Genzyme Corporation (NASDAQ: GENZ) today provided an update on the impact of Cerezyme® (imiglucerase for injection) supply constraints on patient treatment regimens and on the company’s 2009 financial results. The company’s Fabrazyme® (agalsidase beta) supply constraint period, Fabrazyme dose conservation guidelines for patients, and Fabrazyme financial guidance are unchanged.
Genzyme has been working to determine what portion of the work-in-process Cerezyme material that was unfinished when the company temporarily shut down its Allston facility may be finished and released. Since the announcement of its second-quarter results on July 22, Genzyme has made the decision to discard approximately 80 percent of remaining work-in-process material. This decision was made to minimize risk to the Allston plant and ensure that new supply will be available by the end of this year.
Manufacturing in Allston has resumed, and Genzyme has implemented additional viral monitoring procedures. Half of the bioreactors at the plant are currently up and running and all are expected to be operational this month. Genzyme expects to begin releasing new material from these production runs in November and December.
“Reaching a decision on the work-in-process material has been difficult for us as we balance the medical benefit of Cerezyme for patients with minimizing the risk to our newly cleaned Allston plant,” said Henri Termeer, CEO of Genzyme. “In the end, we could not take the risk of processing material that has any possibility of re-contaminating the plant and setting back our ability to supply Cerezyme to patients. Now that we have resumed production, we are focused on the road to recovery.”
Since the contamination occurred during the second quarter and the company decided to write off some of the work-in-process material prior to filing its second-quarter 10-Q report with the Securities and Exchange Commission, second-quarter financial information was adjusted accordingly.
Genzyme’s decision to discard the majority of the work-in-process material has resulted in a second-quarter write-off of approximately $8.4 million in addition to the $14.2 million write-off previously reported. As a result, the company’s second-quarter GAAP net income is now $187.6 million or $0.68 per diluted share, compared with $192.2 million or $0.70 per diluted share reported on July 22. Genzyme’s second-quarter non-GAAP net income is now $226.6 million or $0.82 per diluted share, compared with $232.5 million or $0.85 per diluted share previously reported.
The company continues to evaluate whether to finish the remaining work-in-process material. If Genzyme does not finish and release any of the remaining material, the company would incur an additional write-off of approximately $2.7 million. In addition, Genzyme is currently in discussions with regulatory authorities regarding the release of two lots of Cerezyme that were finished before the plant was shut down. If these finished goods are not released, Genzyme will incur an additional write-off of $3.1 million.
As a result of the decision regarding the work-in-process material, Genzyme now expects its 2009 Cerezyme revenue, total revenue and GAAP/non-GAAP earnings per share to be at the low end of the guidance ranges provided on July 22, which were: Cerezyme revenue of $750 million – $1 billion; total revenue of $4.6 billion – $5 billion; GAAP EPS of $1.74 – $2.29 per diluted share; and non-GAAP EPS of $2.35 – $2.90 per diluted share. Non-GAAP EPS excludes the impact of stock compensation expenses and acquisition-related items. This guidance depends on the release of the two remaining finished Cerezyme lots but no work-in-process material.
Shipments of Fabrazyme were not put on hold following the shutdown of the Allston plant. Dose conservation guidelines for Fabrazyme are in place worldwide to preserve supply during the anticipated 6-8 week period of constraint. Product shipments are expected to resume in November and December. Genzyme previously adjusted its Fabrazyme revenue guidance for this year to $510 million – $520 million from $560 million – $570 million.
Patient Access to Treatment
Following the shutdown of the Allston plant, Genzyme initially communicated voluntary Cerezyme treatment guidelines in conjunction with stakeholders from the physician and patient communities intended to preserve supply for the most vulnerable patients. At that time, the company had projected a supply shortfall that would end in October. As a result of the recent decision regarding the work-in-process material, Genzyme now projects a larger supply shortfall, lasting through the end of the year. Cerezyme supply is expected to begin to normalize when newly produced product is released in late November and December.
In the United States, Genzyme last week implemented a dose conservation program to try to ensure that the most vulnerable patients continue to receive Cerezyme. The company is now shipping Cerezyme only to two patient populations: patients with Gaucher disease type 1 who are 18 years of age or younger, and patients with Gaucher disease types 2 and 3.