UPDATE 3-Genzyme drops as 2009 outlook worse than expected

* Genzyme 2nd-qtr net profit up to 70 cents/shr

* Non-GAAP 2nd-qtr profit 85 cents/shr

* Cuts 2009 non-GAAP view to $2.35/shr to $2.90/shr

* Shares fall nearly 8 pct

(Recasts, adds analyst comment, details throughout)

By Toni Clarke

BOSTON, July 22 (Reuters) - Genzyme Corp GENZ.O said on Wednesday its second-quarter earnings nearly tripled, but it cut its 2009 outlook more than expected following the shut-down of a key drug manufacturing plant due to contamination, sending its shares down nearly 8 percent.

Last month, Genzyme said it had halted production at its Allston plant in Boston. The plant is the only one that makes Genzyme's top-selling drug Cerezyme, to treat Gaucher disease, and Fabrazyme, its treatment for Fabry disease.

Both diseases are rare, and Genzyme is the main supplier to these patient populations. The shutdown is expected to lead to shortages, and all but the sickest patients and children are reducing their doses to stretch supply.

Genzyme said it is on schedule to resume production at the Allston facility this month and to release the first products from the plant by the end of the year.

Cambridge, Massachusetts-based Genzyme now forecasts 2009 earnings, excluding one-time items, of between $2.35 a share and $2.90 a share. Analysts had expected $3.36 a share, according to Reuters Estimates.

Previously Genzyme had forecast 2009 operating earnings of $3.52 a share.

Genzyme cut its forecast for 2009 net profit to between $1.74 a share and $2.29 a share. Previously it had predicted net profit of $3.02 a share.

The company reduced its 2009 revenue prediction to between $4.6 billion and $5 billion. It had forecast $5.15 billion to $5.35 billion.

Analysts had expected the company to reduce its earnings outlook, but the extent of the cut shocked investors.

"The new guidance was far worse than expected," said Geoffrey Meacham, an analyst at JP Morgan. "We expect significant weakness in Genzyme's shares."

SECOND-QUARTER RESULTS

Genzyme posted a second-quarter net profit of $192.2 million or 70 cents a share, compared with a profit of $69.6 million or 25 cents a share a year earlier, when it reported a large one-time charge related to its acquisition of rights to a cholesterol drug.

Revenue rose to $1.23 billion from $1.17 billion a year before.

Excluding one-time items, Genzyme earned 85 cents a share, in line with the average forecast of analysts polled by Reuters Estimates.

OPPORTUNITY FOR RIVALS

Genzyme's problems have presented an opportunity for up-and-coming rivals Shire Plc (SHP.L)(SHPGY.O) and Protalix BioTherapeutics Inc (PLX.A).

Earlier this month Shire said it had received fast track designation for its Gaucher disease drug velaglucerase alfa, after U.S. officials said they were moving to get more treatments for the disease on the market.

Fast track designation is a process under which the U.S. Food and Drug Administration expedites the review of drugs to treat serious diseases where there is unmet medical need.

Patients with Gaucher are deficient in an enzyme that breaks down a certain type of fat molecule. Fatty cells accumulate in different parts of the body, including the spleen, liver and bone marrow.

Protalix said it too had been approached by the FDA to expand access to its experimental Gaucher disease drug prGCD, which is in late-stage development.

Among its key products, Genzyme revised its 2009 sales forecast for Cerezyme to between $750 million and $1 billion, down from $1.25 billion to $1.275 billion.

The new range for Fabrazyme is $510 million to $520 million, down from $560 million to $570 million.

The company also cut its forecast for its Pompe disease drug Myozyme to $330 million to $340 million. Its previous forecast was $370 million to $380 million.

Genzyme's shares fell $4.38, or 7.8 percent to $51.53 in late morning trading on Nasdaq. Earlier they fell as low as $50.83. (Reporting by Toni Clarke; editing by Jeffrey Benkoe and Gerald E. McCormick)