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Insight & Intelligence : Jul 2, 2009
Genzyme Plant Shutdown Could Mean up to $300M in Lost Sales
Sales of drugs for Fabry, Gaucher’s, and Pompe diseases will take a hit.!--h2>
Genzyme stands to lose between $100 million and $300 million in revenues related to Fabrazyme and Cerezyme as a result of the company temporarily shutting down its Allston Landing, MA, manufacturing facility. Announced on June 16, the closure may also compromise Genzyme’s revenue expectations for its Pompe disease therapeutic, Myozyme, which is also produced at the Allston plant. The company does not expect its Allston plant to resume full operation until the end of July.
During a recent conference call the company asserted that the current shutdown was unrelated to an FDA warning letter received earlier this year related to the Allston site and would not be a barrier to getting the go-ahead for its Pompe therapeutic. In February the FDA cited that inspections during fall of last year had uncovered “significant deviations from current good manufacturing practice in the manufacture of licensed therapeutic drug products, bulk drug substances, and drug components.”
The company says that it decided to close the Allston facility following its discovery that a virus had contaminated a bioreactor. Vesivirus 2117 is not known to infect humans but slows the growth of cells that produce therapeutic proteins. The viral contaminant most likely came from a nutrient used in the manufacturing process, according to the company. The same virus previously caused declines in cell productivity at the Allston site and at its biologics plant in Belgium in 2008, the firm adds.
As of June 25 Genzyme said that it anticipates the “period of constraint” for each product to last approximately six to eight weeks, beginning in August for Cerezyme and October for Fabrazyme. Genzyme further explained that following discussions with FDA and EMEA, it began shipping product from finished lots of Cerezyme held in inventory, after PCR testing detected no evidence of Vesivirus 2117. Shipments of Fabrazyme had not been put on hold.
Fabrazyme and Cerezyme’s Future
Investors and analysts reacted to the news of the plant closing in predictable ways. Mark Schoenebaum, senior biotechnology analyst at Deutsche Bank, increased his forecast of Genzyme's revenue shortfall due to the plant shutdown to $245 million, up from $100 million in an earlier shortfall forecast. Goldman Sachs maintained its Sell rating on Genzyme citing no back-up manufacturing for Cerezyme and Fabrazyme and that regulatory approval of Myozyme at a scaled-up manufacturing level may further strain production capacity.
Lazard Capital Markets analyst William Tanner said the two-month manufacturing hiatus could equate to $300 million in lost sales but further commented that the company could absorb up to $100 million of that with its current inventory. Yet, he says that lost sales could mean a $0.16 per share cut in profit.
Myozyme Sales Also to Be Affected
Genzyme had been expecting to generate $430 million to $440 million in 2009 sales (up from $296 million in 2008). The firm’s revenue expectations, however, will depend on the company’s ability to produce Myozyme. FDA has not yet sanctioned the scaled-up Myozyme production process in the U.S., after initially expressing concern that the protein produced at the 2,000-liter level showed changes in its glycosylation patterns compared to the small-scale version and would require approval under a distinct name, Lumizyme. While the name-change issue has been solved, in March the company received a complete response letter for Lumizyme produced at the 2,000-liter scale.
Genzyme announced in May that it submitted the final documentation addressing all items in the FDA’s complete response letter, including data requested by the agency from Genzyme’s Pompe Registry, Genzyme’s Risk Evaluation and Mitigation Strategy, and the final product label. At that point Genzyme had also completed, “measures required to respond to the FDA warning letter regarding the Allston manufacturing facility.”
On February 26 Genzyme announced that EMEA had approved Myozyme production at its Belgian plant at the 4,000-liter scale, thereby alleviating concerns about ex-U.S. supplies.
On June 16 shares of Genzyme stock fell $2.87, or 5.2%, to $52.75. The stock has traded between $50.05 and $83.97 over the last 52 weeks and opened trading on Thursday, July 2, at $54.94 per share.
Patricia F. Dimond, Ph.D. ([email protected]), is a principal at BioInsight Consulting.
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