Week 1 Assignment 1: Genzyme and Relational Investors

User Generated

szrecul24

Business Finance

Description

Individually (not as a group) prepare a case report consisting of a brief one or two paragraph response to each of the six questions. Limit your response to two pages, typed double-spaced, with 12-point font and one-inch margins. Write clearly, using proper grammar and punctuation. Then post a summary of your responses to the Discussion area, read the postings of other students, and respond to these postings. Your responses should address any issues raised in the responses of others that you feel are interesting or warrant clarification.

  1. Think about Genzyme and its business model. What does a biotech company do? How does it succeed? What is Genzyme’s business model and financial strategy? What does Henri Termeer want for the company going forward?
  2. What is the business model for Relational Investors? What are its keys to success?
  3. Why is Relational Investors targeting Genzyme? It has been noted that value is creating by investing in projects that return more than the cost of capital. Look at Exhibit 8 of the case. Suppose Genzyme’s cost of capital is 10%. Where is the company creating value? Where is it destroying value? What do you think should be done to improve?
  4. Evaluate Relational Investors’ criticisms and Genzyme’s defense for each of the following areas:
    • Capital allocation (investing in new projects)
    • Share repurchase
    • Board of director composition
    • Executive pay
  5. What do you think Genzyme should do about its financial strategy?
  6. Is there any way Termeer could have avoided this conflict with Whitworth, or was it unavoidable?

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Explanation & Answer

Attached.

Running head: GENZYME AND RELATIONAL INVESTORS

Genzyme and Relational Investors
Student’s Name
Institution

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GENZYME AND RELATIONAL INVESTORS
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Question One
The original business model of the company was to produce drugs that assist patients
with genetic disorders through research and obtaining collaboration with biotechnology
companies that were still struggling. The company has four segments namely; renal and
cardiometabolic, genetic disorders, hematologic oncology, and biosurgery. The company is also
involved in worldwide manufacturing and sales and thus the model of Genzyme focuses on
research and advancement in the field of biotechnology. It also focuses on the acquisition of
smaller firms and getting the approval of their manufactured drugs from FDA in order to
maximize the advantages offered by Orphan Act of 1983.
Biotechnology deals with the exploitation of the components of living organisms in an
attempt to improve the lives of human beings who are in poor health. In other words, the poor
health is caused by rare diseases that require high costs for large pharmaceuticals...


Anonymous
Excellent resource! Really helped me get the gist of things.

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