Genzyme's Problems Continue - Analyst Blog

Genzyme Corporation’s (GENZ) problems continue with the company recently announcing the discontinuation of the development of its kidney disease drug. Genzyme reported results on its advanced phosphate binder (APB) from a phase II/III study. 

Although the candidate met its primary endpoint, results showed that it was not more effective than Renvela, a product that is marketed by Genzyme. Based on these results, the company has decided to discontinue further clinical development of the APB. 

Genzyme was looking to develop a product with higher potency that would more effectively bind phosphate, while maintaining all the benefits of Renvela. Renvela is a follow-on product of the company’s kidney disease drug, Renagel. Sales of Renagel/Renvela totaled $677.7 million or 15% of total revenue in 2008. 

Renagel and Renvela are phosphate binders for the treatment of hyperphosphatemia. The company was looking to gain approval for the APB before Renagel/Renvela loses exclusivity in 2013/2014. Meanwhile, we expect Renagel/Renvela sales to remain under pressure as the products face competition from Shire plc.’s (SHPGY) Fosrenol and generic versions of PhosLo. 

This is the latest in a series of negative news received by the company over the past few months. Genzyme’s problems started in June when the company had to temporarily shut down its Allston manufacturing facility due to contamination issues. The temporary shut down of the plant led to a shortage in supply of the company’s key product, Cerezyme, which is indicated for the treatment of Gaucher disease. 

The shutdown also hampered the supply of another product, Fabrazyme. Both these products contribute significantly to the top-line. Genzyme suffered another setback recently when it failed to receive U.S. Food and Drug Administration (FDA) approval for Lumizyme (for Pompe disease) - the agency said that it will not grant approval unless the company addresses the manufacturing issues at its Allston Landing plant in Boston . 

We currently have an Underperform recommendation on Genzyme. We expect investor focus to remain on the resolution of the manufacturing deficiencies observed by the FDA and the resumption of supply of new lots of Cerezyme and Fabrazyme.
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