Genzyme

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Genzyme Corporation (NASDAQ: GENZ) is a biotechnology company based in Cambridge, Massachusetts. Genzyme specializes in developing and commercializing orphan drugs. Many of its drugs are replacement enzymes which treat lysosomal storage disorders. Genzyme is known for charging extraordinary prices in order to recoup expenses from small patient populations. However, the company is also respected for its ethics and corporate responsibility, for example,they provide drugs free of charge to patients not covered by insurance or government health plans (outside the U.S.).

Genzyme is the world’s third biggest biotechnology company employing over 8,000 people around the world with its headquarters located in Cambridge, MA. At present, the company has a total of 75 locations in 32 countries. It includes 15 manufacturing facilities and 9 genetic testing laboratories. The company’s products are available in more than 80 countries. In 2005, Genzyme generated $2.7 billion in revenues with more than 25 products in the world’s markets. The company is also involved in philanthropic acts, donating $64 million in product contributions and $10 million in cash contributions in the year 2005. In 2003, it was named the “Company of the Year” by Boston Business Journal and in 2006 named One of Fortune’s “100 Best Companies to Work for.

Unlike giant pharmaceutical companies who search for drugs that having a marketing potential for millions of people, Genzyme started with the contrarian strategy of "think small". The company, started by a small group of scientists in 1981, was primarily devoted to finding drugs that would cure enzyme deficiency conditions that were essential to one’s survival and which usually afflict a very small percentage of the world’s population. Drugs used to treat such conditions are termed “orphan drugs”. In 1983, the US senate passed legislation creating a category of orphan drugs “that treated ailments suffered by fewer than 200,000 patients in the U.S in order to provide incentives for companies to develop them. According to the law, a company that came out with an orphan drug that was approved by the FDA had a right to market that drug for seven years straight without facing any competition from a competing drug unless the latter proved to have better effects than the one existing in the market. The law also allowed the company that came with an orphan drug for tax deductions to half its capital investment in clinical trials. Termeer, who was paying close attention to this change, seized the opportunity to become the president of the company in 1983 realizing that such a move had nothing but gains to this businessman who previously had a top job at Baxter International.

At its inception, Genzyme was particularly interested in discovering orphan drugs and holding its leash to the sole-marketing of its drugs for seven years. In this way, in just a couple of years, the business was soaring and its stocks had allured many investors. In 1986, the company went public raising $27 million. The investors, however, had to wait for five years before a generous payoff. A stockholder that ten years ago had invested $1,000 would have earned $4,665 today.

The company focuses on six areas of medicine relating to Lysosomal Storage Disorders, Renal Disease, Orthopedics, Transplant and Immune Diseases, Oncology, Genetics and Diagnostics. The first orphan-drug for Genzyme that FDA approved was Ceredase, a drug for treating Goucher disease. It was not as effective as Cerezyme, made by recombinant method, which hit the market in 1991 because Ceredase required severe filtering process and was prone to get infected with contaminants. Cerezyme offered stronger hopes to patients with Gaucher disease by replacing “the enzyme (Beta- glucocerebrosidase) that sufferers of Gaucher disease lacked.” The drug provides an ongoing therapy that patients must take for their entire lives. In 2003, there were 6,000 diagnosed people worldwide with Gaucher disease and 3,600 took Cerezyme, which have increased to 4,500 at present. Since Cerzyme treats a life threatening disease and a year of Cerzyme treatment costs $170,000 — all major insurance companies cover it - and as such “the drug brought in $619 million (in 2002),”1 which were almost half of the company’s total revenues of $1.3 billion. As per the industry norm, Cerezyme has a profit margin set at 60%. As per the company’s website, the drug had amassed $932 million in revenues in 2005, and is still the company’s most important product and also the biggest revenue-maker till date.

The company is divided into three divisions: Genzyme Biosurgery, Genzyme General and Genzyme Molecular Oncology. The company’s step to raise money in mid-1990s by issuing tracking stocks for three of the company’s divisions proved to be a drastic failure. In 2002, Genzyme encountered another “nerve racking” situation by acquiring Pharming N.V. in Belgium, the branch of Pharming Group that was involved with producing transgenic human alpha-Glucosidase. As if to ameliorate the situation that Genzyme was in, FDA approved two of Genzyme’s newest drugs: “Fabrazyme, which treats Fabry disease, and Aldurazyme, which treats MPS-1 (Mucopolysaccharidosis I).”2 A competing company in Cambridge, Mass., Transkaryotic Theraies, also involved in making an orphan drug for Fabry disease had submitted its application for FDA approval but Genzyme with the better luck, which had spent $200 million developing Fabrazyme got the green light first.

Other important drugs made by Genzyme are Renegal, used in treatment of dialysis patients, and Fabrazyme, used by arthritis patients. Other pipeline products in development are Tolevamer for Clostridium dificile colitis disease, and Campath for multiple sclerosis affecting 300,000 Americans.

Genzyme spends 20% of its turnover into research with an annual spending of $503 million in 2005. Because of its model, there is relatively little competition in its endeavor to provide for unmet medical needs. The company is very aware of the processes of running clinical trials and is constantly looking for ways to treat diseases that is life threatening but minimizing the downside risk at the same time.

[edit] References

Author of Case Study: Mr. Saurav P. Shrestha. saurav.p.shrestha@gmail.com

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