Genzyme 2Q profit plunges on investment and shutdown costs, sales hurt by manufacturing woes

Genzyme 2Q profit drops on charges, lower sales

CAMBRIDGE, Mass. — Biotechnology company Genzyme Corp. said Wednesday its profit shrank drastically in the second quarter because of falling sales and charges partly connected to its manufacturing problems.

Genzyme also slashed its profit and revenue forecasts for the year, saying it will not be able to sell as much of its drugs Cerezyme and Fabrazyme as it expected. Sales of both products have plunged because viral contamination at a Genzyme facility in Allston, Mass., caused the company to halt production, causing inventory shortfalls.

During the second quarter, Genzyme said its profit fell to $23,000, or break-even per share, from $187.6 million, or 68 cents per share, a year ago. Excluding one-time costs Genzyme said it earned 18 cents per share in the latest period.The one-time charges included a $32.3 million write-down related to an investment, and $21.9 million in costs related to the temporary shutdown of a facility in the U.K. in December.

Revenue fell 12 percent to $1.08 billion from $1.23 billion. Because of the manufacturing problems, Genzyme shipped enough Cerezyme to meet only half of all worldwide demand for the drug, and enough Fabrazyme to meet just 30 percent of demand. It said Cerezyme sales fell 53 percent to $138.7 million and Fabrazyme sales dropped 71 percent to $39.5 million.

The results missed the average estimates of analysts polled by Thomson Reuters, who expected 51 cents per share and $1.16 billion in revenue.

Cerezyme treats an enzyme disorder called Gaucher disease, which can result liver and neurological problems. Fabrazyme treats Fabry disease, which is caused by the buildup of a type of fat in the body’s cells.

Sales of another drug, Myozyme, rose 16 percent to $92.1 million. Myozyme treats Pompe disease, which interferes with muscle development. Revenue from Synvisc, which treats osteoarthritis of the knee, rose 31 percent to $107.7 million. Sales of Genzyme’s kidney treatments Renvela and Renagel slipped 3 percent to $107.1 million.

“This was a difficult quarter as reflected in our financial results, but based on the progress we’ve made with our recovery efforts, the outlook for the second half of 2010 is promising,” said Chairman and CEO Henri Termeer.

However, the company now expects a profit of $1.90 to $2 per share this year and $4.41 billion to $4.51 billion in revenue. That was down from prior forecasts of $2.80 to $3.20 per share in profit and $5.23 billion to $5.53 billion in revenue.

Analysts expect $2.47 per share in profit and $4.95 billion in sales on average.

The company said Cerezyme production is now at normal levels. It plans to start increasing shipments of the drug in August. Patients will be able to start upping their doses in September and reach normal levels during the fourth quarter. Genzyme said it will start focusing attention toward making Cerezyme available to new patients during the fourth quarter.

Shipments of Fabrazyme also are expected to increase in the fourth quarter.

Genzyme is moving some operations out of the Allston plant, including drug vial filling. Hospira Inc. will handle some of those operations, while others will be transferred to a Genzyme facility in Ireland. The company said it is on track to meet a government deadline of Nov. 28 for transferring two other drugs to Hospira.

The company hopes to get regulatory clearance for manufacturing at a new plant in Framingham, Mass., late next year.

Genzyme now expects to generate $725 million to $775 milion in Cerezyme revenue this year, and $200 million to $220 million in Fabrazyme revenue. Six months ago the company had forecast $980 million to $1.04 billion in Cerezyme sales, and $360 million to $380 million from Fabrazyme.

The company is forecasting profit of 40 cents to 50 cents per share in the third quarter and 90 cents to $1 per share in the fourth quarter. Analysts have predicted earnings of 69 cents per share in the third quarter and 91 cents per share in the fourth quarter, on average.

In morning trading, shares rose 78 cents to $53.04.