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

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.

Cambridge, Mass.-based Genzyme touted the deal as a way to fast-forward its cancer drug development activities. Ilex provides Campath, a treatment for B-cell chronic lymphocytic leukemia, and is also testing the drug as a possible treatment for non-Hodgkin's lymphoma and multiple sclerosis.

As for the company's first quarter, a consensus of analysts polled by Thomson First Call look for earnings of $77.9 million, or 37 cents a share, on revenue of $472.5 million.

Comparisons with the same period last year are difficult because Genzyme was still reporting results from three different tracking stocks. By mid-2003, it consolidated all of its reporting under one financial roof. Some shareholders of one tracking stock, Genzyme Biosurgery, are suing the company, seeking damages related to the elimination of the tracking stock.

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