Genzyme has been using activist investor Carl Icahn (photo) as a punching bag over the last couple of days, aiming to undermine his attempts to grab seats on the company's board. It's been calling out possible conflicts of interest for Icahn's nominees, and now it's adding Ralph Whitworth--another activist investor--to its board immediately, a move that could weaken Icahn's case.
Genzyme has trumpeted new data on its blood cancer drug Campath as a treatment for multiple sclerosis, pointing to a trial that showed 71 percent of MS patients who used the drug for four years had no relapses or increased disability. But two of Icahn's nominees to Genzyme's board also serve as directors of Biogen Idec, which has MS therapies of its own. Those nominees couldn't serve Genzyme impartially if the company pushes into the MS market, the company said. Nor could Icahn, as a big investor in Biogen.
"Directors owe shareholders a duty of loyalty and a duty of care," Genzyme's Peter Wirth tells Bloomberg. "When you have people who are on the board of a competitor or have a billion-dollar stake of a competitor, they can't satisfy either."
Adding to Icahn's headaches is Genzyme's agreeing to add Ralph Whitworth--another activist investor--to its board. Whitworth had agreed to back the company's board nominees at this year's shareholder meeting in return for a promise that he could join the board himself after November. But there's a new agreement now: Whitworth joins the board immediately and gets the right to appoint another director and to chair a new committee overseeing strategic planning and capital allocation, the Wall Street Journal reports. And his firm, Relational Investors, will continue to support Genzyme management.
As the WSJ points out, this agreement helps Genzyme build a case that it's working on its problems and open to outside help--and to change. Will it persuade shareholders to vote against Icahn's board nominees? For that we'll have to wait for the June 16 meeting.