Genzyme Corporation (GENZ) recently announced that it achieved the first milestone under the consent decree implemented by the US Food and Drug Administration (FDA). The company said that it has successfully transferred fill/finish operations for certain products from its Allston Landing plant to its Waterford plant in Ireland and to contract manufacturer Hospira (HSP).
The company transferred fill/finish operations for Cerezyme, Myozyme, Fabrazyme and Thyrogen sold in the US. Genzyme also said that the restrictions that were imposed on the marketing and distribution of Thyrogen within the US were lifted.
Genzyme is now working on shifting its fill/finish activities for products sold outside the US. The deadline for shifting operations for these products is August 31, 2011.
The consent decree was implemented by the FDA so as to ensure that the products manufactured at the Allston Landing facility are made in compliance with good manufacturing practice regulations. The consent decree will not only be in force for an extended period, it will also require Genzyme to make payments to the government and incur other costs.
The company has already been charged $175 million and the inability to meet deadlines could result in the company paying 18.5% of revenues derived from sales of products manufactured at the Allston facility.
Neutral on Genzyme
We currently have a Neutral recommendation, which is supported by a Zacks #3 Rank (short-term Hold recommendation) on Genzyme. Genzyme spent a major part of 2009 dealing with contamination issues at its manufacturing plant at Allston Landing.
In June 2009, the company had to temporarily halt production at its manufacturing plant due to contamination issues. The temporary suspension of production hampered the company’s supply schedule for lead product Cerezyme as well as Fabrazyme.
We are pleased to see that Genzyme is taking steps to emerge from the impact of the temporary shutdown of the Allston plant. We view the recent approval of Lumizyme as a major positive and are pleased to see that the company is working on expanding its product portfolio and pipeline so as to reduce its dependence on a handful of products for growth.
We expect investor focus to remain on takeover talks with Sanofi-Aventis (SNY) and possibly other suitors, the company’s emerging pipeline, and updates regarding the supply schedule of Cerezyme and Fabrazyme.
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