In 1999, Genzyme Corp.'s chief executive, president and chairman Henri Termeer stood before a Massachusetts Institute of Technology audience and predicted that of the 1,300 biotech companies in business at the time, only a dozen would still be thriving in a decade.

As far as anyone can remember, Termeer didn't venture a guess about his own company. Nearly 10 years later, though, Genzyme isn't just a survivor, it's still one of the rare profitable firms in the industry (although not last year). It's also the only big biotech that has unapologetically built its portfolio through relentless acquisition.

Credit Termeer for that. With 9,000 employees, Genzyme is still nearly synonymous with "Henri" (pronounced "Henry," although he originally hails from the Netherlands), no last name needed, either at the company's eco-green Cambridge headquarters or elsewhere in Boston biomedical circles.

"He's been the force behind Genzyme," says industry veteran Alison Taunton-Rigby, CEO of Boston-area startup RiboNovix Inc. and a former Genzyme executive. "He's been superb in taking one good asset that generated enormous profits and building a company from that."

That one good asset is a drug now called Cerezyme. Together with its sister products, Cerezyme generated nearly half of Genzyme's $3.2 billion in revenue last year and has enabled Termeer to assemble a product line that makes Genzyme look more like a mini-Johnson & Johnson than a focused biotech. Cerezyme and Genzyme's other enzyme replacement therapies are bioengineered drugs that assuage a family of rare genetic disorders, each with fewer than 10,000 patients worldwide. Genzyme also makes and sells products in the areas of kidney dysfunction, transplant rejection, artificial joint lubrication and wound healing, and medical testing. Each area is its own reporting unit, each built through acquisition. "The original Genzyme was such a hodgepodge, and it still is," says Taunton-Rigby.

Tracking Genzyme's deals over the years, it sometimes seems they have had as much to do with whom the company knows as what it knows. Familiar faces often crop up among its target companies. One of them belongs to Termeer's old colleague from Baxter Pharmaceutical, Robert Carpenter, who has sold two companies to Genzyme.

Loath to cut deals with big pharma for funding, Genzyme has turned to creative -- some would say questionable -- financing decisions. The most controversial began in 1994 when it issued a tracking stock for its tissue repair division. Tracking stocks for molecular oncology (1998) and biosurgery (1999) followed. Genzyme kept full ownership and the right to buy back the stock at any time, and when it did in 2003, it was at a price so low shareholders sued, claiming Genzyme conspired to depress the price in the run-up to the repurchase. The firm recently settled one of the suits for $64 million. Documents from the case show Genzyme officials mapped out the buy-back of the biosurgery stock for well over a year, according to the Boston Globe recently.

The legal imbroglio hasn't stalled the firm's acquisition machine. Most recently, Genzyme went after Bioenvision Inc. to help bolster its nascent cancer-therapy business, only to come up short when Bioenvision shareholders rebelled at the low-ball offer. Genzyme managed to buy 22% of the company from a venture firm that was ready to exit, but it seems unlikely shareholders will approve a full takeover at their Oct. 4 vote.

Genzyme's many deals -- both the controversial ones, and the merely successful -- are worth studying because, in an industry that prides itself on scientific innovation, the company has been willing to blaze a trail in a different direction. Few biotech execs would have told analysts, as chief financial officer Michael Wyzga recently did, that their companies are better at later-stage work than at "deep research." Times are quickly changing, however. "Genzyme's strategy of using acquisitions to fuel long-term growth is proving to be where the entire sector is moving," says Deutsche Bank biotech analyst Jenn Chao.

One of four executive vice presidents under Termeer, Wyzga is part of a dealmaking team that benefits from a vast alumni network. He recently held a wide-ranging discussion with Wall Street analysts and spoke at length about Genzyme's acquisition strategy.

Wyzga puts Genzyme's acquisitions into two camps. "Tactical" deals carry a price tag of less than $1 billion and fit some way into the firm's existing infrastructure, either its manufacturing facilities or its specialized sales teams. Larger, "strategic" deals are the rarer acquisitions that add an entirely new business or indication to the company's rolls, usually at a blockbuster price but not necessarily so.

Genzyme's first transformative deal came in the late 1980s. Founded in 1981, the firm was bumping along, trying to draw revenue from a bulk pharmaceutical catalog business it bought early on as it pushed Cerezyme, then known as Ceredase, through clinical trials. Termeer had joined in 1983, became CEO in '85 and took the firm public in '86.

