UPDATE 1-More woes for Genzyme; rival posts good drug data

* Rival to Genzyme drug shows promise

* Genzyme's shares fall 3.6 pct

(Updates with details, background, share price)

By Toni Clarke

BOSTON, Aug 3 (Reuters) - Genzyme Corp GENZ.O suffered a new blow on Monday after results from a trial of rival Shire Plc's (SHP.L) drug for Gaucher disease brought it a step closer to winning approval and competing with Genzyme's biggest product.

Genzyme shares were down 3.6 percent in the afternoon.

The Cambridge, Massachusetts-based biotechnology company is already struggling to resolve manufacturing problems that forced it to temporarily shut down production of Cerezyme, its flagship drug and the world's leading treatment for Gaucher disease.

Shire reported the results from the first of three late- stage, or Phase III, studies of velaglucerase alfa, which produced positive clinical results, and said the U.S. Food and Drug Administration has accepted its treatment protocol.

The FDA said last month it was moving to speed up access to experimental drugs for Gaucher disease -- a rare disorder in which patients are deficient in an enzyme that breaks down a type of fat molecule -- to offset shortages of Cerezyme stemming from the shut-down of Genzyme's Allston manufacturing plant in Boston.

"When it rains it pours," said Christopher Raymond, an analyst at Robert W. Baird. "With Allston supply issues front and center, it would be hard to imagine worse timing for Genzyme."

Genzyme, one of the world's biggest biotechnology companies, has largely been immune from competition for its drugs for rare diseases. As a result, Genzyme has been able to charge astronomical prices for the drugs, sometimes more than $200,000 per patient per year.

The company's manufacturing problems also affect Fabrazyme, the company's treatment for Fabry disease. Fabry disease is an inherited disorder caused by a faulty gene, in which a fatty substance known as GL-3 builds up in the the tissues of the kidney, heart, skin and brain.

Now other companies are nipping at Genzyme's heels. Israel- based Protalix BioTherapeutics Inc (PLX.A) is also developing a drug, prGCD, for Gaucher disease. Last month, the company said it held a meeting with the FDA to discuss the company's proposed marketing application.

The company's drug is in a late-stage trial. Protalix expects to report results in the fourth-quarter of 2009 and anticipates submitting a marketing application before the end of the year.

Brian Abrahams, an analyst at Oppenheimer & Co said he expects the side effect profile of velaglucerase and Cerezyme to be similar, although it appears as though velaglucerase did not reduce liver size as much as Cerezyme does.

In Gaucher patients, organs such as the spleen and liver become enlarged due to the lack of the enzyme needed to break down fats.

Abrahams said he does not expect significant erosion of Cerezyme's market share over the long term. He expects Cerezyme to generate sales of $1.07 billion in 2013 compared with sales of $300 million from competitors.

Genzyme's shares fell 3.6 percent to $50.02 in afternoon trading on Nasdaq. (Reporting by Toni Clarke; editing by Maureen Bavdek and Andre Grenon)