MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Genzyme fixates on process

Nir Kossovsky - Friday, December 11, 2009
Earlier this week, Robert Bertolini, former Schering-Plough Corp. executive vice president and CFO, was elected to the board of directors at Genzyme Corp (Nasdaq: GENZ). Bertolini worked for the last six years at Schering-Plough, where he was responsible for overseeing tax, accounting and financial asset management before the company’s merger with Merck & Co. Prior to his time at Schering-Plough, he worked at PriceWaterhouseCoopers.

Why elect an accountant to the board of a leading biotechnology company? We think it is for his process expertise. This is why. Three weeks prior, the U.S. Food and Drug Administration notified Genzyme of new deficiencies at its primary manufacturing plant in Massachusetts. A five-week inspection of the facility made the timely approval of the new drug, Lumizyme, unlikely and comes after the location failed an inspection in May.

Today, Genzyme CEO Henri A. Termeer said Genzyme also hired Pamela Williamson from Serono Inc. to be Genzyme’s senior vice president and head of regulatory affairs and corporate quality compliance; Ulrich Goldmann from Novartis Pharmaceuticals to be Genzyme’s senior vice president of global medical affairs; Andrew Lee from Pfizer Inc. to be senior vice president of clinical research; and Michael Panzara from Biogen Idec Inc. to be Genzyme’s therapeutic area head and group vice president for multiple sclerosis and immune diseases. Genzyme has to focus on process improvements.

There is not much else to tweak. Its stakeholders are giving it the benefit of all doubts. Its reputation ranking (see IA index below) is near the peak of the Biotechnology sector according to the Steel City Re Corporate Reputation Index. Nevertheless, its stock price is back to 2004 levels, and trading activity level is rising--a harbinger of reputation changes.





This is what we read in the messaging. Reputation protection is the mission, and business process improvement is the strategy. Loss of reputation at this stage would lead to a precipitous drop in enterprise value and an empowerment of activist investors such as the hedge fund, Relational Investors LLC, of San Diego. Failure is not an option.

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