Tuesday, January 13, 2009

Press Release

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Settlement Nearly Double Original Valuation Paid by Genzyme

New York, New York, January 13, 2009 – Shareholders of Genzyme Biosurgery (“Biosurgery”), the former tracking stock of the Genzyme Corporation (Nasdaq: GENZ) (“Genzyme”) received their $64 million settlement from the Class Action lawsuit filed against Genzyme Corporation in connection with Genzyme’s consolidation of the tracking stocks which resulted in the forced buyback of all the outstanding stock of Biosurgery for $1.77 per share, as announced on May 8, 2003, which was 32% below the market price of Biosurgery stock which closed at $2.57 per share on May 7, 2003. The final settlement distribution to shareholders was approximately $1.58 per share after legal fees and expenses, representing a nearly 100% increase over the original payout by Genzyme.
According to the Amended Class Action Complaint (“the Complaint”) which originally had been sealed pursuant to Court Order, the action arose from “insider trading and the manipulation of the market price of Biosurgery stock in connection with the repurchase; breaches of fiduciary duty by Genzyme executives and Board of Directors relating to the management of Biosurgery earnings, the manipulation of the market price of Biosurgery stock, and the timing of the announcement of the Repurchase—and therefore the price at which it took place; and breaches of contract and of implied covenants of good faith and fair dealing in connection with the repurchase.”
The Class Action lawsuit was initiated by Rory Riggs, principal of Balfour, LLC and former President of Biomatrix, Inc., and John Lewis, President of Gardner Lewis, a well respected money management firm and one of the largest shareholders of Biosurgery.
Genzyme Biosurgery was created on December 19, 2000, through a merger between Biomatrix Inc. (“Biomatrix”), a NYSE-listed public company and Genzyme’s former tracking stocks, Genzyme Surgical Products and Genzyme Tissue Repair. In the merger documents and thereafter, Genzyme management represented repeatedly that Biosurgery would be managed with the objective of creating a self-sustaining business that would generate near term profits. Based on this business model and the existence of the tracking stock structure, Biosurgery shareholders reasonably expected and were led to believe by Genzyme executives that Biosurgery would be managed as a stand-alone business with the objective to maximize the market price of Biosurgery stock.
According to information presented in Discovery and included in the Amended Complaint, Genzyme executives and Board, “systematically plotted to repurchase the Biosurgery stock at a fraction of its value for their own benefit and the benefit of the Genzyme General shareholders.”
Documents obtained from Discovery that were included in the Amended Complaint showed that Genzyme’s internal valuations reflected a value of Biosurgery that ranged from $12.75 per share to more than $50 per share, valuations which were never publicly disclosed by them.
Commenting on the Class Action suit, John Lewis said, “Biosurgery shareholders were outraged by this unilateral move by Genzyme as there had been no prior indication that such a transaction was feasible much less part of management’s corporate plans. Genzyme’s repurchase price was 32% below the market valuation of Biosurgery’s stock on the day they announced the mandatory buy back—giving shareholders no choice as to whether they wanted to sell their shares. Further, Genzyme determined the 20-day trading period on which the buy back price was based – a time frame during which Genzyme and its Board were privy to material, non-public information related to a number of significantly positive developments for Biosurgery and during which they were in a ‘blackout period’ that prevented them from trading the Company’s stock.”
Lewis continued, “In addition, Genzyme failed to disclose to shareholders its pending sale of Biosurgery’s cardiothoracic instrumentation division which was in negotiation during the 20-day pricing period and which sold for $40.4 million the day after Genzyme closed the buyback of Biosurgery. Consequently, we felt compelled to take Genzyme to task for this blatant abuse of its fiduciary responsibility to its Biosurgery shareholders.”
Commenting on the settlement, Rory Riggs said, “I believe the most egregious part of Genzyme’s actions was the timing of the transaction, as management and the Board were in possession of material, non-public information that included the proposed sale of material assets; a record quarter for Synvisc, Biosurgery’s lead product; important progress in Synvisc’s clinical program; and the restructuring of operations that would result in Biosurgery turning profitable. Biosurgery shareholders never had a chance to benefit from these significant material events because Genzyme’s actions prevented the market from fairly valuing Biosurgery stock. The cumulative effect of these events made the acquisition non-dilutive to the Genzyme General shareholders. Genzyme’s refusal to disclose these material events in advance of mandating the buyback of Biosurgery shares is the most flagrant non-disclosure breach I have ever seen in any corporate stock repurchase.”
“In my opinion, this settlement of approximately twice the original payout to Biosurgery shareholders while nowhere near full retribution for the injustices of this transaction, demonstrates that Genzyme, while not specifically admitting guilt, acknowledges the magnitude of their malfeasance,” concluded Riggs.

About the Amended Complaint:
The original Class Action Complaint, filed on August 1, 2003 was amended on December 30, 2005 to include information obtained through Discovery. Due to the confidential nature of the information obtained through Discovery, at the request of Genzyme Corporation, the Amended Complaint was sealed by order of the Hon. Judge Stanton. It remained sealed until the New York Times petitioned the Court to make the document public. That request was granted on October 17, 2006. For those interested in the specifics of the infractions detailed in the Complaint and the information obtained through Discovery that documents these infractions, the complete Amended Complaint is available at: www.genzymelawsuit.com.
For More Information Contact:

Jules Abraham
Lippert/Heilshorn & Associates, Inc.
Tel. (212) 838-3777

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