GSAS Harvard Biotechnology Club

Genzyme Corporation
One Kendall Square
Cambridge, MA 02138
(617) 252-7500

Symbol: GENZ
Founded: 1981
Employees: 3,800
www.genzyme.com

Genzyme Corporation, founded in 1981, is a biotechnology company that actually makes money. In 1999 Genzyme earned $772.3 million in revenues. Genzyme has grown over the years by acquiring companies with complimentary niche products which are then either taken public or launched as separate tracking stocks. This strategy has resulted in the creation of Genzyme General (GENZ), Genzyme Molecular Oncology (GZMO), Genzyme Surgical Products (GZSP) and Genzyme Tissue Repair (GZTR). Holders of stock from each of these companies are common stockholders of Genzyme Corporation and have no specific rights to the assets to which each stock relates.

1 Genzyme Corporation and Biomatrix Inc. have filed a joint proxy statement/prospectus with the SEC for the planned formation of Genzyme Biosurgery, a new Genzyme division with its own newly created stock. Genzyme Biosurgery would combine the Biomatrix, Genzyme Tissue Repair and Genzyme Surgical Products.

Genzyme General (GENZ) focuses on development of therapeutic products for rare genetic diseases including lysosomal storage disorders and cystic fibrosis. The division has three therapeutics on the market and various diagnostic products and services. Genzyme General owns 33 percent of the outstanding common stock of Genzyme Transgenics (GZTC), a company focused on therapeutic human proteins produced in the milk of animals, plus non-clinical research services. GZTC was spun off from Genzyme in 1993.

Genzyme Molecular Oncology (GZMO) is focused on developing novel cancer therapies in the areas of immunotherapy and antiangiogenesis (blocking the formation of new blood vessels). This division has products in clinical trials for breast cancer and melanoma, an antigen discovery program and proprietary technologies. GZMO was created in 1997 when Genzyme bought PharmaGenics.

Genzyme Surgical Products (GZSP) develops and markets a portfolio of devices, biomaterials and biotherapeutics for the cardiothoracic and general surgery markets. The division has a large portfolio of minimally invasive instruments, biomaterials for reducing adhesions and air leaks and advanced biotherapeutics. Before June 1999 Genzyme Surgical Products operated as a business unit.

Genzyme Tissue Repair (GZTR) develops and markets biological products for orthopedic injuries, such as cartilage damage and severe burns. GZTR has a leading cartilage repair product, and advanced orthopedics research program and a life-saving skin replacement program for treating severe burns. GZTR was created through the acquisition of Biosurface Technology in 1993.

Therapeutics	Preclinical	Phase 1	Phase 2	Phase 3	Marketed
Cerezyme					X
Renagel					X
Thyrogen					X
CF-86 test					X
LDL and HDL Cholesterol Tests					X
Fabrazyme			X
Aldurazyme			X
Pompe Therapy			X

Cerezyme® (imiglucerase for injection) is a recombinant form of the enzyme glucocerbrosidase. This enzyme is used for the management of Type 1 Gaucher disease, the most common genetic lysosomal storage disorder. Patients who have Gaucher disease are born with a deficiency in the enzyme glucocerebrosidase. Recombinant DNA technology, or genetic engineering, is used to make Cerezyme which is intended to work as a substitute for the missing enzyme. Cerezyme was approved in 1994 for use in the United States and in 1997 for use in Europe.

Afp4, a genetic test, was developed by Genzyme Genetics, a part of Genzyme General. This quadruple marker maternal serum screening program utilizes AFP, hCG, uE3, plus dimeric Inhibin-A to assess fetal risk for open neural tube defects, Down syndrome, and trisomy 18.

Renagel® (sevelamer hydrochloride), calcium-free, aluminum-free phosphate binder, is indicated for reduction of serum phosphorus in patients with end-stage renal disease (ESRD). Renagel offers a new approach to providing long-term phosphorus control in patients with ESRD on hemodialysis, without adding to the calcium or aluminum load. In hemodialysis patients, Renagel decreases the incidence of hypercalcemic episodes relative to patients on calcium acetate treatment.

