Genzyme's Big Bet on Cancer

When executives of Genzyme(GENZ Quote) report first-quarter earnings Thursday morning, they'll probably face a lot of questions about the pending acquisition of Ilex Oncology(ILXO Quote).

Even though Genzyme's stock is up about 30% over the last 12 months, it has faded ever since the company said it would pay $1 billion, or about $26 a share, for Ilex in a stock swap deal announced in late February.

Genzyme's stock reached a plateau in the mid-$50 range during late January and much of February. On Feb. 26, Genzyme's stock closed at $53.28; and just after the markets closed, it announced the Ilex deal. Genzyme's stock fell to $50.45 the next day. By early afternoon Wednesday, it was at $46.84.

The transaction, expected to close by midyear, is based on a sliding exchange ratio pegged to Genzyme's stock. Right now, Ilex shareholders can expect a high exchange ratio due to Genzyme's slumping shares. Genzyme said the Ilex acquisition would dilute earnings in 2004 and 2005, but add to earnings in 2006. ...