<< Previous Story----Next Story >>

By Toni Clarke

BOSTON, Oct 21 (Reuters) - Genzyme Corp (GENZ.O) reported lower-than-expected quarterly earnings and cut its 2009 outlook on Wednesday after a viral contamination at a production plant in Boston led to shortages of two key drugs.

Genzyme said the plant is now up and running and it is on track to ship new batches of Cerezyme, its treatment for Gaucher disease, and Fabrazyme, its treatment for Fabry disease, by the end of the year.

But investors remain skeptical that the company's manufacturing problems are over, and the company's shares fell as much as 5 percent on the Nasdaq.

"It is evident that the impact of the manufacturing meltdown has much farther ranging effects than previously thought," said Geoffrey Meacham, an analyst at J.P. Morgan, in a research report.

Company executives told analysts on a conference call that Genzyme is moving to reduce its risk of future viral contamination, including possibly irradiating its raw materials or applying UV light. But it is not considering high heat treatments, as some of its rivals are. [ID:nN20449453] "These processes will lower the risk from where we are today," said Executive Vice President David Meeker.

Cambridge, Massachusetts-based Genzyme said third-quarter net profit fell to $16 million, or 6 cents a share, from $119.6 million, or 42 cents a share, a year ago.

Excluding one-time items, the company reported earnings of 31 cents a share. Analysts on average expected earnings of 44 cents a share, according to Thomson Reuters I/B/E/S. Revenue fell to $1.06 billion from $1.16 billion, hurt by interruptions to the supply of its drugs Cerezyme and Fabrazyme. Both drugs treat rare genetic disorders.

Sales of Cerezyme, Genzyme's biggest-selling product, fell to $93.6 million in the quarter from $309.3 million a year ago, while sales of Fabrazyme fell to $115.2 from $125.6 million. Genzyme said it expects to begin shipping new batches of Cerezyme by the end of November and Fabrazyme by late December.

However, it lowered its 2009 earnings outlook to $2.26 a share, excluding one-time items. Previously it said it would earn between $2.35 and $2.90 a share. It said previously that it expected 2009 revenue of between $4.6 billion and $5 billion.

The lower outlook reflects the company's decision to scrap unfinished batches of Cerezyme and the cost of sanitizing the plant.

The third-quarter revenue decline was offset to some extent by strong sales of the company's osteoarthritis product Synvisc-One, whose sales rose 30 percent to $87.5 million. Sales of the drug Myozyme, to treat Pompe disease, rose to $86 million from $76.7 million.

Revenue from the company's cancer business rose to $88 million from $34.1 million.

Genzyme shares were down $2.37 or 4.2 percent at $52.48 on the Nasdaq in early afternoon, off an earlier low at $52.06. (Reporting by Toni Clarke, editing by Maureen Bavdek, Dave Zimmerman and Matthew Lewis)

<< Previous Story----Next Story >>