Seprafilm™ Bioresorbable Membrane, composed of chemically modified sodium hyaluronate and carboxymethycellulose (HA/CMC), is indicated during surgery to reduce the incidence, extent and severity of postsurgical adhesion formation in the abdominopelvic cavity. It is a translucent adhesion barrier that is placed by the surgeon at the end of surgery, before surgical closure. It acts as a temporary barrier that keeps tissue surfaces separated during the early days of wound healing, when adhesions form. Seprafilm hydrates to a gel within 24-48 hours following placement and then slowly resorbs from the abdominal cavity in about five to seven days.

Note: More information on these products as well as other Genzyme products can be found on the company's website: www.genzyme.com.

To understand Genzyme’s culture, one must first understand the corporate structure. Genzyme Corporation consists of separate divisions with individual strengths and focuses, however, together as one entity Genzyme is focused on meeting individual patient’s special needs. The individual persons employed in each division have specialized knowledge applicable to their division’s focus. There are also certain individuals (see Termeer and Smith interviews) who share their knowledge and efforts with each of the divisions. Collaborations on many levels take place between the different divisions. Due to the structure of the corporation, an entrepreneurial environment is maintained in a large corporation.

As Chief Scientific Officer, Dr. Alan Smith, puts it (see interview), the competition for Genzyme may be classified into two areas. First, there are the smaller companies that compete with Genzyme’s various products and then there are the bigger companies that compete with Genzyme "to be number one in 2010... those companies are Amgen, maybe Biogen and Centocor, maybe." Other competitors: Chiron, Genentech and Johnson and Johnson.

Genzyme, a company with tracking stocks, divisions, partnerships, investments and more, is a complex biotechnology labyrinth. It operates in a wide variety of market and employs an equally wide variety of scientific approaches and technologies To understand both how and why this corporation has been structured in such a manner and what this means for the science it does -- and the products it makes -- Profiles went to the top to talk with Chairman/ President/CEO Henri A. Termeer and Senior VP of Research/Chief Scientific Officer, Dr. Alan Smith. The interviews below were conducted prior to the announcement by Genzyme that it was acquiring Geltex Pharmaceuticals.

Name: Henri A. Termeer, M.B.A.
Title: Chairman of the Board, President and Chief Executive Officer
Age: 50
Background:
Mr. Termeer has served as President and Director of the Company since October 1983, as Chief Executive Officer since December 1985 and as Chairman of the Board since May 1988.

For ten years prior to joining the Company, Mr. Termeer worked for Baxter Travenol Laboratories, Inc., a manufacturer of human health care products.

In October 1997, as part of its tenth anniversary celebration, the Biotech Meeting at Laguna Niguel honored Mr. Termeer with the Special Recognition for an Individual Award; an award recognizing the cumulative contribution and seminal impact of leading companies, scientific achievements and individuals who have been central to the development and success of the biotech industry. In 1995, "Success Magazine" named him Renegade of the Year; honoring business leaders whose guts and vision have paid off. Mr. Termeer is also recipient of the 1993 Laguna Niguel SWAT Team Award. Mr. Termeer has been acknowledged by the financial publication "Wall Street Transcript" for four consecutive years as an industry executive who advocates shareholder value. During 1990 to 1992, Mr. Termeer also received the Transcripts Gold Award. In 1992, Mr. Termeer was named Entrepreneur of the Year by Merrill Lynch and Ernst & Young, Inc. for his achievements in establishing an innovative, successful, and growing business.

Mr. Termeer is Chairman of the Boards of GTC and Neozyme II. Mr. Termeer is also a director of Abiomed, Inc., AutoImmune Inc., GelTex Pharmaceuticals, Inc. and Xenova Ltd. and a trustee of Hambrecht & Quist Healthcare Investors and Hambrecht & Quist Life Sciences Investors. He serves on the board of directors of both the Biotechnology Industry Organization (BIO), and PhRMA, the pharmaceutical trade organization. Mr. Termeer is also a board member of the Massachusetts High Technology Council.

Outside of work, Mr. Termeer actively participates in public service. He is a trustee for Darden Graduate School of Business Administration, a director of the Massachusetts Cystic Fibrosis Foundation, trustee and vice-chairman of the Boston Museum of Science and a member of the Massachusetts Governor's Council on Economic Growth and Technology.

