Genzyme (NASDAQ:GENZ) is getting some commentary this morning after the co disclosed on 8/28/09 that the European Medicines Agency (EMEA) issued a letter detailing one major observation and several other deficiencies at the Allston manufacturing facility.
- Baird is downgrading GENZ to Neutral from Outperform while lowering their target to $58 (prev. $64). Firm is lowering theior Cerezyme estimates considerably through 2012 as they now feel the odds of continued delays at Allston Landing and longer-lasting fallout from said delays are now higher. While continued snags with FDA’s review of Allston are one thing, now that EMEA has found issues at the plant, they are increasingly wary of further delay at this critical competitive juncture.
EMEA’s turn. GENZ indicated Friday that EMEA inspected Allston (August 17-21), finding one “major observation” and several other observations. GENZ will respond within 15-days.
- Very surprising Allston still has deficiencies. While they have urged patience until now, the firm is surprised that there are still significant deficiencies at Allston this late in the game.
- Can no longer blame an overzealous FDA. Until now they have perceived European regulators as more accommodating (e.g., approval of the Myozyme 2000L process). EMEA statistics show historically only ~10% of EMEA observations are categorized as “major.”
- Timing could not be worse. With Shire gearing up to supply velaglucerase through a treatment IND, Baird thinks effects could be more enduring than anticipated. They are lowering Cerezyme estimates to $985M, $1,096M, and $1,098M for 2010-2012 respectively.
- Could things get worse? Indeed they could. GENZ’s recent 10-Q disclosed FDA could withdraw market exclusivity for both Fabrazyme and Myozyme under Orphan Drug. While Shire’s desire to enter the US with Replagal is well known, they remind investors that under such a scenario, BMRN’s BMN-103 could begin trials with no requirement for superiority over Myozyme.
- Still reason for hope. Still undisclosed velaglucerase/Cerezyme head-to-head and switching trials could show numerical inferiority to Cerezyme, which they think would be a significant positive for GENZ shares. However, with little indication such a scenario is likely, and no visibility into likelihood of further Allston delays, they see a better entry point in the high $40s.
- Goldman Sachs believes the news could pressure Genzyme shares because resumption of product supply might be delayed. The Allston facility is the single supply source for Cerezyme (25% of revenues) and Fabrazyme (10% of revenues).
1) Resumption of Cerezyme supply may be delayed. Genzyme expects shipments of new Cerezyme product from the Allston plant to resume in November or December 2009 after FDA re-inspection of the facility in the coming weeks/months and resolution of the issues in the FDA Warning Letter. If the EMEA deficiencies relate to items in the FDA Warning Letter, Genzyme might need additional remediation steps prior to the FDA re-inspection. If the EMEA deficiencies are unrelated, the FDA might require that these deficiencies be corrected before shipments resume. Outside the United States, there could be risk that the EMEA might restrict shipments if the deficiencies are not resolved on schedule.
2) Could lead to more severe Cerezyme shortages. Although the FDA has cleared two lots of the old finished Cerezyme for use in the United States, Goldman believes the EMEA has not yet approved these lots. It is difficult to assess the impact the news has on the status of these lots without details of the EMEA deficiencies. However, with 2/3 of Cerezyme sales outside the United States, delay is approval by EMEA could create local shortages and additional share loss to competing products by Shire and Protalix.
Notablecalls: Well, as Leerink noted in their upgrade a week ago any delays with the Allston manufacturing facility will likely send the shares down to low-$50's.
That's where GENZ is headed today. I'm guessing $53 or lower.
Note that the delay is NOT yet confirmed. That should keep the downside more moderate.
- Baird is downgrading GENZ to Neutral from Outperform while lowering their target to $58 (prev. $64). Firm is lowering theior Cerezyme estimates considerably through 2012 as they now feel the odds of continued delays at Allston Landing and longer-lasting fallout from said delays are now higher. While continued snags with FDA’s review of Allston are one thing, now that EMEA has found issues at the plant, they are increasingly wary of further delay at this critical competitive juncture.
EMEA’s turn. GENZ indicated Friday that EMEA inspected Allston (August 17-21), finding one “major observation” and several other observations. GENZ will respond within 15-days.
- Very surprising Allston still has deficiencies. While they have urged patience until now, the firm is surprised that there are still significant deficiencies at Allston this late in the game.
- Can no longer blame an overzealous FDA. Until now they have perceived European regulators as more accommodating (e.g., approval of the Myozyme 2000L process). EMEA statistics show historically only ~10% of EMEA observations are categorized as “major.”
- Timing could not be worse. With Shire gearing up to supply velaglucerase through a treatment IND, Baird thinks effects could be more enduring than anticipated. They are lowering Cerezyme estimates to $985M, $1,096M, and $1,098M for 2010-2012 respectively.
- Could things get worse? Indeed they could. GENZ’s recent 10-Q disclosed FDA could withdraw market exclusivity for both Fabrazyme and Myozyme under Orphan Drug. While Shire’s desire to enter the US with Replagal is well known, they remind investors that under such a scenario, BMRN’s BMN-103 could begin trials with no requirement for superiority over Myozyme.
- Still reason for hope. Still undisclosed velaglucerase/Cerezyme head-to-head and switching trials could show numerical inferiority to Cerezyme, which they think would be a significant positive for GENZ shares. However, with little indication such a scenario is likely, and no visibility into likelihood of further Allston delays, they see a better entry point in the high $40s.
- Goldman Sachs believes the news could pressure Genzyme shares because resumption of product supply might be delayed. The Allston facility is the single supply source for Cerezyme (25% of revenues) and Fabrazyme (10% of revenues).
1) Resumption of Cerezyme supply may be delayed. Genzyme expects shipments of new Cerezyme product from the Allston plant to resume in November or December 2009 after FDA re-inspection of the facility in the coming weeks/months and resolution of the issues in the FDA Warning Letter. If the EMEA deficiencies relate to items in the FDA Warning Letter, Genzyme might need additional remediation steps prior to the FDA re-inspection. If the EMEA deficiencies are unrelated, the FDA might require that these deficiencies be corrected before shipments resume. Outside the United States, there could be risk that the EMEA might restrict shipments if the deficiencies are not resolved on schedule.
2) Could lead to more severe Cerezyme shortages. Although the FDA has cleared two lots of the old finished Cerezyme for use in the United States, Goldman believes the EMEA has not yet approved these lots. It is difficult to assess the impact the news has on the status of these lots without details of the EMEA deficiencies. However, with 2/3 of Cerezyme sales outside the United States, delay is approval by EMEA could create local shortages and additional share loss to competing products by Shire and Protalix.
Notablecalls: Well, as Leerink noted in their upgrade a week ago any delays with the Allston manufacturing facility will likely send the shares down to low-$50's.
That's where GENZ is headed today. I'm guessing $53 or lower.
Note that the delay is NOT yet confirmed. That should keep the downside more moderate.
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