Staff Writer

It was biotech's version of "buy-one-get-one" for Genzyme business units on Thursday.

Sekisui Chemical Co. Ltd., of Osaka and Tokyo, started the business day Thursday by buying one – Genzyme's diagnostic products business – for $265 million.

Soon after, Laboratory Corp. of America, of Burlington, N.C., got one – Genzyme's genetics business unit – following the Federal Trade Commission's (FTC) sign off on the $925 million September sale. The companies anticipate closing around Dec. 1.

Both deals involved units that Genzyme, of Cambridge, Mass., said in May it would try to sell or spin out. The company also wants to divest its pharmaceuticals business unit.

Divesting all three should improve the company's gross and operating margins. The company said proceeds might be used to finance the last half of its $2 billion stock buyback program, aiming for completion in May 2011.

The Sekisui deal is the latest move in an effort to increase value for Genzyme shareholders by sharpening the company's focus and allocating resources to key areas such as manufacturing, a rare-disease business and the product pipeline.

Low sales and production facility problems have plagued the company throughout the year. Contamination at its Allston Landing facility resulted in shortfalls of enzyme replacement therapies Cerezyme (imiglucerase alfa) and Fabrazyme (agalsidase beta) and was followed by a costly consent decree and disappointing earnings.

Moreover the company has been the target of a hostile buyout attempt by Sanofi-Aventis SA. Genzyme's board has twice rejected a $69-per-share offer – about $18.5 billion – from the French company. And it has projected future financial success for pipeline drug alemtuzumab in relapsing-remitting multiple sclerosis (MS). (See BioWorld Today, Oct. 15, 2010.)

Genzyme reported in an 8-K filing earlier this month that it cut 392 jobs in the first phase of a work force reduction plan that will eliminate 1,000 jobs – roughly 10 percent of its global work force – by the end of 2011.

Shares (NASDAQ:GENZ) were up 5 cents, to close at $70.27Thursday on light trading.

Sekisui will purchase substantially all of the assets of the diagnostic business, including product lines and technologies, the companies said. Sekisui will retain the diagnostic unit's 575 employees including senior managers and plans to maintain operations in all current locations. The companies hope to close the transaction by the end of 2010.

Genzyme's diagnostics business had revenue of $167 million in 2009. It provides raw materials and enzymes, clinical chemistry reagents, rapid tests and infectious disease products to manufacturers, clinical laboratories, distributors and health care providers. The business is focused on the cardiovascular, diabetes, renal and infectious disease areas and is a major provider of HDL and LDL cholesterol tests.

Genzyme CEO Henri A. Termeer noted that Genzyme Diagnostics has worked with Sekisui for more than 15 years. "This history ensures a level of continuity that will greatly benefit employees and customers," he said.

The business will be operated as part of Sekisui Medical Co. Ltd., of Tokyo, a division of Sekisui Chemical. Sekisui Medical has four businesses, which focus on diagnostic reagents, medical devices, pharmaceuticals and fine chemicals, and toxicology research.

In an announcement of the deal, the company stated that ". . . Genzyme has been an important part of Sekisui Medical's strategic efforts to expand its sales outside Japan. Specifically, Genzyme and Sekisui Medical have been collaborating since as far back as 1995 through a supplier-customer relationship involving the distribution of Sekisui Medical's biochemical diagnostics and the supply of Sekisui Medical's raw materials in the field of infectious disease to the U.S. and Europe. For example, Sekisui Medical's role as Genzyme's HDL and LDL cholesterol reagent supplier has helped the companies together build a solid position in this segment of the formulated reagents business. Thus, the acquisition will enable Sekisui Medical to build upon this historical relationship and establish an even firmer platform for Sekisui Medical's growth outside Japan in the diagnostic field."

LabCorp said it received early termination from the FTC of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 for the acquisition of Genzyme's genetics business unit. LabCorp agreed to acquire Genzyme Genetics in a cash transaction worth $925 million. (See BioWorld Today, Sept. 14, 2010.)

The genetics unit provides complex reproductive and oncology testing services to maternal fetal medicine specialists and obstetrician/gynecologists, performing more than 1.5 million tests annually. The tests offered range from maternal serum screening and prenatal diagnostics to carrier screening and postnatal testing services. The genetics unit is also employed as a network of geneticists and genetic counselors who provide infertility and prenatal genetic counseling to physicians and patients. The business unit reported 2009 revenue of about $371 million.

LabCorp would get the entire unit, including testing technology and nine laboratories, and would continue to employ 1,900 employees and senior managers.