To make Ceredase, Genzyme used enzymes extracted from placentas, an expensive process with limited yields. In the late 1980s, Termeer ran into his old colleague Carpenter, who by then was CEO of the struggling firm Integrated Genetics, which he'd been trying to sell. The firm had recombinant DNA expertise, just what Genzyme needed to make its enzymes on a larger, cheaper scale. Carpenter agreed in 1989 to sell for Genzyme stock worth $31.5 million.

Once on board, its technology made a huge impact. Only three years after Ceredase was approved in 1991, its recombinant follow-on Cerezyme hit the market, manufactured in vats of genetically reprogrammed hamster cells.

Genzyme followed with other enzyme replacement drugs, but it also needed to diversify. That led to the $1.1 billion purchase of GelTex Pharmaceuticals in 2000, another company associated with Bob Carpenter, who founded it after his first go-round with Genzyme. The deal brought a drug called Renagel, the firm's first big foray into renal care. With $515 million in sales last year, Renagel is now Genzyme's second biggest seller, growing 18% annually since 2004.

Genzyme has since added on to its renal division, buying Bone Care International in 2005 for $600 million to bring on board Hectorol, a vitamin D injection.

The other grab for new territory this decade hasn't borne fruit as rapidly. In 2003 Genzyme bought Ilex Oncology of San Antonio for $1 billion, its sights set on alemtuzumab (Campath), a monoclonal antibody that treats a type of leukemia known in shorthand as B-CLL. It's also being tested against multiple sclerosis and more widespread forms of CLL, but for now its sales, along with those of a second cancer drug acquired in the Ilex deal, are negligible: $31 million in the first half of 2007.

Another tactic Genzyme has turned to this decade is the multi-stage acquisition. In its $480 million buyout of Biomatrix Inc. in 2000, Genzyme gained partial rights to Synvisc, a replacement fluid injected directly into arthritic knee joints. It then paid Wyeth $240 million more in 2005 to nab the Synvisc rights in the U.S. and several European countries, with as much as $294 million more depending on future sales. The past three years, Genzyme has recorded $541 million in Synvisc sales.

Its most recent attempt to build upon partial rights -- the attempt to buy Bioenvision for $345 million -- isn't the biggest deal the company has aimed for, but it provides a fascinating look at Genzyme's approach to dealmaking.

Genzyme moved this spring to buy Bioenvision and gain full rights to clofarabine, a treatment for children with hard-to-treat cases of acute lymphoblastic leukemia. (It acquired the U.S. and Canadian rights when it bought Ilex in 2004.). The firm reached a $5.60-a-share agreement in late May. It was an offer with a long gestation period, as Genzyme has marketed clofarabine in North America since 2005 and has spent millions of dollars helping Bioenvision develop the drug for new indications.

The two companies had barely ended their conference call to introduce the deal when a top Bioenvision shareholder dissented. In a public letter SCO Capital Partners LLC chairman Steve Rouhandeh called the deal "ill-timed," seeing how Bioenvision raised $28 million (at $3.75 a share) in a direct offering the previous month, trading shareholder dilution for cash to help expand clofarabine's range of treatment.

It was soon clear Rouhandeh spoke for many investors. On July 10, Genzyme ended its tender offer with little more than the shares it bought from Perseus-Soros Biopharmaceutical Fund LP -- a 22% stake. Perseus-Soros, with three board members, was happy to exit at $5.60 a share, but no other significant investor took the bait.

On the May 29 call to announce the deal, Genzyme CEO Termeer estimated that clorfarabine could reach $600 million in annual sales in 10 years. Genzyme admitted the figure was "conservative." Bioenvision shareholders have scoffed, noting that Bioenvision officials last year touted the drug's market potential at twice that size.

With a shareholder vote Oct. 4, it's unlikely Genzyme will win at the current price. Is an 11th-hour increase forthcoming? A line in the sand isn't a bad thing, says one analyst. "They need to be choosy," says Jefferies & Co. analyst Adam Walsh. "Some past acquisitions have come up somewhat short."

