* FDA rejects Genzyme's Pompe disease drug
* Cites deficiencies at manufacturing plant in Boston
* Shares up as shipping still on track
(Updates with details from company conference call)
By Toni Clarke
BOSTON, Nov 16 (Reuters) - Genzyme Corp GENZ.O, which is struggling through the most trying period in its history, said on Monday U.S. regulators will not approve its drug to treat Pompe disease, a rare muscle disorder, until it addresses manufacturing deficiencies at its Allston Landing plant in Boston.
The ruling by the U.S. Food and Drug Administration follows the agency's announcement last week that it had found foreign particles, such as stainless steel fragments and non-latex rubber, in vials of several Genzyme products, including its top-selling Gaucher disease treatment Cerezyme.
Genzyme executives said on a conference call on Monday that the company has temporarily shut down the section of its Allston plant that handles vial filling and finishing while it fixes the problem. The company said metal fragments were being shed by antiquated machinery.
The company said that it is establishing additional internal controls in the fill/finish area, transferring additional filling activities to contract manufacturers and utilizing excess capacity at Genzyme's facility in Waterford, Ireland.
It said the interruption in the fill/finish area will not delay shipments of Cerezyme, though it may have a brief impact on shipments of Fabrazyme, the company's treatment for Fabry disease.
Gaucher and Fabry are both rare genetic disorders that can lead to life-threatening organ damage. The drugs have been in short supply since Genzyme was forced to shut down production in June following a viral contamination.
The company said it still expects to ship new batches of both drugs by the end of the year.
That was reassuring to investors, and the company's stock rose 0.6 percent in afternoon trading. But a good deal of skepticism remains.
"We believe manufacturing issues will continue to be an overhang on the shares near-term," said Brian Abrahams, an analyst at Oppenheimer & Co.
The negative FDA ruling on Lumizyme, the company's Pompe disease drug, follows a five-week inspection of the plant. Lumizyme will be the name given in the United States to the company's Pompe disease drug Myozyme.
Myozyme was approved in the United States in 2006, but only when made in a very small bioreactor. The FDA ruled that Genzyme would have to prove that the drug was just as effective when made in bigger, 2,000-liter bioreactors.
Genzyme had hoped the FDA would approve the 2,000-liter product, which would then have allowed it to apply to sell the 4,000-liter product currently made at its plant in Belgium.
Myozyme is approved in the higher batches outside the U.S.
That strategy now is no longer optimal, said Henri Termeer, the company's chief executive. Now the Cambridge, Massachusetts-based biotech plans to discuss with the FDA alternative faster ways of getting the drug approved.
The company said it believes it has met other FDA requirements for the drug, such as providing a satisfactory risk management program and prescribing information package.
Genzyme's shares rose 0.6 percent to $49.59 in afternoon trading on Nasdaq. They have fallen 32 percent since reaching their year-high in February. (Additional reporting by Esha Dey, editing by Gerald E. McCormick)