HT: It hasn’t really changed. The original vision was to create an innovative, commercial enterprise in-licensing the technologies that were coming increasingly visible almost 19 years ago. We were excited about this sudden opening that developed as a result of the new technologies that became available to whomever wanted to take the risks to develop them. It began to be possible to think that you could create new enterprises based on the new technologies rather than on pure marketing muscle. So we set up Genzyme to become a commercial enterprise very quickly and stayed very competitive…we had the emotion and discipline of having a product that you could sell and that people wanted to come back for more. Applying innovative technologies and creating step functions is the only way we could visualize that we could muscle our way into the market place to make a true contribution to a new therapy.

HT: That is when a disease is not treated very well, or at all, and you create a completely new therapy that allows something to be done that has not been done before; so small incremental improvements were very interesting to us in making step functions work. From the very beginning, we were prepared to take very ambitious steps. We said we can get to a completely new therapy where no therapy exists, and that became our business approach. This is different maybe from pure technology driven companies; Millennium for example has been much more based on developing a backbone and then seeing who else can take it to market.

EBC: You have been very successful in the different interesting structures that you have developed…what was the philosophy behind developing, really acquiring, the companies and either then taking them public or developing them as tracking stocks?

HT: Yeah, tracking stocks today -- in the earlier days we set up R& D partnerships. So an acquisition target we would become interested in would be one where we could do something new, or make a more complete picture out of something. An attractive opportunity would be where we had some piece and they had another piece and we would combine the two to make a better whole. We were never interested in selling significant pieces of our technologies to major corporations; we didn’t do many of these large, strategic deals that many in the biotechnology industry have done. Many have done them successfully, but we never chose to do that. We chose to finance these things through our partnerships and and kept them in-house. So the reason that we are now structured the way we are is that in today’s environment…this makes more sense. Of course, there is no certainty that this makes sense tomorrow -- things can change.

HT: A broader base of investors. Earnings-driven companies have a hard time…investing in R&D without influencing the share and the ever-increasing multiples-- that’s sometimes difficult. For people that don’t take the time to understand the business, then it becomes a complex structure.

EBC: How are the separate entities managed? Are they are all responsible for their own bottom lines?

HT: Yes, and no different than if you have different divisions. So you have a president for a division, and he or she is responsible for the results of that particular entity. In some cases that entity is a tracking stock and in other cases that division is not a tracking stock, just a division…and in both cases there are many more layers down of people who believe in what they do and what they need to do to make the ends meet -- to finance it…. The tracking stocks allow the outside world to finance it.

HT: There are significant synergies, because if there were not, this structure would not make sense. We have a core science, a core regulatory, and a core medical development that support the different operations. What we are building is Genzyme Corporation. Currently the structure of Genzyme Corporation has a number of different divisions, some of these divisions are tracking stocks, but still the purpose is to build Genzyme Corporation. Genzyme Corporation is really characterized by having this variety of technology capabilities and manufacturing capabilities and marketing capabilities and global medicines, that can be utilized across the divisions. We created a critical mass for the earlier stage efforts…these are not arms lengths efforts, they are part of the same infrastructure. For instance, in oncology the number of direct employees in Genzyme Oncology is very small, maybe less than 10, but the number of people who work on GO programs is quite large—hundreds, but often only a piece of their time is being spent.

EBC: Okay, so let’s explore an example that I saw in a recent press release regarding a phase 2 study with two of the Genzyme separate entities described to be working in "partnership" on this trial. Would that be structured the same as say a partnership with Biogen -- how would that be structured?

HT: Well, in the case of Genzyme Transgenics, which is a subsidiary, because we own shares -- not the majority, the press release mentioned a LLC (Limited Liability Corporation) partnership with GG (Genzyme General) to develop a particular product. Both sides of these infrastructures are helping to develop it; one manufactures protein milk from goat and purifies it, etc.... The time that is spent by these organizations is costed out against the LLC, then the loss is divided out between the two. And that is the same if the LLC was Geltex or another company. The costs of both companies go into the LLC.

EBC: How do you keep the relationships between the different entities positive?

HT: Because the synergies are so powerful, the points where you really help enable these companies to exist and leverage each other overwhelms the negotiation that is required to make these charges^* acceptable to each other. So these companies, these individual divisions, particularly those that have to report to the outside world on their results, have to make promises. Where analysts are making projections, they are responsible for pushing back. When something happens on a corporate level that impacts their results they go absolutely insane saying that it has to be resolved. So, everybody stays a little more honest that way because it isn’t somehow covered up. In a way it evens out over time, and it’s more transparent.

