I'm beginning to think the forces of nature are against Genzyme
Genzyme is in a proxy fight with Carl Icahn, so its investor day yesterday was a pretty important chance for management to explain to investors how it plans to get back on track. But it didn't get analysts' full attention. Company officials were reportedly looking at the tops of analysts' heads as they looked down at their handheld devices, trying to figure out what the heck was going on with the market. Who knows how much retail investors were paying attention?
Well, in case you missed it, here you go.
Genzyme's new plan calls for divesting three noncore business -- genetic testing, diagnostic products, and pharmaceutical materials. While Pfizer
I'm not sure that's such a bad idea. One has to wonder whether being overextended caused management to be distracted. Fellow orphan-drug maker BioMarin Pharmaceutical
The part of Genzyme's plan that I'm not so sure about is the repurchase of $2 billion worth of its stock. Sure the stock is theoretically cheap based on its growth potential, but when it comes to cash, Genzyme is no Bristol-Myers Squibb
Unlike Bristol-Myers and its mountain of cash, Genzyme ended last quarter with less than $1 billion in cash and equivalents. It plans to finance the first $1 billion purchase within the next year and then purchase the second $1 billion the following year. Presumably, divesting the noncore assets will help pay for the repurchase, but I wonder whether management could find better use for the funds. Like, I don't know, new fill and finish equipment.
Until the stars align back in Genzyme's favor, investors should be very careful when considering an investment in its potential comeback.
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