Shire Making Lemonade with Genzyme’s Lemons

12/15/09

Shire, the British drugmaker with a big presence in Massachusetts, has seen its fortunes rise during this year of manufacturing woes over at Cambridge, MA-based Genzyme. Shire (LON: SHP) doesn’t yet have regulatory approval to market two treatments for genetic diseases that will rival Genzyme, but U.S. regulators have allowed the company to go ahead anyway and start supplying its therapies to patients who are in need, and can’t get access to Genzyme’s drugs.

Sylvie Gregoire, president of Shire Human Genetic Therapies, talked to me this week from her office in Lexington, MA about how her firm has made inroads in the U.S. markets for Fabry and Gaucher’s diseases. Genzyme (NASDAQ: GENZ) has dominated these two markets for years with its Fabry drug, agalsidase beta (Fabrazyme), and its Gaucher’s treatment, imiglucerase (Cerezyme). Together, those two drugs generated $1.7 billion in revenue last year, more than one-third of the company’s total revenue.

But both those drugs have been in short supply since June, when Genzyme revealed that viral contamination was found at its Allston plant in Boston, where both those treatments are made. Shire is hoping to gain FDA approval for its Fabry and Gaucher’s treatments—agalsidase alfa (Replagal) and velaglucerase alfa, respectively—next year. Shire’s timeline for full approval of has been sped up by several months because of the manufacturing trouble over at Genzyme, Gregoire says.

By September, three months after the viral contaminant struck Genzyme, regulators gave Shire permission to give patients its Gaucher’s treatment to address the void in supply for Genzyme’s treatment, which is the market-leading therapy for the disease in the U.S. A similar program to supply Fabry patients with Shire’s drug for that disease began last month. Gregoire would not disclose how many Fabry and Gaucher’s patients are receiving her firm’s therapies, but she did acknowledge that having people already taking the drugs could give her company a head start in marketing the products if the FDA approves them.

“We haven’t announced what percentage of the market we think we will have,” she said, “but whatever market share we are anticipating we expect to gain it more rapidly” because of the current supply shortages. The FDA has granted Shire an expedited approval process for its Gaucher’s treatment. The agency has a deadline of February 28 to decide whether or not to approve the drug for sale.

Given the low numbers of people with Fabry and Gaucher’s diseases and the high prices paid for their treatments, every customer that Shire wrests from Genzyme has significant financial implications. For example, Genzyme gets about $200,000 annually per patient for Cerezyme, which brought in $1.2 billion for the company last year.

Gaucher’s disease is caused by the lack of an enzyme that leads to the buildup of a fatty substance in peoples’ organs.The disorder affects about 1 and every 20,000 people born today, according to Shire. Fabry disease is a similar genetic disease caused by the lack of a different enzyme, and it is twice as rare as Gaucher’s. Both Genzyme’s and Shire’s treatments for the diseases are intended to replace the lacking enzymes.

Outside the U.S., Shire has competed with Genzyme in the market for Fabry treatments for about seven years. Shire’s agalsidase alfa has historically had about 45 percent of the ex-U.S. market, Gregoire said, with Genzyme’s drug owning the rest of the market share. She noted that Shire expects the FDA to speed up its review of her firm’s application for permission to sell its Fabry drug in the U.S., after Shire files the application this month.

Genzyme told investors early this month that it doesn’t expect to be able to produce enough of its Fabry treatment to meet demand for the drug until the second quarter of 2010, and the shortage for its Gaucher’s treatment is expected to last into the first quarter of next year.

Shire’s velaglucerase isn’t the only treatment vying for a piece of lucrative U.S. Gaucher’s market. Israel-based Protalix Biotherapeutics this week completed its application for approval of a Gaucher’s treatment, and earlier this month the firm inked a partnership deal with New York-based drug giant Pfizer, which will market the drug in the U.S. and in all foreign markets other than Israel. (Switzerland-based Actelion also has an FDA-approved Gaucher’s treatment, which has a tiny portion of the U.S. market dominated by Genzyme.)

Indeed, Wall Street has taken notice of the shortages and competitive threats that Genzyme faces. Robert W. Baird & Co. analyst Christopher Raymond lowered his revenue projections for Genzyme late last month, citing the supply issues due to mishaps at the company’s Allston plant and likely approvals of Shire’s and Protalix’s treatments.

There are also key differences between Shire’s enzyme-replacement therapies and those from other firms. With technology gained through its 2005 buyout of Cambridge-based biotech Transkaryotic Therapies, Shire uses human cells to grow the molecules for its enzyme-replacement drugs Fabry and Gaucher’s diseases. Genzyme’s process involves the use of cells from Chinese hamster ovaries, which are commonly used to make biotech drugs.

Gregoire said that producing the treatments with human cells reduces instances in which the body’s immune system rejects them. Also, infusions of Shire’s enzyme-replacement therapies take no more than an hour, she said, while it can take twice as long to give patients competing treatments made by Genzyme.

She wouldn’t say how much her firm plans to charge for their therapies in the U.S. if they can secure approval, so it’s unclear whether Shire will seek to command a premium price, or whether it will undercut Genzyme further in its pursuit for market share.

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