To build Genzyme Corporation, we could tomorrow collapse all of these companies into one, because there is an agreement…to buy back these divisions at a 30% premium. So that would be another way, if tomorrow’s conditions changed entirely so that the tracking stocks would not be the mechanism of choice. We could do that overnight.

*[Each division that requires work from another division is charged for the time spent on that particular project, no different than from charging out the time for a customer]

HT: There are many different levels. On one level, it is quite individualized. We seem to be very down to earth. To me the most important thing is that individuals feel good about what they do. The human factor is part of what we do, very much. Not that we are perfect, but we try very much to keep the human factor very high on our list of priorities. Without saying we are a team, team -- I hate that. We are a bunch of individuals living our lives in a particular way and choosing to do this…to work together to get things done. The only way you are a very efficient individual is if you feel in charge of yourself and good about the contribution you make and understand the contribution. Any other way around doesn’t work. So it’s an individualized environment where the human factor is extremely important. So our turnover is very low.

We had to make a truly innovative contribution to surgery -- otherwise there’s no point in going through the exercise. So bio-surgery is what we like. Bio-surgery is the notion biotechnology needs to improve surgical procedures; this would include eventually gene therapy to revascularize the heart. Today the patient is still in trouble. If you introduce living cells and you actually reconstruct a broken bone then you can truly repair things. That’s not a small task.

Every orthopedic surgeon has been trained using knives and forks; they are carpenters. You go to an orthopedic meeting and you hear mostly hammering because everyone is selling you a lot of tools, saws, implants and stuff like that. So making that move to working with living cells is very complex -- it creates an intimate relationship with the surgeon that they are absolutely not used to. You could take it off the shelf in the past, now they have to give us cells and grow them which they can't see... it is a big culture shock. That goes slow. But it attracts us, not the fact that it is slow, but that it is that innovative and it’s that unique. That intimacy, the changing cost, and the complications in the cost are all new things.

Eventually, big decisions will have to be made by the patient and the reimbursement agency will often say "this is not my problem". Of course you have a major regulatory challenge: there are no regulations in this area. New regulations have to be drafted and we became involved and that’s not a responsibility we have to take. You have two choices: you can sit on the sidelines and wait or you can help them figure them out. So we have some very smart people who are politicians who are trying to figure out the regulations.

HT: …Because that is where we could do something about something. And that is where we decided to do something…

HT: I think that an MBA is very important, but it is what you do with it…Taking these courses, doing three cases a day for two years and discussing the contents of that program was a powerful experience. I was able to test myself in some situations. I think the individual needs that experience. For me it was good and it was time very well spent. They made me believe that young people can learn a lot of things and can take on responsibility very early. And that helps me in this company. I think that the school has to really challenge you…it is useful to put yourself into such situations.

CV Summary
Name: Alan E. Smith, Ph.D.
Title: Senior Vice President, Research & Chief Scientific Officer
Age: 50
Background: Dr. Smith received his B.A. degree in Biochemistry from Christ’s College, Cambridge, England and holds a Ph.D. from the Laboratory of Molecular Biology, Cambridge, England.

Before he came to Genzyme in 1989, Dr. Smith held the position of Vice President and Scientific Director at Integrated Genetics. Prior to joining IG in 1984, Dr. Smith was head of the Biochemistry Division of the National Institute for Medical Research, Mill Hill, London, England. Previous to that, he was a member of the scientific staff of the Imperial Cancer Research Fund, London, England, and he began his career as a recipient of the European Molecular Biology Traveling Fellowship, Department of Molecular Biology, University of Aarhus, Denmark.

Dr. Smith has authored and co-authored over 180 publications in the areas of biochemistry, virology, and molecular biology. In addition, he has served on various committees, including the MRC Cells board, London, England; EMBO Course and Workshop, Heidelberg, Germany; Board of Studies in Biochemistry, London University, London, England; MRC Cells Board Grants Committee A, London, England; and the Nucleotide Group Committee of the Biochemical Society, London, England.

Outside of his work in the sciences, Dr. Smith enjoys spending time with his five children, collecting water colors and (when the weather permits) driving his ‘68 MG.

