Genzyme Corp. (GENZ) suffered yet another setback yesterday when Protalix BioTherapeutics Inc. announced that the US Food and Drug Administration (FDA) has approved the treatment protocol for its experimental drug for Gaucher disease. This means that the drug, prGCD, will be available for the treatment of Gaucher patients prior to its commercialization.
The FDA had approached both Protalix and Shire Plc (SHPGY) last month to consider submitting a treatment protocol that would allow the use of their Gaucher disease treatments under an expanded access program in order to make up for a shortage in the supply of Cerezyme, which is the leading treatment for Gaucher.
As a reminder, Genzyme has been facing manufacturing issues at its Allston plant which was temporarily shut down due to contamination issues. While the plant has resumed production, new supplies of Cerezyme and Fabrazyme, which are key contributors to Genzyme’s top line, will not be available until later this year.
Shire and Protalix will initially provide their treatments free of cost to patients. We believe the availability of these two products could lead to some erosion in Cerezyme’s patient base.
While Shire has commenced the filing of its New Drug Application (NDA) for velaglucerase alfa, Protalix intends to file for approval by year-end. Once launched, both products will be competing directly with Genzyme’s Cerezyme. Although Cerezyme holds a leading position in the treatment of Gaucher disease, the patient population for the disease is not large. As such, the entry of additional players in the market could restrict the company’s future sales growth opportunities.
We view the temporary shutdown of the Allston facility as a major setback for Genzyme and believe its impact will drag down the company’s performance in the second half of 2009. In fact, Genzyme slashed its financial outlook for 2009 and now expects to post earnings of $2.35 – $2.90 per share on revenue of $4.6 billion – $5 billion. Both earnings and sales are expected to come in towards the lower end of the guidance range.
We expect investor focus to remain on the resolution of manufacturing issues at Allston and resumption of supply of key products. We believe the stock will remain under pressure until the resolution of these issues. We currently have an Underperform rating on Genzyme.
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