyme has incentive to sell the company due to pressures from various factors. One is from institutional investors to increase shareholder values. Another one is recent Allston facility’s manufacturing problems regarding marketing or transportation of tainted drug products which dented Genzyme’s market share and the risks of recapturing lost market share in the orphaned drug market. Another factor is to relieve top-level managers including CEO Termeer from personal liability should the marketing or transportation of any additional tainted drug products happen again.
From 5-factor ROE Dupont analysis, the current 5-factor ROE for 2011 is 0.088076 which is relatively ok for this biotech company. EVA is 181 which indicates Genzyme is a potential wealth creator. EVA momentum is .459 which, again, indicates Genzyme is a good company to invest in. Positive Residual Income of 23 and positive MVA of 11720 also reinforce the indication. On the scale of good vs. bad company...