EBC: Genzyme has often been noted for the interesting structure with the tracking stocks and with the different divisions…how you think this structure has helped Genzyme’s R&D?

AS: It means that we can generate a critical mass in particular areas and share the crust of that particular mass amongst the tracking stocks. Meaning that for example gene therapy is used by the tissue repair, surgical and general divisions, yet all three of those draw on the same pool of technology, the same pool of people. The place where that is most important is at the very earlier stages when you are trying to develop a new technology…you can have such a group working in a centrally funded location and the three tracking groups can all draw on that. So, it is kind of a way of drawing on the interest structure and building the interest structure, yet sharing the financial burden of that amongst all groups.

AS: The problem is in terms of priorities, knowing what the right priority list is for any given person, given that what might be the priority list for one tracking stock certainly wouldn’t be the priority list for another tracking stock because it doesn’t belong to them… and so there is a great deal of judgement required on the part of managers and we work on that. We work hard on that but there is no doubt that it is an issue. If you are working for one entity, then you can say what is the priority list for that entity. That, in of it itself, is difficult because what is important to one person isn’t necessarily important for another person but from a corporate perspective, you have to figure that out. When you are then talking about separate business units, separate groups of shareholders, you have to pay even more attention to that.

EBC: You probably must get pulled in many different directions because you serve all the different divisions, right?

AS: Oh, there is a whole spectrum. We have protein chemists, bio-engineers, molecular biologists, increasingly people involved in pre-clinical studies--that is the studies that you do directly before human studies. So, that may include things like toxicology and pharmacology. We are trying to find people in bioinformatics and we are finding that very difficult. There are very few on the ground. So, I would say we really cover the whole spectrum.

AS: How do we attract good scientists? I think the key, over the years–I have been here 15 years and I must have interviewed hundreds of people. I have interviewed hundreds of people and hired hundreds of people -- I think the key point is getting people excited in the science. That has got to be it. They need to feel good about the company, to feel it is in good hands, that it has a good overall strategy…They want to get up in the morning and go into work because it is going to be fun and they are going to be doing something useful. A great many people see turning the science into something real as a big plus, as opposed to writing a paper or writing a thesis that will then go sit on a library shelf and gather dust.

So, that is a big plus for a big proportion of people and then just simply the sense that it really does make a difference what you do and that there are people alive today who wouldn’t be alive had it not been for what people had done here in the past. So, it is good science. It is cutting edge technology, as it were, and we can truly claim that in the sense that we don’t just do recombinant proteins or recombinant antibodies, but we do gene therapy. We do cell therapy. So, it is an exciting mix and that is how you attract people, by convincing them that there is a great future for them here. This is the organization of people who have done exactly what I just described.

AS: It is harder to do that in as much as we are 4,000 people, now, in I don’t know how many different countries. We try very hard to remain entrepreneurial, opportunistic so we can get a very high standard of work but also allowing people to take risks and encouraging them to take risks, by which I mean things like picking up the ball when they see the ball fall loose, picking up the ball and running with it, asking forgiveness rather than permission... that kind of thing. We kind of like people who try but don’t necessarily succeed rather than don’t try at all.

So, it is a bigger company which is trying hard to retain the good elements of a smaller company, the entrepreneurship, the risk taking, the hard work but yet the desire to make a difference and be at the leading edge of technology. That is a heavy mix, as it were, and it is easy to say that in the labs, but it is not easy to say that to people who are doing the cleaning or who are the janitors; it is not easy to convey that to them or make their job as exciting. We try that, but it is obviously not that easy to do.

EBC: What would you say are the main components of what you said before is your cutting edge technology?

AS: Again, I would divide it up into pieces. I would think of that in terms of: 1., established technologies; 2., emerging technologies; and 3., things that are still in development.

A major established technology would be recombinant proteins. That is what the factory at Allston does and that is something that we do very well. We are not unique in doing that. There are probably four or five companies, maybe more around the world, biotech companies that do that and do that well and the technology is–it is there. It works.

The question isn’t so much does the technology work as to what are you making using the technology, meaning which recombinant protein are you going to do next. Now we try to have a clear focus on what the foci with the genetic disease is: replacement protein therapies for genetic diseases. That is one–I mean we are the company that does that. We think about other areas too.

