Genzyme's bad year gets worse: Experimental kidney drug a no-go
Genzyme's first major setback this year came in the second quarter, when it had to temporarily shut down its Allston Landing, Mass., plant after viral contamination was discovered. The plant manufactures Cerezyme -- Genzyme's top-selling drug -- and Fabrazyme, a treatment for Fabry disease. Cerezyme treats Gaucher disease, a rare genetic disorder that can cause life-threatening organ damage, and the plant closure sparked fears of a shortage of the drug. The U.S. Food and Drug Administration consequently approved emergency use for two rival drugs from Protalix BioTherapeutics (PLX) and Shire (SHPGY).
In September, a U.S. advisory panel rejected Genzyme's study for its pediatric leukemia drug, Clolar, for use in older adults with aggressive blood cancer. Genzyme will have to run a new study.
On Friday, the company was hit with a double-whammy:
- The FDA warned doctors to inspect medicine vials after it found foreign particles -- including stainless steel fragments -- in drugs manufactured at the previously shut-down Genzyme facility, and;
- The FDA delayed the approval of Genzyme's Pompe disease treatment Lumizyme until it fixes the production problems at the plant. Pompe disease is a genetic disorder that interferes with muscle development and can cause deadly respiratory problems.
And now, we can add today's setback. The Cambridge, Mass.-based company stopped development of its experimental kidney disease drug after a clinical trial of 349 patients showed that it wasn't any better than Renvela, Genzyme's current kidney disease treatment, at getting rid of excess phosphorus from the blood of dialysis patients.
With all this negative news, you'd expect Genzyme shares to flop more than they did. Shares were hit in March with the rest of the stock market. It's true they haven't dropped much further than that, but unlike other biotechs and pharmas, they also haven't recovered much, reflecting anxiety among investors. Year-to-date, Genzyme shares are down about 25%.
Looking for a Positive Spin
In the meantime, the company has tried to pair each setback with good news. For example, regarding production problems in Allston Landing, the company said the FDA has now completed a five-week inspection of the facility and the company is working with the FDA to fix any remaining problems. It added that both drugs it manufactures there should start shipping again by the end of the year. Also, the troubled plant recently received approval of European regulators. Regarding its Lumizyme drug, Genzyme said it plans to meet with the FDA to see if it can quickly gain approval for Lumizyme that is produced at its plant in Belgium.
Also, on Tuesday, billionaire investor Carl Icahn reported a new stake of 1.45 million shares in Genzyme, giving his vote of confidence to the company.
But is that enough? Genzyme's $4.6 billion in annual revenue derives in large part from making drugs to treat rare diseases. The questions are: How stable is this figure, and how much growth is expected? The plant shutdown has already hurt sales of its blockbuster drug Cerezyme. Now, analysts estimate $1 billion in sales are at risk due to today's setback.
Perhaps it's no wonder TheStreet.com chose Genzyme's CEO Henri Termeer as the winner of the 2009 Worst Biotech CEO of the Year, saying he is responsible for the sloppy manufacturing processes. One just has to look at records to see that before the plant shutdown in June, the FDA sent a warning letter about manufacturing missteps in February. Industry watchers can only wonder: What's next?