PROTALIX BIOTHERAPEUTICS, INC. (PLX)

[genisi]

Genzyme scraps drug material at tainted plant

http://www.reuters.com/article/marketsNews/idINN1046442820090810?rpc=44

* Lowers previously reported Q2 earnings

* Sees 2009 results at low range of forecast

* Shares up 4.5 percent

(Adds analyst comment in paragraphs 4, 5; updates shares)

By Lewis Krauskopf

NEW YORK, Aug 10 (Reuters) - Genzyme Corp (GENZ.O: Quote, Profile, Research, Stock Buzz) said on Monday it will scrap most unfinished batches of its top-selling drug after the plant where they were being produced was contaminated by a virus, and that 2009 results will come in at the low end of its forecasts.

Genzyme previously warned of a gloomy forecast because of unusable material, and its beaten-down shares rose 4.5 percent to $50.36 after the announcement.

The biotechnology company's disclosures stem from the shutdown of a key manufacturing plant in Boston due to the contamination, which it said in June it had detected. Hurt by the plant woes, the stock is off some 25 percent this year.

Robert W. Baird analyst Chris Raymond called the latest plant update a "mixed bag."

"While this presents downside to our numbers, we think many investors expected as much," Raymond said in a research note.

Genzyme said its decision to discard about 80 percent of the unfinished batches of its Cerezyme drug for Gaucher disease resulted in a new write-off of about $8.4 million. It said this reduced its second-quarter results, first reported on July 22.

Genzyme revised downward its second-quarter net income to $187.6 million, or 68 cents per share, from $192.2 million, or 70 cents per share. Earnings excluding one-time items were revised downward to $226.6 million, or 82 cents per share, from $232.5 million, or 85 cents per share.

Genzyme said it now expects 2009 earnings, revenue and Cerezyme sales to come in at the low end of the forecasts it provided on July 22.

Genzyme had halted production of Cerezyme, as well as another big seller, Fabrazyme for Fabry disease, after detecting a virus at the plant that did not endanger health, but interfered with cell growth.

Manufacturing at the Allston plant has resumed, and Genzyme expects to begin releasing new material in November and December, the company said.

"Reaching a decision on the work-in-process material has been difficult for us as we balance the medical benefit of Cerezyme for patients with minimizing the risk to our newly cleaned Allston plant," Chief Executive Henri Termeer said in a statement.

"Now that we have resumed production, we are focused on the road to recovery."

Genzyme previously said it was evaluating the unfinished Cerezyme material and, if the material proved unusable, full-year results would be at the low end of forecasts.

On Monday, the company said it is still evaluating what to do with the remaining unfinished Cerezyme batches.

"The problem is it still could be a little worse because they could write off the remaining 20 percent," said Jon Stephenson, an analyst with Summer Street Research.

Last month, Genzyme said the U.S. Food and Drug Administration would reinspect the plant, sending shares lower.

"I just can't see how the stock is going to significantly outperform from the current levels because there's still a tremendous amount of uncertainty out there," Stephenson said.