UPDATE 2-Genzyme negative news continues; stops drug trial

Wed Nov 18, 2009 9:39am EST

* Genzyme stops trial of kidney disease drug

* Drug did not work better than company's existing product

* Shares fall 1.5 percent early trading

By Toni Clarke

BOSTON, Nov 18 (Reuters) - U.S. biotechnology company Genzyme Corp GENZ.O reported more bad news on Wednesday, announcing it is dropping development of its experimental kidney disease drug after it proved no more effective than the company's existing drug Renvela.

The news comes as the company is struggling to resolve a series of manufacturing problems that have led to a shortage of its biggest-selling drug, Cerezyme, a treatment for Gaucher disease, a rare genetic disorder that can cause life-threatening organ damage.

Genzyme's shares fell 1.5 percent to $49.57 in early trading on Nasdaq.

Cambridge, Massachusetts-based Genzyme said it had hoped to develop a drug that was more potent than Renvela, itself a successor to the company's kidney disease drug Renagel. The active ingredient in the drugs is known as sevelamer.

Renvela treats hyperphosphatemia, or excess phosphate in the blood, a risk factor for cardiovascular disease in patients with chronic kidney disease.

"This is a very significant negative in our view," said Christopher Raymond, an analyst at Robert W. Baird, in a research note. "With Renagel/Renvela patent expiry in 2014, this program was seen as the primary vehicle to extend Genzyme's $850 million renal franchise."

Genzyme had been studying its new drug, an advanced phosphate binder, in 349 patients. The trial was in mid-to-late stage development.

"Without line extension for the Renagel-Renvela franchise, we estimate nearly $1 billion in sales is at risk for Genzyme looking to 2014," said Geoffrey Meacham, an analyst at J.P. Morgan, in a research report. "We view the franchise as vulnerable to generic sevelamer competition, which we assume will dominate the phosphate binder market in 2014."

(Additional reporting by Vidya Loganathan, editing by Dave Zimmerman)