Genzyme Faces FDA Enforcement Over Plant Problems

Biotechnology company said FDA will take enforcement action against Genzyme after series of manufacturing problems stalled production of key drugs.

CAMBRIDGE, Mass. (AP) -- Genzyme Corp. said Wednesday the Food and Drug Administration will take enforcement action against the biotechnology company after a series of manufacturing problems stalled production of key drugs.

The FDA will likely require that a third party inspect and review plant operations for an extended period of time. Genzyme would also be required to make payments to the government, the company said.

Genzyme expects shipments of its top-selling drugs Cerezyme and Fabrazyme to continue uninterrupted. The company does not yet know the financial impact of a potential FDA action.

In June, the company shut down its manufacturing plant in the Boston neighborhood of Allston for about three months to clean up viral contamination that had been slowing down production of Cerezyme and Fabrazyme. The virus was not harmful to people, but the shutdown was costly. During the fourth quarter profit plunged 73 percent to $23.2 million on lower sales.

Then in November, the FDA said it found tiny particles of trash in drugs made by Genzyme, including steel, rubber and fiber. The agency recommended that doctors closely inspect vials of Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Thyrogen.

Cerezyme treats Gaucher disease, an enzyme disorder that can result in liver and neurological problems, while Fabrazyme treats an inherited disorder known as Fabry disease, which is caused by the buildup of a particular type of fat in the body's cells. Myozyme treats Pompe disease, which is a rare disorder that interferes with muscle development and can cause deadly respiratory problems.

Since January, Genzyme has restructured its manufacturing operations, naming a new president of global manufacturing and corporate operations, along with a senior vice president of global product quality. It also contracted manufacturing for some of its key products to Hospira Inc.

"Genzyme will work cooperatively with the FDA to restore the agency's confidence in its ability to operate the Allston plant at the highest standards, building on the progress it has made over the past year to address the manufacturing deficiencies at the Allston plant," the company said, in a statement.

Overshadowing the FDA and manufacturing issues is activist investor Carl Icahn and his attempt to gain control of the company's board of directors.

He has already said he intends to nominate himself and three other people to the board. Icahn also boosted his stock ownership in Genzyme to about 2 percent.

Looking ahead, Leerink Swann analyst Dr. Joshua Schimmer reaffirmed his "Market Perform" rating, and said the implications of the FDA action will likely be modest.

"Genzyme is already taking aggressive, and costly, steps to remediate the facility in a timely fashion, so we see little incremental facility-based spending and no meaningful delays as a result of this announcement," he said in a note to investors.

Shares of Genzyme fell $3.21, or 5.4 percent, to $55.89 in Wednesday afternoon trading. The stock has traded between $47.09 and $63.47 over the last 52 weeks.

More in Operations