Genzyme lowers guidance after Fabrazyme production delay

Genzyme has lowered 2011 financial projections after delaying the date it expects Fabrazyme production to return to normal.

Manufacture of Fabrazyme (agalsidase beta) has been moved to a plant in Framingham, Massachusetts, US but production levels are yet to return to earlier levels. Genzyme had expected supply to meet demand in the first half of 2011 but has now pushed back its timeline.

Supply is now expected to fully meet demand after the site gains regulatory approval in the second half of 2011. Genzyme has nearly completed engineering runs and process validation, which will produce material to be used in regulatory approval, is due to start this month.

Efforts to ramp up manufacturing output are impacting on expenditure. In addition to starting-up the Framingham plant Genzyme is also working on fill/finish at Waterford, Ireland and transferring operations from Allston, Massachusetts, US to a third-party manufacturer.

As a result of a number of factors Genzyme is lowering earnings per share (EPS) projections for 2011 to $4.10 (€3.10) to $4.35, down from $4.30 to $4.60 in previous guidance. This is accompanied by a dip in 2011 projections from $5.1bn to $5bn.

Genzyme anticipates fourth quarter EPS will be lower than previously predicted, in part because of Cerezyme (imiglucerase) revenues and margins falling short of expectations. Manufacturing improvement costs and weather related European shipping delays both impacted on financials.

Valuing Genzyme

Despite lowering projections Genzyme shares remained around the $72 mark, closing yesterday at $72.34. Genzyme previously rejected a $69 a share takeover offer from Sanofi-aventis but has confirmed discussions including advisors and representatives of both companies are underway.

Negotiations have focused on potential terms and include the possible use of contingent value right, a supplemental fee based on market approval, relating to alemtuzumab for multiple sclerosis.

Data from Phase III alemtuzumab trials is expected in mid-2011 and Genzyme anticipates US approval in 2012. Other 2011 milestones include approval of the Framingham site and transfer of fill/finish away from the Allston plant.

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