Biotech Values

[DewDiligence]

Shareholder Sues GENZ re Non-Disclosure of Manufacturing Problems

[Most biopharmaceutical companies probably have manufacturing problems on a regular basis without disclosing them to shareholders; what made GENZ’s Myozyme problem unusual was that the inventory was close to nil and hence the ensuing production shutdown cost the company serious money in lost sales. Moreover, the production problem with Myozyme was at least partly responsible for the FDA’s non-approval of GENZ’s BLA for “Lumizyme” (#msg-35994101).]

http://www.reuters.com/article/marketsNews/idINN2930039420090730

›Wed Jul 29, 2009 9:36pm EDT

NEW YORK, July 29 (Reuters) _ Genzyme Corp (GENZ) has been slapped with a shareholder lawsuit accusing the biotechnology company of concealing problems at its facilities that caused investors to lose over $8 billion.

The lawsuit was filed on Wednesday in the U.S. District Court in Boston by Florida resident Jon Rahn.

The suit alleges that Genzyme concealed manufacturing problems at two of its manufacturing plants, causing a shortage of its top-selling Myozyme drug and delaying approval of a new formulation of that product, Lumizyme.

These manufacturing issues hurt Genzyme's revenue projection for 2009, and should have been disclosed to investors as "material information," according to the suit.

Genzyme Chief Executive Henri Termeer was named as a defendant.

"We provide our investors with timely and appropriate information about the issues affecting our business and we are confident in the way we have communicated the recent manufacturing supply challenges we have faced," said Genzyme spokeswoman Lori Gorski.

The U.S. Food and Drug Administration raised concerns about Genzyme's Allston, Massachusetts plant in the fall of 2008, the lawsuit said.

But Genzyme did not disclose the FDA's concerns until Mar 2, "a full trading day (plus a weekend) after receiving a second reprimand," the lawsuit said.

Genzyme's stock fell 7.1 percent when this news hit the market, and the stock has continued to slip as the company released more information, the suit said.

Genzyme also did not promptly disclose contamination problems at its Geel, Belgium facility, the suit said.

"From a class period high of $83.25 per share, Genzyme's stock has fallen over 35 percent to trade in the low-to-mid-$50 range," according to the suit.

As a result, investors have lost more than $8 billion, the suit said.‹