Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations

Chapter 9How Hannibal Profits From His VictoriesThe Returns to Activist Investment

“Vinse Hannibal, et non seppe usar’ poi Ben la vittoriosa sua ventura.”

[Hannibal won battles, but he never knew how to profit from his victories.]

— Petrach, Sonnet 82(83) from Screech, Montaigne’s Complete Essays

“The fact is that the Hypermodern Theory is merely the application, during the opening stages generally, of the same old principles through the medium of somewhat new tactics. There has been no change in the fundamentals. The change has been only a change of form, and not always for the best at that.”

—José Raúl Capablanca, the “Human Chess Machine,” in Chess Fundamentals (1934)

2009 was an annus horribilis—horrible year—for Genzyme Corporation, a giant biotechnology firm located in Cambridge, Massachusetts. The problems started in June when the company uncovered a viral contamination in its Allston Landing plant.¹ The U.S. Food and Drug Administration (FDA) had in February warned Genzyme that the plant needed to pass inspection in May as part of the approval process for a new drug candidate, Lumizyme, used to treat a rare condition called Pompe disease. With the contamination, the FDA delayed approval for Lumizyme, ordered the plant closed, and then subjected it to a five-week inspection and decontamination. As embarrassing as the contamination and delay were, Genzyme’s troubles were just getting started. The five-week closure revealed problems with the stocking process for Genzyme’s ...