Decision comes shortly after Carl Icahn’s push to get himself and three others on the Genzyme board.

Genzyme announced plans to effect a $2 billion stock buyback and says that it is actively looking to sell, spin-out, or facilitate a management buy-out of its genetic testing, diagnostic products, and pharmaceutical intermediates businesses. The decision is part of a wider plan to boost the firm’s growth and bolster its manufacturing operations and is also likely the latest step in Genzyme’s battle to quash the recent proxy challenge by billionaire investor Carl Icahn.

Under the stock buyback program, Genzyme aims to repurchase $1 billion worth of shares in the near-term, which it will finance with debt. Another $1 billion of stock will be repurchased over the next 12 months.

The genetic testing, diagnostics, and pharmaceutical intermediates businesses, meanwhile, are no longer relevant to the firm’s focus on therapeutics, admits Genzyme CEO, Henri Termeer. “As we evaluated our company to create a mix of businesses that will deliver sustainable growth and stronger returns on invested capital, it became clear that these businesses do not fit in within this strategy,” he states. “Focusing on our core businesses will enable us to continue to build a portfolio of high value therapies for patients.”

The firm says that it has already identified a number of potential partners for the three businesses and has received additional unsolicited inquiries. It expects transactions to be completed during this year. The Genzyme genetics business operates nine laboratories and reported revenues of $371 million in 2009. Genzyme’s diagnostics segment offers enzymes, clinical chemistry reagents, and rapid tests in the fields of cardiovascular, renal, and infectious diseases as well as diabetes. The business recorded $167 million in revenues last year.

Genzyme pharmaceuticals develops and manufactures chemically synthesized pharmaceutical materials and technologies with a focus on lipids, peptides, carbohydrates, oligonucleotides, custom small molecules, and drug delivery technologies. The business includes a cGMP manufacturing facility in Liestal, Switzerland.

Icahn’s push to get himself and three other compatriots on the Genzyme board has yet to lead to an overt or public verbal battle, but the gloves are, apparently, off. In its proxy challenge statement, the Icahn camp called Genzyme’s manufacturing system broken and claimed that the four new nominees to the board would “significantly improve the science and business expertise” of Genzyme’s directors.

Genzyme, meanwhile, has been effecting its own management reshuffle. Most notably, evp David Meeker, Ph.D., was appointed to the newly created position of COO and is charged with overseeing the firm’s commercial organization to improve operational efficiency and drive cost savings. Dr. Meeker’s team will also oversee products at the early-launch or prelaunch stage, which Genzyme maintains represent key near-term growth drivers.

The firm’s stock repurchase and business sale plans come just weeks after Genzyme confirmed it will have to pay some $175 million in FDA fines relating to last year’s viral contamination of the Allston Landing, MA, manufacturing plant for Cerezyme and Fabrazyme. Plant closure led to global shortages of the two drugs. Manufacturing even now, seven months after the plant reopened, is running well below par.

Genzyme claims that it is now working to transition fill/finish operations out of its Allston facility to its plant at Waterford, Ireland, and to a contract manufacturer. A new plant in Framingham, MA, while mechanically complete, will probably not be approved until next year, the firm stated in its financial report for the first quarter of 2010.

While the company is working to transfer production of Cerezyme and Fabrazyme, if the Allston fill/finish facility is still operating after a specified deadline, the consent decree from the FDA could force Genzyme to pay another 18.5% of revenues from sales of products manufactured and distributed from the plant.

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