Genzyme says Carl Icahn to nominate 4 to its board

BOSTON (Reuters) - GENZYME (GENZ.NQ)Corp said on Monday it has received notice from billionaire investor Carl Icahn that he intends to nominate himself and three others to the biotech company's board of directors.

Cambridge, Massachusetts-based Genzyme said it will evaluate the nominees and make a recommendation "that is in the best interests of all of the company's shareholders."

The company's board consists of nine directors. All are up for election at the annual meeting scheduled for May 20.

Genzyme is recovering from a manufacturing crisis that led to shortages of two if its top-selling drugs for rare diseases, and dented the company's credibility with patients and investors.

It has been racing to make changes to its board and management to head off a challenge from Icahn but the moves may not be enough to block him entirely.

"We believe the manufacturing challenges and associated impact on the business over the past year has left the Board vulnerable," said Geoff Meacham, an analyst at J.P. Morgan.

Genzyme's shares have fallen 22 percent over the past year, compared with a gain of 55 percent in the NYSE Arca Biotech Index.

Unlike some of its peers, whose fortunes are tied to a small handful of drugs, Genzyme has built itself into a diversified drugmaker through acquisitions.

The company's biggest-selling product is Cerezyme, a treatment for Gaucher disease that generates annual sales of more than $1 billion. Patients with Gaucher are deficient in a enzyme that breaks down certain fats in the body -- leading to organ damage and even death.

It also sells treatments for kidney disease, osteoarthritis, cancer and a product used in transplants. The company's growth-by-acquisition strategy may now have to change.

"With potential board turnover, there is no guarantee that this approach would be carried forward," said Meacham. "Indeed, activist focus is often toward streamlining costs and creating more strategic interest in companies as opposed to investing in fundamental business growth."

Genzyme's chief executive officer, Henri Termeer, said in a statement it has already shown it is open and responsive to shareholder input, and said "we welcome a constructive dialogue with Mr. Icahn."

As part of its attempt to assuage investor dissatisfaction, Genzyme recently agreed to appoint Ralph Whitworth of Relational Investors, another activist shareholder, to its board in November.

Whitworth has suggested in the past that Genzyme focus more tightly on its core business, which is making drugs for rare, genetic disorders, and less on costly acquisitions in unrelated areas. Icahn has not publicly outlined his strategy for Genzyme.

Icahn's move on Genzyme comes at the same time as his fight for more board seats at Genzyme's Cambridge, Massachusetts-based rival Biogen Idec Inc , which makes the multiple sclerosis drugs Avonex and Tysabri.

Icahn has already pushed, unsuccessfully, for a sale of Biogen to a big pharmaceutical company. But concerns over the safety of Tysabri have caused potential buyers to hold back, at least for now.

Given Genzyme's many moving parts and diverse businesses, an outright sale of the company might not be the first line of attack by activists. They could rather recommend divesting businesses that have little relation to each other.

Icahn plans to nominate himself, as well as Dr. Alexander Denner, Dr. Richard Mulligan and Dr. Steven Burakoff, to Genzyme's board.

The company's shares were down 17 cents at $55.80 in mid-morning trading on Nasdaq.

(Reporting by Toni Clarke, editing by Dave Zimmerman)