Recent news that Genzyme Corp. sold its laboratory testing division to one of the largest lab companies in the country, Laboratory Corp. of America Holdings of North Carolina, has left some local officials wondering what impact the move will have on Genzyme operations in MetroWest.
Because of the similar nature of both companies, one New York analyst who tracks LabCorp said he expects the company to consolidate some of the nine laboratories and 1,700 employees Genzyme Genetics has around the country.
But locally, no one is sure what exactly that will mean for Genzyme Genetics' operations at 3400 Computer Dr. in Westborough.
"Obviously we'd like to see them stay and grow that operation here," said Rod Jane, chairman of the Westborough Economic Development Committee.
Consolidation Strategy
If LabCorp does consolidate services, Jane said Westborough could be a good location to do that.
Westborough Town Planner Jim Robbins said he's not sure how many employees Genzyme Genetics has in Westborough, but he said he will be reaching out to LabCorp.
Genzyme Genetics is a small division within the large Cambridge-based biotech Genzyme, representing about 8 percent of the company's total revenues last year. Genzyme Genetics had about $372 million in sales last year, compared to $4.5 billion in sales for the parent company. Robyn Karnauskas, a biotech analyst with Deutsche Bank in New York, said the genetics division has been a drag on the company, with a negative 1.6 percent operating margin last year.
LabCorp meanwhile made a $540 million profit on about $4.7 billion in sales last year. While Genzyme Genetics focuses its testing on oncology and prenatal genetic testing, LabCorp is a general testing company offering a wider range of services.
Kevin Ellich, who tracks LabCorp for the New York firm RBC Capital Markets, said it's only natural to assume LabCorp will benefit from some efficiencies after the $925 million deal closes later this year.
"When I look at the financials of these two companies, there are probably some redundancies that can be reduced or removed," Ellich said. And while creating efficiencies is often code for job cuts, that may not happen immediately.
LabCorp recently noted in an SEC filing its intentions to maintain a "certain salary level and benefits arrangements" for one year after the closing and to provide "certain severance and other benefits" to the Genzyme employees the company will acquire.
Ellich said that's good news for the Genzyme employees in the near future, but as for the long-term, he expects Lab Corp to consolidate some of Genzyme Genetic's operations.
Overall, the sale of Genzyme Genetics was not a surprise to those who follow the company.
Karnauskas, the biotech analyst with Deutsche Bank, said when activist investor Carl Icahn gained three seats on the Genzyme board of directors this summer, the company announced soon afterwards it would reorganize three divisions, including the genetics one.
"This is a good move if they want to make the company look more attractive and streamline their business," Karnauskas said.
Later this fall the company will announce plans to reorganize Genzyme staff, which Karnauskas could mean potential layoffs within the company.
Since federal inspectors found a virus in Genzyme's Allston manufacturing plant last year, the company has been on its heels, Karnauskas said. In the past few months French biotech company Sanofi-Aventis has made an $18.5 billion public bid to purchase Genzyme, which Genzyme CEO Henri Termeer promptly rejected.
Karnauskas said the sale of Genzyme Genetics will make Genzyme more attractive to a possible buyer because the company has dropped an unprofitable portion of its business and has almost $1 billion in new cash. That, she said, makes it more likely that Sanofi would increase its bid to buy Genzyme.
0 Comments