There is a distinction between replacement therapies and interventional therapies. Interventional therapies mean things like I have an interesting protein here. It has a lot of interesting biology but what is it good for in medicine? The interferons would come into that category. We have tended not to do some much of that but more of the replacement therapy, although as time goes by, we are adding that interventional therapy including using antibodies more so but again all in the context of a well established technology that we do as well as anybody. We are second to none in that sense and a technology that is less well established but is there would be cell therapy.

Cell therapy would be that medicine which rather than being a single molecule is a single or a well defined subset of cells. So you can think of cell therapy as sort of being halfway between organ transplantation–you know we take the whole organ and transplant it or a replacement therapy where you take a single molecule and replace it. We have two products on the market right now in Genzyme tissue repair, so this is clearly a technology that is there. It hasn’t reached its fullest potential yet. It has a ways to go.

Some of the ways to go, some of the factors that will influence that will be just what cells do you use… and how do you deal with the issue of either autologous cells, which becomes a more cumbersome process, or xeno cells, meaning from another species or a different person, both of which will require one way or another some kind of immune suppression, just as does organ transplantation. The issue there is how can we push that, how can we develop that. That is a very exciting field which is made all the more exciting in the weeks that have passed by the emergence of what is called stem cells.

At one time we used to think of stem cells as being those cells that had the potential to proliferate to create more stem cells and also to differentiate to other cells, meaning they are now becoming rather than omnipotent cells, pluripotent cells -- cells with multiple potential but not unlimited potential. Then, as they differentiate more, become more and more committed to cell type they will be -- for example a red blood, just to pick one out of the hat. Now it seems that the ability of cells to be driven to differentiation down different pathways seems more plastic (developmentally flexible) than ever before. It was once thought there were very few, very specific and very regionally localized stem cells. That view is becoming more and more challenged, so that you might be able to take cells from the bone marrow for example and differentiate them into brain cells or muscle cells.

This is very exciting, because it means that the issue of where you get the cells from is much more open that was previously thought: you take the cells from some source and then you proliferate them so you get a lot of them and then you differentiate them so you get the cell type you want. Obviously, the only thing that you can vary in doing that is the way in which you culture the cells during those two phases; for example, what growth factors or differentiation factors do you put in the medium in which those cells are growing? It turns out that, as I said, the ability to manipulate that in many surprising directions seems much more prevalent that we -- the scientific community -- thought.

So that is a very exciting area in cell therapy. We are working hard on that in relation to heart disease, in relation to osteoarthritis and cartilage damage and in relation to burns and in relation to neuronal cells, particularly in Parkinson’s Disease but also in some of the genetic diseases we are interested in. So, that is a great, sort of emerging area. It is already here in some instances. There is a long way to go, but it is very exciting and we are an obvious player in that field.

And then a therapy that is not there yet, but is hopefully getting closer, is gene therapy, where we have a major in-house, home grown program. The focus there has changed dramatically over the last little while, as we have learned more about the capabilities of gene therapy today -- as opposed to potentially in the future, which is enormous. You just replace a gene for whatever, and you fix the problem forever. That is the ultimate, but we are no where close to the ultimate as yet. What we are close to is, in a small number of cases with limited efficacy, being able to transfer a gene into some cells for some period of time.

Now, what that means is that we originally set out to do one thing. We've learned what the technology is capable of today and what's it's not. To that we take a two-fold approach. One is to say, okay, we know what the problems are, let’s go fix the problems, with the basic research that I was referring to earlier; the second approach is to say okay, I understand that today's technology can’t solve the problem that I was originally working on, but what about another problem?

For example, if you were to say for cystic fibrosis you need to fix a particular set of cells and you need to do that for a very long period of time. You could say, well, I can’t do either of those. I can get some cells but not most cells and I can do it for a while but not that long. But you could also say, "well, wait a minute, can I get immune cells?" Sure I can get immune cells. That is not what I am trying to get in CF but I can get immune cells, and is there anything I could do by transferring a gene into an immune cell, remembering I can only do it for a short period of time? Absolutely -- you could use that approach to stimulate the immune system to melt an immune response to something and in the area we have chose is pira cells.

