Genzyme Corporation is a biotechnology company based in Cambridge, Massachusetts. It is listed on Nasdaq under the symbol GENZ. 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.). A Case Study of Genzyme www.genzyme.com

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. So, what are the drugs that have made Genzyme into what it is today—the third biggest biotech company? 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 $170,00—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.

The other important drugs of Genzyme in market are Renegal, the second highest revenue-maker, which is used in the “treatment of chronic kidney disease for patients on dialysis,” generating $417 million3 in revenue in 2005; Fabrazyme, the third highest revenue-builder generated $305 million and Synvisc, the fourth top product generated $219 million in revenue in 2005 and is used in the treatment of “pain in osteoarthritis of the knee in patients who have failed to respond adequately to conservative nonpharmacologic therapy, and simple analgesics, e.g., acetaminophen.” It is considered to be a therapy instead of a drug. The other key pipeline products of Genzyme that are in development are Tolevamer for Clostridium difficle colitis disease that is the most common infection acquired by patients during their stay in hospitals caused by bacterium that cause tetanus and botulism. The second pipeline product is Campath for Multiple Sclerosis affecting 300,000 Americans.

Genzyme pays extra attention to its R&D unit and spends 20% of its turnover into research with an annual spending of $503 million in 2005. Because of its unique model, there is a very high barrier set by the company and as such “relatively little competition”2 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. It knows its scientists who have helped in discoveries of its proteins very well and is good at holding all its cards.2 The other competitors to Genzyme are Amgen, Abbott Labs, Genentech and Johnson & Johnson. Unlike Genzyme’s philosophy “to make big money in small markets,” the others are involved in making big monies by serving to the bigger markets.

The CEO of Genzyme is very excited about integrating the ideas of stem cells and gene therapy into the biotechnology world. In his interview with a Netherlands press he said that those two can be the most promising technologies in the future even though it is a strong subject of debate.1 Genzyme is predicted to have a more successful future with it’s very “contrarian strategy” ideology of doing what it’s good at: “wringing big money from small markets,”3 making new products every 1-2 years with Myozyme, its most recent drug to get FDA approval just this year that treats Pompe disease, saving lives with products that work well, and the willingness of the market to pay for it, no matter what the asking price is?

Schouten, E. Genzyme’s lifelong commitments. NRC Handelsblad. Novemeber 24, 2005. Gaucher’s website. (http://www.gaucher.org.uk/cercer.htm) Watson, N. This Dutchman is Flying. Fortune. June 23, 2003 (www.fortune.com) Hirehealth’s Website (http://www.hirehealth.com/Public/CompanyDetails.aspx?COMPANY_ID=44719) Curley. S. Genzyme acquires manufacturing facility in Europe. 2000 (http://www.worldpompe.org/gpr301001.html) Genzyme Corporate’s website. (http://www.genzyme.com/corp/structure/fastfacts.asp) Synvisc’s Official website. (http://www.synvisc.com/aboutsynvisc/default.asp) Riskind. P. Multiple Sclerosis—The immune system’s terrible mistake. Fall 1996, Vo. 5, No. 4. Hoovers’ Website (http://www.hoovers.com/genzyme/--ID__13560--/free-co-factsheet.xhtml)

External Links

• Genzyme Corporate Website

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