Genzyme Board Probes Insider Stock Sales

Sometimes, trouble begets still more trouble. Already besieged by regulators, upset patients and deep-pocketed investors, Genzyme now faces an investigation into allegations that several unnamed executives and board members "took advantage" of their knowledge of inside doings at the biotech and illegally sold some of their personal stock holdings.

The Genzyme board has designated three independent directors to oversee the investigation and independent legal counsel has also been retained, although no names were offered (click here for the list of board members). This unseemly disclosure was made in a filing with the US Securities and Exchange Commission (which you can see here on page 31).

The probe was prompted by nine letters from shareholders received since last August, when Genzyme shut its Allston Landing, Ma., plant for several weeks to remediate viral contamination. That prompted rationing of two key drugs - Cerezyme, which is used to treat Gaucher disease, and Fabrazyme for treating Fabry disease. Then, bits of trash were found in some products (background). Genzyme has scrambled to hire new execs and consultants, but the FDA is preparing a consent decree that will involve a $175 million fine.

Shareholders, not surprisingly, have been steamed for months. In December, Genzyme added an independent director, Bob Bertolini, who was chief financial officer at Schering-Plough before it was acquired by Merck, under pressure from Ralph Whitworth of Relational Investors, who is now a board member himself. At the same time, Sheridan Snyder, who founded Genzyme in 1981 and recruited Henri Termeer as ceo, said Termeer should leave. And now, Carl Icahn is gearing up for a proxy fight over Genzyme’s board and wants to remove ceo, Henri Termeer, and three others from the biotech’s board.