So, what started off down one track, ended up a completely different track. We now can put genes into antigen-presenting cells, though not necessarily at particularly high efficiency. But we don’t need high efficiency and we don't need it to last for a long time -- because you only need it to stimulate the immune system and then the immune system does the work. The direction and strategy of that program has changed completely. We are in a final clinical trial with immune therapy for cancer now under GMO.

AS: Let me start off by saying that some people say Genzyme likes perhaps small markets. That is kind of a silly way of putting it. Everybody who is marketing anything likes the biggest markets they can find. It so happens that the area that we started is Gaucher disease. People think we have done an outstanding job in creating the market from a disease that involves a small number of people. How can we do that? Well we can do that because the drug is spectacularly successful. It totally changes people’s lives. It is expensive because it is required in high doses, and it is a very complicated protein to make. It is not an easy one to make. The protein has to be remodeled: it is unstable. So, everything is going against you in terms of developing that as a recombinant protein. We fix those things, but the drug is expensive. It is needed in large amounts, but it is life-alteringly good.

Contrast that with many so called good types of drugs which mean that a person doesn’t die in three months. -- they die in six months. Now, that is a spectacular cancer success. Well, having lived with families who have had cancer, as we all have, it doesn’t seem like that much of a success. So, there are drugs that are successful meaning they…make life a little more bearable; it is better than nothing, and that is really the category we are talking about, in which many drugs fall.

The replacement therapies for many diseases are not in that category at all. They are life alteringly good. So, there are markets there. There is a market, and we have shown how that can be developed and that it can be done for areas where there are only small numbers of patients. Because it can be done, we feel somewhat of an obligation to do that…So, there is quite a focus on these genetic diseases that the drugs we are developing are required to be extremely good. They are likely to be expensive but there will be a reasonable market with a reasonable return. So that is why we do that.

Now you say will any genetic disease be like this and the answer is no. There are some cases where there aren’t enough patients to make it economically viable, and frankly I don’t know how to answer that question. What do you tell the patients then -- "oh, yes we could do it but it ain’t worth our while or anybody else’s while"...? I think that is a discussion that is worth having. It is not a Genzyme discussion. That is a much broader discussion…I don’t know how you develop these things for diseases where there simply isn’t a market, where present conditions don’t allow you to make a market… I think the challenge here is not to get the politicians to buy-off on that -- because they very easily buy-off on that. But how you get the regulators to buy-off on that? Congress can buy-off any kind of laws they like, but implementing those laws in terms of the people of the FDA understanding what it is they are trying to do…and doing what they have been instructed is very hard. You are basically saying you have spent 25 years creating rules to insure safe drugs and now you are going to ignore them.... That is a major challenge but it is one that we feel something of an obligation to raise, to get to the point.

It is not here today, but you are getting to the point where you can say, there are a number of diseases where you clearly know how to do something. They are devastating diseases. You know how to fix it but nobody is going to bother. It is a little bit like the third world where sleeping sickness in Africa, you know how to do that but nobody is going to bother with that either because they can’t make a return on it. So, in a sense it is that same discussion in our own backyard.

AS: Ten years is an extremely short time. I have been doing this for 15 years, so I can look back a ten years -- easily. The world is divided into two ways of answering that question. There are those who like to give visionary predictions, and promise the world, and generally get the timing hopelessly wrong. Then there are those who like to under-promise and over-deliver. I would much prefer to under-promise and over-deliver -- I am firmly of that category.

There is lots of good stuff happening, and it is very reasonable to see a lot happening in the next ten years -- lots of recombinant proteins. There will be some early gene therapy things working. Cell therapy will be more established, largely in part or partly in part because mechanisms of immune suppression will develop. But there is this whole school of thought that says it is all going to be totally different ten years from now. One person who says it is George Post. What George says is true, but I think his timing is off, maybe by as long as a century. What he says is one day we will all know our precise genetic makeup, and we will know what diseases we are likely to be susceptible to, and we will know exactly what to do, and nobody will get any diseases... and, by the way, that will all happen in ten years, at least in the case of cancer. I think his ultimate message is right, but I think his timing is hopelessly out, and I will tell you why.