So far Genzyme has kept its cards close, as major investors say they haven't been contacted. Elliot Associates LP, which holds nearly 7% of Bioenvision shares, said publicly Sept. 6 it would gladly accept a better offer but characterized the current price as a "fire sale."

Genzyme has already made a few concessions. To appease Bioenvision management, it upped its price from $5.25 to $5.60 a share just before the announcement in May. It also eased its demand that Bioenvision's termination fee equal 3.75% of the transaction price. It now stands at $9 million, or 2.6%.

Genzyme's low offer, given its failure, might seem a blunder. A closer look, however, shows that Genzyme played a patient hand. According to its own historical summary, Bioenvision has tried for years to gin up outside interest with little to show for it. When Genzyme made its approach earlier this year -- not the first time it had talked merger with Bioenvision -- the smaller company's management and lead shareholder jumped at the opportunity.

As far back as 2003 Bioenvision had sought a buyer with little success. Regulatory documents show the company finding little interest and steadily losing negotiating leverage. From July 2003 to June 2004 the firm's bankers talked to possible suitors but never received an offer. That's when Genzyme jumped in, initially to discuss a licensing deal. Bioenvision found Genzyme's terms wanting and shut down discussions.

They reconvened in August 2005, talks progressed through the fall and led to an all-hands-on-deck meeting in December. It still wasn't enough. Genzyme backed out the next month over concerns that European regulators and markets wouldn't be favorable to clofarabine, concerns that Bioenvision said have turned out wrong.

That spurred the Bioenvision board to recommend a sale. Bankers at UBS came on board in early 2006 and rounded up suitors -- 20 in all, with four serious enough to sign confidentiality agreements, according to documents. One company offered between $6.25 and $6.75 a share, which seemed to knock out the other three. Talks with the undisclosed company wound on through the year, only to end up with a rejection because of "concern[s] about the risks associated with our regulatory strategy and commercialization prospects," according to the regulatory documents.

That led to the current situation. According to documents, Genzyme made the first move with a call to Perseus-Soros managing director Dennis Purcell. Purcell relayed the message to Bioenvision CEO Christopher Wood. After some wrangling, Genzyme offered $5.25 a share. Bioenvision tried one last time to bring in another bidder, again with little success. Genzyme upped its bid to $5.60, and the deal was announced in late May.

Even investors screaming bloody murder acknowledge Genzyme did the best for itself. "This deal makes enormous sense for them," one disgruntled Bioenvision investor said.

If Genzyme blinks and raises its offer before the Oct. 4 vote, it will be the second straight buyout in which it has upped the ante. Last year it jumped from $380 million to $580 million to fend off a rival bidder for Vancouver, British Columbia, biotech AnorMed Inc. and its promising bone-marrow transplant drug Mozobil, which could be on the market next year.

With eight major acquisitions and several more under $100 million this decade, Genzyme is undoubtedly evaluating its next several deals. One former executive says Genzyme is not likely to make a huge splash that would decentralize power: "Henri and Genzyme would always want to be in control."

But as long as the incremental build-up continues, the company remains a viable target itself. There are pros and cons to its scattershot approach: it's not a straightforward biotech "bolt-on," as MedImmune Inc. and its vaccine and antibody expertise was for Astra Zeneca plc. (Whether MedImmune was worth $15 billion is another discussion.) Genzyme offers several businesses with revenue and manufacturing expertise.

Whether CFO Wyzga calls the deals tactical or strategic, Genzyme shies away from the dramatic. "We're perfectly comfortable hitting singles and doubles and building the company that way," Wyzga said.

One analyst, though, says the company should swing harder. "As their revenue footprint gets bigger, to sustain growth trends they need to acquire larger and larger companies," Deutsche Bank's Chao says. "They're at a critical inflection point."

In other words, Genzyme is starting to look like a big pharma, not a biotech, at a time when the drug giants are having trouble justifying the massive sales forces and other infrastructure needed to market billion-dollar drugs.

Wyzga says the company can avoid the big-pharma trap by ruthlessly managing its portfolio when a program fails. As an example he cites tolevamer, an antibiotic aimed at the effects of a nasty bacterium, C. difficile, infecting patients in hospitals. The drug showed great Phase 2 results but fizzled in Phase 3, and Wyzga didn't hold much hope for it. "Take it out of your models," he told analysts. "We certainly have." - Alex Lash

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