Genzyme's voluntary decision to temporarily close and sanitize its Allston Landing, Mass., production facility is a decided setback for a company that only recently resolved FDA inspection issues and may now suffer hundreds of millions of dollars in lost sales.

On June 15, Genzyme revealed it had discovered the production of material used in the making of Cerezyme and Fabrazyme had been tainted with the virus strain Vesivirus 2117. Although the contamination was limited to one of six bioreactors at the plant, Genzyme shut down the facility for a process in which it will disassemble and decontaminate the machinery, with production projected to restart in late July.

During an investor call June 16, CEO Henri Termeer warned the temporary production halt for the two biologics means constrained supply for a short period of time. A shortage of Cerezyme, the only approved therapy for Gaucher disease, will be felt beginning in August, he said, while diminished supply of Fabrazyme, for Fabry disease, will have an impact in September or October.

Although Vesivirus 2117 was found not to be infectious in humans, some of the tainted manufacturing material may have been used in current stock of Cerezyme, leaving the question of whether that amount of the drug would be permitted into circulation. In a June 16 note, Lazard Capital analyst William Tanner predicted "regulators will be appropriately cautious and require decontamination prior to release."

Genzyme did not provide revised sales guidance for the two biologics during the investor call but said it would try to provide revised projections soon. Tanner said a six-week shortfall for Cerezyme revenues and a two-week shortfall for Fabrazyme revenues would occur in the third quarter, but that estimate was based on the assumption that potentially tainted Cerezyme could be used. If not, Genzyme will incur a 12-week sales shortfall, he wrote.

Lazard and Standard & Poor's both remained optimistic overall about Genzyme's outlook, with the former rating the company "buy." In a June 16 note, S&P's Steven Silver rated the biotech a "strong buy" but added that manufacturing issues have been a recurring problem for Genzyme of late.

Previous problems at two manufacturing sites

The Allston Landing plant had just passed an FDA re-inspection earlier this spring. In addition, Genzyme previously had detected Vesivirus 2117 at both that plant, in the production of 2,000 liter formulation of Myozyme , and one in Belgium that is producing the proposed 4,000 liter formulation of the Pompe Disease drug.

"Though the virus does not cause human infection, we are concerned by persistent manufacturing issues preventing Genzyme from meeting key drug demand and sales targets, and we see such events overshadowing what we view as impressive recent pipeline progress," Silver wrote.

The impact of Vesivirus 2117 is that it interferes with the growth of Chinese hamster ovary cells used by Genzyme in the manufacture of Cerezyme, Fabrazyme and Myozyme. The firm said it detected the virus with the use of a highly specific assay that also helped it confirm the virus' role in reducing production at the Massachusetts and Belgium plants in 2008.

Tanner predicted investors would see the plant shutdown as a one-time event and "that the situation will ultimately be controlled and that the risk of future occurrences could be mitigated by availability of an assay to detect [the virus.] Genzyme will benefit from Cerezyme having no current market competition, he added, while Fabrazyme might lose a small portion of market share to Replagal .

"We believe Shire's Replagal could benefit from the development if the interruption [in availability] causes physicians to switch patients from Fabrazyme," Tanner said. "Even if Genzyme can correct the situation in a timely fashion, some physicians might not be inclined to stay with [Fabrazyme] in the event that any interruptions occur in the future."

Overall, Tanner estimated Genzyme might lose $300 million in potential revenue from the drugs, although that could be mitigated by as much as $100 million depending in part on how much of the current Cerezyme inventory gets released.

On April 22, Genzyme reported first-quarter sales of $112.2 million for Fabrazyme, up 5 percent from first-quarter 2008, and $296.0 million for Cerezyme, down $8.3 million year over year. Genzyme attributed that decline to the impact of foreign exchange. For 2008, Fabrazyme sales grew 17 percent to $494 million, while Cerezyme sales increased to $1.2 billion from $1.1 billion in 2007.

Investors seemed slightly spooked by the day's events, as Genzyme shares finished trading June 16 down $2.87 to $52.75.

-Joseph Haas (j.haas@elsevier.com)

Genzyme Plant Cleanup Brings Temporary Halt To Fabrazyme, Cerezyme Production

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