He places all of his faith in the genome and knowing the genome. Now, the genome is a wonderful project, and we will learn huge amounts from it, but the genome is merely exquisite molecular anatomy. Good medicine requires an understanding of much more than anatomy, particularly physiology -- or you want to use a simple word, biology. You need to understand biology in order to do good medicine and genomics does not equal biology. So, the people who tell us that genomics is wonderful are right, but when they tell us that it will all be different five and ten years from now, I believe they are hopelessly wrong. I will give you an example.

The argument is that in ten years it will all be over: we will all be fixed. We know the gene, we know what the gene does, and we know what protein the gene encodes. Is that analysis right? Well no, the answer is that analysis is hopelessly wrong. Just a couple of weeks ago I came back from the annual meeting where the CF Foundation gets together about 100 people who are sort of the leaders and shakers in CF research. It has been held every year since the gene was found, and we go there and say, "so what have we learned?" The answer is we have learned incredible amounts of stuff every single year. So, what difference is it? How many years has that saved in CF? Not a single one. So, there is a clear-cut example of a well studied, well funded, important gene where we simply don’t understand the biology. We know the gene. We know the mutations. We don’t understand the biology, and until we understand the biology better, it is going to be hard to fix the disease. That is just one out of a hundred-thousand new genes that we are going to have available as soon as the genome is completely finished.

…This is not to say it is not a useful exercise. It is to say that biology is the difficult bit and anyone who tells you that knowing the sequence of the genome means it is all over doesn’t know what they are talking about. To conclude, my Ph.D. mentor was Fred Finer, and I recently sat next to Fred at a dinner. I asked him, "what do you think of the genome?". He said, "Oh it is just wonderful. It is just terrific, but of course it is just the beginning"... and then the second quote -- and these might be quoted by other people, too, but coming out of Fred’s mouth, to me that adds extra weight -- was, "It is like having a book that you don’t understand the language that it is written in." Now that is coming straight from the horse’s mouth, as it were, given that Fred is the one who worked out the metrics for sequencing that have led to the sequencing of the genome.

So you say, where is it going to be in ten years. We are going to make wonderful progress but I would tend to be on the under-promise and over-deliver category, rather than tell you it will be over.

AS: Oh, Genzyme is in fine shape. I get uncomfortable about trying to predict the future because to me it is sort of a stupid exercise. I tend to look at the past and say, okay so what is the track record? The track record is we have been profitable since essentially day one. We have grown since day one. We have been run as a business, rather than a university department or something like that that you could accuse some companies of being and we have managed to go through many of the sort of transitions from startup to small company, from small company to middle-sized company. This is not to say we haven’t done those things without a great deal of soul searching and pain -- we are still doing that now.

I would say right now we are in corporate teenager-hood and need to make those decisions that will dictate what our adult life will look like. Not that there is a right way and a wrong way -- just as when you are a teenager. There are just many choices to make, and we are making those choices now. I have every confidence that we will make it through and be an exciting company. Whether we will be the leading one, time will tell, but certainly it is our aspiration to be. Just as it was our aspiration to be about a billion dollars at the time of 2000, it is our aspiration to be about ten billion at about 2010. That is doable, and if we did that we would probably be amongst the leading biotech companies of 2010, independent. That would be a fun place to be.

AS: Well it depends. Again there are so many ways–we are big enough now that you can answer that in many different ways. Our competitors in some cases are people who are working on an exact similar project, for example just to pick one that isn’t much on the radar screen, say Cystic Fibrosis gene therapy. There, our competitors would be tiny little startup biotech companies. If you said, to go to the other extreme, who is going to be your competitor to be the number one biotech company in 2010, I would say clearly it is Amgen, maybe it is Biogen, maybe Centacor… They compete in our world, and these are the ones that are the big guys that are likely to be around in 2010.

Had you asked who are our competitors in bio-surgery, you would have a completely different list, the likes of Boston Scientific but there is a whole spectrum of answers to that question. I tend to think in two ways, one in terms of the ways I have just answered the question in the big picture sense, who is likely to be at ten billion? Well, if it is not you, it is not us and who is competing with you on say treatments for fibrosis disease. So, it goes to two extremes and don’t worry too much about the stuff in the middle.

About the Author
E. Blair Clark is Associate Director of Corporate Finance at The Medicines Company in Cambridge, MA. She is by far the best squash player in the Biotech Club. You can contact Blair at: blair@thebiotechclub.org