FDA fines Genzyme Corp. $175 million for manufacturing problems

Company will continue to ship Cerezyme and Fabrazyme, which are manufactured, filled and finished in Allston, as well as Thyrogen, which is filled and finished at the plant

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CAMBRIDGE, Mass.—Genzyme Corp. announced May 24 that the terms for the consent decree regarding its Allston manufacturing plant have been finalized with regard to fines to be imposed by the U.S. Food and Drug Administration (FDA) and other remedies to be carried out by Genzyme. The company says these terms are in line with its expectations announced last month. The consent decree is subject to approval by the U.S. District Court for the District of Massachusetts.

Genzyme will pay an up-front disgorgement of past profits of $175 million. The company will continue to ship Cerezyme (imiglucerase for injection) and Fabrazyme (agalsidase beta), which are manufactured, filled and finished in Allston, as well as Thyrogen (thyrotropin alfa for injection), which is filled and finished at the plant.

In the United States, distribution of Thyrogen will be based on medical necessity until product filled and finished at another facility is available. The FDA has developed a "Dear Healthcare Provider" letter describing the patients for whom FDA considers Thyrogen to be medically necessary. This letter will be included in shipments of Thyrogen that are filled and finished in Allston.

In addition, the consent decree requires Genzyme to move fill/finish operations out of the Allston plant for Cerezyme, Fabrazyme and Thyrogen sold within the United States by Nov. 28, 2010, and by August 31, 2011, for products sold outside of the United States.

Genzyme says it will work closely with regulatory authorities globally with a goal of meeting these deadlines. Should Genzyme not be able to meet these deadlines, the FDA can require the company to disgorge 18.5 percent of revenue for these products.

In June 2009, the company shut down the Allston plant for roughly three months to clean up viral contamination that had been slowing production of both Cerezyme and Fabrazyme.

In November 2009, the FDA says 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 four drugs made at the plant: Cerezyme, Fabrazyme, Myozyme and Thyrogen.

Since January, Genzyme has restructured its manufacturing operations, named a new president of global manufacturing and corporate operations, and named a new senior vice president of global product quality.

Last November, Genzyme announced plans to transfer all fill/finish activities from Allston to other locations. Genzyme began to utilize excess capacity at its facility in Waterford, Ireland where it currently fills 80 percent of Cerezyme supply. Recently, Genzyme received regulatory approval to fill and finish Myozyme (alglucosidase alfa) produced at the 160 L scale at the facility in Waterford and will no longer be conducting fill/finish operations for Myozyme in Allston. In addition, Genzyme has begun the process of transferring all remaining filling activities from Allston to an existing Genzyme contract manufacturer.

Last year, Genzyme began implementation of a comprehensive remediation plan to improve quality and compliance at the Allston facility. This plan was submitted to the FDA in October of 2009. Under the terms of the consent decree, a plan to complete the remediation will be drafted by Genzyme with the assistance of its current third-party consultant, Quantic. This plan will be submitted to the FDA for approval, and will include ongoing oversight from Quantic.

Genzyme expects this remediation plan will require approximately two to three years to complete, with milestones throughout this period. If remediation actions are not complete by these milestones, the FDA can require Genzyme to pay $15,000 per day, per affected drug, until these compliance milestones are met. Once the remediation plan is fully completed, FDA will require five years of oversight and annual reports submitted by Quantic.

"We continue to make significant progress both to improve manufacturing and quality systems in Allston and transfer fill/finish activities to other locations, working as expeditiously as possible through the regulatory pathways globally," says Henri A. Termeer, Genzyme's chairman and CEO. "We appreciate the guidance the FDA provided over the past year as we work to restore the agency's confidence in our ability to operate the Allston plant at the highest standards, and return to reliable product supply for patients."

Genzyme has launched a website, www.genzymetransformation.com, containing information on additional changes being made within the company with the goal of strengthening the organization for the future.

Genzyme is currently shipping Cerezyme at approximately 50 percent of demand and Fabrazyme at approximately 30 percent of demand. Genzyme plans to provide a more detailed assessment of supply for both Fabrazyme and Cerezyme in June that will factor in Fabrazyme working cell bank performance, and the impact, if any, of the consent decree on product release times.

Genzyme is assessing the impact of several factors on its total financial guidance for 2010, including the company's decision to pursue strategic alternatives for three of its businesses, ongoing expense reduction measures, an announced $2 billion share buyback, the impact of foreign exchange rates, and the supply of Cerezyme and Fabrazyme. Genzyme continues to expect to exit the fourth quarter of 2010 at a non-GAAP EPS rate of $1 per share.

After news of the consent decree, shares of Genzyme fell 52 cents, or 1 percent, to $48.90 in afternoon trading on May 24.

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 interferes with muscle development and Thyrogen is used to diagnose thyroid cancer.

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