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Article updated, as of 3:30 p.m., March 24, 2010.
Genzyme Corp. faces potentially hefty financial penalties as part of an enforcement action from the U.S. Food and Drug Administration announced Wednesday.
Trading of Genzyme (Nasdaq: GENZ) shares was briefly halted in before-market trading in anticipation of the announcement. The company’s stock was down nearly 5 percent to $56.70 a share shortly after the Nasdaq Stock Market’s opening bell.
The FDA is taking action following continuing problems at the company’s manufacturing plant in Allston. The regulatory action will likely result in the plant being subject to long-term oversight by third party inspectors to ensure Genzyme is within compliance of FDA Good Manufacturing Practice guidelines. Genzyme also will be required to make payments to the government and could incur other costs.
The payments could be sizeable, depending on the specifics ordered by the FDA. Genzyme confirmed Wednesday it must pay a portion of profits derived from the products manufactured at the Allston plant during the period it was in non-compliance.
Genzyme officials confirmed in an investor conference call that the enforcement action is limited to the Allston plant and will not affect the company’s ability both to produce and to develop drugs at other plants.
Company officials said they are committed to exit the Allston fill-finish operations. While the enforcement action relates to the fill-finish operations, officials said that it was possible that the FDA could uncover other issues in the facility but said they don’t think they would find anything significant.
While officials said that they are confident that the FDA will not halt production of the two products that are part of the shortage, they acknowledged that the enforcement activities may affect the rapidity with which these products can be released.
The news is the latest setback for Genzyme’s local manufacturing operation, a saga that began over a year ago with warning letters from the FDA over quality control. FDA inspections later resulted in a six-week shutdown of the plant last summer and the discovery of foreign materials in drugs produced at the plant this past fall.
The company has taken several steps to correct the problems, including outsourcing the final steps of the manufacturing process — filling and labeling the vials of medication. The company moved most production of one of its drugs, Cerezyme, to its facility in Waterford, Ireland, but recently reported that an impurity was detected in a drug sample there as well.
Genzyme continues to experience shortages of two of its drugs for rare diseases that are produced at the plant — Cerezyme for the treatment of Gaucher disease and Fabrazyme to treat Fabry disease. The company announced that the shipments of both drugs will continue uninterrupted during the period of the enforcement action.
Genzyme also said that shipments of a third drug, Myozyme to treat Pompe disease, will continue uninterrupted. The company disclosed that it is in discussions with the FDA over whether shipments of a fourth drug, Thyrogen, will be temporarily halted.
In a news release, Genzyme officials said the company “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.”
Genzyme has retained a quality assurance advisory firm, and officials said more than 30 expert consultants from this firm are currently working at the Allston plant or at other Genzyme manufacturing facilities.
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