UPDATE 2-Genzyme, FDA agree a pathway for Lumizyme approval

* Genzyme says working toward FDA approval in 2010

* New strategy bypasses Allston manufacturing problems

* Shares fall 1.4 percent (Adds details, analyst comment, byline; updates share price)

By Toni Clarke

BOSTON, Dec 3 (Reuters) - Genzyme Corp GENZ.O and U.S. regulators have agreed on a plan that could lead to approval of the company's Pompe disease drug Lumizyme, Genzyme said on Thursday.

Last month the U.S. Food and Drug Administration declined to approve the drug due to manufacturing problems at Genzyme's Allston Landing plant in Boston.

The Cambridge, Massachusetts-based biotech company had been seeking FDA approval of a version of the drug made in 2,000-liter bioreactors.

Now, instead of applying for the 2,000-liter version, the company will apply for approval of a 4,000-liter version produced at its plant in Geel, Belgium.

The plan would eliminate the need for approval of the 2,000-liter version and bypass all the problems involved at the Allston plant.

Lumizyme, which treats the rare muscle disorder Pompe disease, is sold outside the United States under the brand name Myozyme.

"While some regulatory risk and timeline uncertainty remain, we believe this is a positive step," said Brian Abrahams, an analyst at Oppenheimer & Co.

Genzyme said it expects to exchange its 2,000-liter application for the 4,000-liter application this month and is working toward FDA approval in 2010.

The announcement is the first good news from Genzyme in months. The company has been dogged by manufacturing issues that led to shortages of its top-selling drug, Cerezyme, a treatment for Gaucher disease.

Still, investors reacted with caution to the news on Lumizyme, and the company's shares fell 1.4 percent in midday trading on Nasdaq.

"People are so doubtful of what Genzyme promises now that they are not going to give them credit until they see the official approval," said Phil Nadeau, an analyst at Cowen & Co.

Christopher Raymond, an analyst at Robert W. Baird, agreed, saying that while the news appears good, "there's a lot of show-me sentiment out there."

The FDA is expected to compare the 4,000-liter version of Lumizyme with the 2,000-liter version to ensure there are no changes to the drug's properties, even though the 2,000-liter version has not been approved.

Lumizyme, under the name Myozyme, was approved in 2006 for use in the United States when made at a 160-liter scale. Because the supplies were small, the drug was reserved for infants, where the disease tends to be more severe.

Genzyme then sought approval for a 2,000-liter version, but the FDA said that when produced in larger quantities, the drug has a different carbohydrate structure and therefore needed to be approved separately.

But the drug was approved in other countries, and Genzyme supplied the rest of the world with 2,000-liter product made in the Allston plant.

In the meantime, it built a new facility in Belgium, with two 4,000-liter bioreactors. Patients outside the United States have been transitioned from the 2,000-liter version to the 4,000-liter version.

Under its original plan for Lumizyme, Genzyme had hoped to win U.S. approval for the 2,000-liter version, and then submit a supplemental application for approval of the 4,000-liter product.

But earlier this year the Allston plant was hit by a virus and the company was forced to temporarily shut down the facility.

The FDA said it would not approve the 2,000-liter version until Genzyme fixed the problems. Although the plant is up and running again, not all of the manufacturing problems have been resolved.

In the meantime, Genzyme has ceased making the 2,000-liter version. All of its supply is produced in Belgium. The company said it has enough capacity to supply the entire world patient population, including U.S. patients, with product from its two 4,000-liter bioreactors in Geel. It is installing another 4,000-liter reactor to avoid any supply constraints in the future.

Genzyme shares fell 72 cents to $50.57 in midday trading on Nasdaq. (Reporting by Toni Clarke; editing by John Wallace) ((toni.clarke@thomsonreuters.com; 617-856-4340; reuters messaging: toni.clarke.reuters.com@reuters.net))