Tuesday, May 25, 2010

Genzyme Agrees to $175 Million Payment for maufacturing cock ups

Genzyme Agrees to $175 Million Payment, Plant Fixes (Update2)

By Elizabeth Lopatto

May 24 (Bloomberg) -- Genzyme Corp., the largest maker of genetic disease medicines, said it agreed to pay $175 million to the U.S. government in a consent decree for manufacturing violations at its Allston Landing plant in Boston.

The company also agreed to move certain operations from the Allston Landing plant to another facility and to be supervised for five years after correcting the manufacturing defects. Earnings per share, excluding some costs, will remain $1 for 2010, the Cambridge, Massachusetts-based company said today in a statement.

Genzyme said in June that production at its Allston Landing facility was disrupted by contamination with a germ called Vesivirus 2117. Closure for cleaning caused shortages of Genyzme’s two biggest drugs, Cerezyme, for Gaucher disease, and Fabrazyme, for Fabry disease. The company said in March that the Food and Drug Administration sought a consent decree.

“Final agreement with FDA is in-line with what was disclosed over the last few months,” wrote analyst Michael Yee of RBC Capital Markets, in a note to investors today. “One of the key questions continues to be whether management can meet deadlines.”

Two to Three Years

Fixing the plant’s quality deficiencies will require two to three years, the company said in its statement. If Cambridge, Massachusetts-based Genzyme doesn’t adhere to the timetable set by the FDA to fix the plant, it may be fined $15,000 per drug, per day until it’s in compliance. The company will be supervised by a third-party consultant, Quantic, during the plan, and for five years afterward.

Genzyme fell 93 cents, or 1.9 percent, to $48.48 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

The terms for the consent decree are subject to approval by the U.S. District Court for the District of Massachusetts.

Genzyme will transfer the operations in which drug vials are filled from Allston to other sites, or else pay further penalties, according to a release from the FDA. The $175 million payment is known as a disgorgement, in which a company must give up some of its profits obtained by “improper or illegal acts,” according to the FDA statement.

About 80 percent of the Cerezyme supply is filled in Waterford, Ireland, according to today’s release. The rest of the products sold in the U.S. that are filled at Allston will have to be moved elsewhere by November 28. Filling for products meant for markets outside the U.S. will have to be moved outside the plant by Aug. 31, 2011.

To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net.

Last Updated: May 24, 2010 16:26 EDT

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