May 24, 2010 / 6:27 PM / 9 years ago

UPDATE 2-Genzyme says terms of plant decree finalized

* Confirms to pay $175 mln to disgorge past profits

* Shares fall 1 percent in afternoon trading

* FDA sets dates for moving fill/finish operations (Updates with comment from FDA, analysts, adds background, changes dateline, previous NEW YORK)

By Toni Clarke

BOSTON, May 24 (Reuters) - Genzyme Corp GENZ.O said on Monday that terms of a consent decree with U.S. regulators over its troubled manufacturing plant in Boston have been finalized, and confirmed it will pay the government $175 million in profits from past sales of certain drugs.

The Cambridge, Massachusetts-based biotechnology company said it was still assessing the impact of the consent decree, as well as its decision to explore strategic alternatives for three business units, on its financial forecast for 2010.

Genzyme expects fourth-quarter earnings per share of $1 a share. The company booked the payment, which it had expected, as a one-time charge in the first quarter.

Genzyme’s plant in the Allston neighborhood of Boston was temporarily closed last June following a viral contamination, and the situation has cast a huge shadow over the company.

The closure led to shortages of Cerezyme, the company’s treatment for Gaucher disease, and Fabrazyme, its treatment for Fabry disease. Both are rare disorders caused by an enzyme deficiency that can lead to organ damage and death.

In addition, an FDA inspection of the plant found some drugs had been contaminated with metal, fiber, rubber and glass particles.

The consent decree requires Genzyme to move fill/finish operations out of the plant for Cerezyme, Fabrazyme and another drug, Thyrogen, sold within the United States, by Nov. 28, 2010. The deadline is Aug. 31, 2011 for products sold outside of the United States.

“It is critical for the safety of the drug supply that companies comply with basic manufacturing standards,” said Dr. Joshua Sharfstein, principal deputy commissioner at the U.S. Food and Drug Administration, which oversees drug safety, in a statement. “FDA takes these obligations very seriously and expects manufacturers to do the same.”

Though the plant is running again, Genzyme is still not able to meet demand for Cerezyme or Fabrazyme. It is only able to meet 50 percent of demand for Cerezyme, and 30 percent for Fabrazyme.

Some investors had been concerned the FDA would halt sales of Thyrogen, its drug used to help diagnose thyroid cancer, due to the contamination. But the agency said it will allow sales of Thyrogen to continue for those patients for whom it is a medical necessity until product that is filled and finished at another facility is available.

The FDA has drafted a letter to physicians describing the patients for whom it considers Thyrogen to be medically necessary.

Genzyme said it expects the remediation plan will need two to three years to complete. If the company fails to meet key deadlines, the FDA can require it to pay $15,000 per day, per affected drug, until the compliance goals are met.

Once the remediation plan is complete, the FDA will require five years of oversight and annual reports submitted by the Quantic Group, a consultancy hired by Genzyme to oversee its compliance program.

Genzyme’s shares fell 1 percent to $48.90 in afternoon trading on Nasdaq, and some analysts were skeptical the company will be able to meet its deadlines.

“We think the Nov. 28 timeline for transferring fill/finish for U.S. products from Allston could prove difficult given the company’s poor track record of meeting manufacturing timelines,” said Geoff Meacham, an analyst at J.P. Morgan, in a research note. “Indeed, we suspect the FDA will be even more vigilant than normal before approving other facilities, and these timelines leave little room for error.”

The consent decree is subject to approval by the U.S. District Court for the District of Massachusetts.

(Additional reporting by Lewis Krauskopf)

Reporting by Toni Clarke, editing by Bernard Orr

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