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FDA Delays Lumizyme; Genzyme Expects 6-month Wait

Tue, 03/03/2009 - 5:33am
NEW YORK (AP) — Analysts expect Genzyme Corp. to feel a negative impact from the Food and Drug Administration's delay in approving the genetic disorder drug Lumizyme, which is expected to be a growth driver for the biotechnology company. On Monday, the FDA said it wanted Genzyme to correct problems at a manufacturing plant before it will approve the Pompe disease treatment, which is a disorder that interferes with muscle development and can cause deadly respiratory problems. The company already makes the drug as Myozyme, but in 160-liter bioreactors. It wants to increase the scale to 2,000-liter bioreactors, and the FDA determined that the process for a higher scale of manufacturing actually produces a different drug. Cambridge, Mass.-based Genzyme also needs to needs to reach an agreement on the design of a study to test the drug's effectiveness after it is approved, and to finalize a strategy to evaluate Lumizyme's risks. Genzyme is assuming a six-month delay and trimmed its 2009 adjusted profit by about 12 cents per share. It now expects $370 million to $380 million in 2009 sales of its Pompe disease treatments, down from $430 million to $440 million. Last month, Genzyme forecast profit of $3.50 per share for this year, or $4.70 per share excluding one-time items. Analysts surveyed by Thomson Reuters had projected earnings of $4.72 per share. Citi analyst Dr. Yaron Werber downgraded Genzyme to "Hold" from "Buy", saying the delay makes for an uncertain timeline on what is expected to be a significant growth driver for the company. He also slashed his target price to $61 from $81. "We will revisit the stock once there is better clarity on timelines," he said. Genzyme has already received approval in Europe for an expanded production process on Myozyme. Meanwhile, Thomas Weisel Partners analyst M. Ian Somaiya also expects the U.S. delay to negatively impact the company, cutting his price target to $81, from $101, though he reaffirmed a "Overweight" rating. Deutsche Bank-North America analyst Mark Schoenebaum reaffirmed a "Hold" rating and cut his price target to $65 from $73 and expects the FDA delay to affect Myozyme sales. Elsewhere, Jefferies & Co. analyst Eun K. Yang took a more positive outlook on the stock, reaffirming a "Buy" rating with a $88 price target. "Assuming no further delay, we view the delay in Lumizyme approval as a minor setback for Genzyme shares as Myozyme/Lumizyme currently account for less than 8 percent of Genzyme's total revenue," Yang said, in a note to investors.
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