West Coast Editor

Genzyme Corp.'s longstanding legal dispute with some shareholders over the buyback of Genzyme Biosurgery stock in 2003 will end not with a figurative bang but with a $64 million whimper, if a judge approves an agreement made between the parties.

The news hardly touched the price of Cambridge, Mass.-based Genzyme's stock (NASDAQ:GENZ), which closed Friday at $59.55, down 93 cents.

Four class-action lawsuits were filed in all, but they have been combined or dismissed. Word of the settlement showed up in Genzyme's second-quarter earnings report, where the company predicts the proposed $64 million payout "will, as a practical matter, resolve the consolidated case that remains pending" in Massachusetts Superior Court, and lay the whole matter to rest.

"I don't think the Street will blink if [the settlement amount is] below $200 million," Jennifer Chao, analyst with Deutsche Bank, told BioWorld Today. The $64 million, she noted, is "negligible, compared with the war Genzyme tracking stock shareholders were originally waging against [president and CEO] Henri Termeer, suggesting the legal case against Genzyme was relatively weak, and the settlement a vehicle to put this behind the company."

The trouble began in May 2003, when Genzyme decided to consolidate its three tracking stocks - General, Biosurgery and Molecular Oncology - as allowed by the firm's charter. Shareholders of the Biosurgery piece argued that the move would wrongly let the parent company buy back that division for about $72 million, when the price should have been much higher, possibly as much as $2 billion. (See BioWorld Today, May 12, 2003.)

Genzyme set up the Biosurgery tracking stock after buying Biomatrix Inc., of Ridgefield, N.J., and getting Synvisc, an injected material for the treatment of knee osteoarthritis, to pair with Genzyme's own Carticel, for damaged knee cartilage. (See BioWorld Today, March 7, 2000.)

Though shareholders insisted the Biosurgery division had gained value over the years, Genzyme's buyback was not costly because the division's shares were trading low. Lawyers for Genzyme argued the move was legal and in line with the charter, but the plaintiffs hung on, claiming the parent company unfairly waited until Biosurgery's stock fell.

Genzyme has other fish to fry. Though the firm suffered a setback in early July when tolevamer, the Clostridium difficile-toxin binder to fight diarrhea related to the bug, failed in its first Phase III trial - and this blowup followed closely the fizzle of hylastan, a joint lubricator for osteoarthritis knee pain, in a pivotal study - the firm has generated excitement over Mozobil. (See BioWorld Today, July 6, 2007, and July 9, 2007.)

An antagonist of the SDF-1/CXCR4 complex, Mozobil (plerixafor) proved strong in recent Phase III trials with multiple myeloma and non-Hodgkin's lymphoma, and the company plans to file for approval in both indications, here and overseas, during the first half of next year. (See BioWorld Today, Aug. 3, 2007, and July 20, 2007.)

Chao hosted a conference call for analysts last week with Michael Wyzga, Genzyme's chief financial officer, during which he talked about the pipeline. A trial with tolevamer is ongoing in Europe, he said, which "could have a different outcome [from the U.S. study], but I would encourage people to take it out of their models."

The company's research and development approach "in the case of tolevamer was fairly straightforward. Spectacular Phase II trials, [and] we thought they would continue into Phase III. It didn't. Now we move on to Mozobil."

There was also talk on the call of Myozyme (alglucosidase alfa), launched last year for Pompe disease. The drug's sales totaled $46.7 million for the second quarter, and Genzyme is working on gaining approval for that drug in additional markets, but Wall Street buzz last week concerned manufacturing issues mentioned in the SEC filing related to earnings.

The company is trying to get FDA clearance for a larger-scale Myozyme manufacturing process, which could come in the first half of next year. Meanwhile, Genzyme is "taking actions to optimize our U.S. Myozyme supply, including making Myozyme available to some patients through a clinical access program."

Wyzga said remarks about Myozyme manufacturing during a conference call on earnings may have been misinterpreted, and capacity likely will not become a problem.

"What we were trying to highlight in the call is that you shouldn't take a 12-inch ruler and draw a straight line between what you see in the first quarter and second quarter of next year," he said. "We were just trying to explain that you may see a bump up in the patient count, [the] commercialized patient count in the first half of the year. But you shouldn't expect that to continue because it's due to the transition of people from this clinical assets program to the large-scale manufacturing. And that's all it was."

Genzyme has asked that adult patients skip a Myozyme dose in August and September or November (rather than stick to the regimen of an infusion every two weeks), so younger patients will have a supply while distribution switches to a new manufacturing plant.