Genzyme Takes Steps To Repair Itself (GENZ)

August 10, 2009 · Filed Under R&D, fda 

Genzyme Corp. (NASDAQ: GENZ) has taken what is the first of several probably steps to remedy its situation with the FDA and to remedy its image.  Genzyme issued some new guidance with an investor update on Cerezyme.  To ensure no issues or batches would be tainted, the company said it would discard the majority of the work-in-process material under question.

This action will result in a Q2 write-off or charge of roughly $8.4 million that is in addition to the $14.2 million write-off previously disclosed.  As a result, the GAAP net income is now $187.6 million or $0.68 EPS rather than the $192.2 million or $0.70 EPS given in July.  The company said its non-GAAP net income is now $226.6 million or $0.82 EPS rather than $232.5 million or $0.85 EPS reported.

Genzyme also noted that it continues to evaluate whether to finish the remaining work-in-process material. If Genzyme does not finish and release any of the remaining material, the company said it would be hit with another write-off of $2.7 million.  The company said that it is currently in discussions with appropriate regulatory authorities regarding the release of two lots of Cerezyme that were finished before the plant was shut down.  Genzyme said it will incur an additional write-off of $3.1 million if these finished goods are not released.

Genzyme now expects that its 2009 Cerezyme revenue, total revenue and earnings will be at the low end of the guidance ranges given in July: $750 million to $1 billion in Cerezyme  revenues, total revenue of $4.6 to $5 billion; and $2.35 to $2.90 non-GAAP EPS. Thomson Reuters had estimates at $4.75 billion and $2.81 non-GAAP EPS. Genzyme previously adjusted its Fabrazyme revenue guidance for this year to $510 to $520 million from $560 to $570 million.

There is something to note. This new range of guidance does depend on the release of the two remaining finished Cerezyme lots but no work-in-process material.  The company said that Fabrazyme shipments were not put on hold after the shutdown of the Allston plant.  The company also noted that dose conservation guidelines for Fabrazyme are now in place to preserve supply during the anticipated 6 to 8 week period of constraint. Product shipments are expected to resume in November and December.

Genzyme had been hitting 52-week lows last week as a result of its woes.  Shares closed up almost 5% at $50.54 today.

JON C. OGG

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