Genzyme Expects $175M Expense for Manufacturing Problems in Allston

4/21/10

Genzyme has given its first-quarter 2010 earnings a $175 million haircut. The Cambridge, MA-based biotech firm (NASDAQ:GENZ) said today that it expects to pay that amount to the FDA due to deficiencies at its manufacturing plant in Allston, MA.

The company and the FDA are negotiating terms of a consent decree, under which the firm would agree to certain deadlines for addressing problems at the Allston plant, says Bo Piela, a spokesman for Genzyme. In addition to the $175 million charge, the company says that it expects to pay 18.5 percent of its revenues on sales of products shipped from Allston if it fails to meet deadlines for moving its deficient operation for filling medicine vials away from the plant. (In November, the FDA warned doctors that it found foreign particles in medicines made at the Allston plant, including fragments from a rubber vial stopper used in the deficient operation in question.) Those deadlines are still under negotiation. Also, the company is in talks with the agency about setting deadlines for when broader improvements will need to be made at the plant, and the company would have to pay $15,000 per day after those deadlines until the operations are compliant.

Genzyme says that it expects to wrap up negotiations with the FDA about the terms of the consent decree sometime in the second fiscal quarter of 2010. In the meantime, Piela says, the company has already begun to move the medicine vial filling operations from its Allston facility to its plant in Waterford, Ireland, as well as to a contract manufacturing facility owned by Hospira (NYSE:HSP), a specialty drugmaker based in Lake Forest, IL.

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