Going Strong: Genzyme Corporation

First quarter was a roller coaster ride for the market, driven by hope and fear. While just about every category of stocks has been hammered in recent months, biotech has edged up the past several weeks. Investors have been betting that the biotech business model, which relies on breakthrough technologies and long-term contracts, can weather the economic storm in the U.S. On April 21, 2008, Genzyme/NASDAQ: GENZ said it will have to reapply with the FDA for the approval of Myozyme. Myozyme produced at the 160 liter bioreactor scale and Myozyme produced at the 2000 liter scale should be classified as two different products because of differences in the carbohydrate structures of the molecules. Currently, Myozyme is manufactured at the 160 liter bioreactor scale and treats Pompe disease, a genetic disorder that impairs muscle function and can be life-threatening if the disease affects the lungs or heart. The drug is approved in more than 40 nations, but not yet in the U.S. The FDA has agreed to give priority review to the new application using data from a prior study with the 2,000 liter process. That means the FDA will make a decision on the drug within six months.

The delay prompted the company to cut its Myozyme guidance for 2008 to between $275 million and $285 million from between $320 million and $330 million. Profit will now reach about $2.65 per share, compared with prior guidance of $2.75 per share. Genzyme anticipates that Myozyme will be available commercially in the U.S. in the first quarter of 2009. Myozyme is an important component of Genzyme’s growth story, with estimated peak sales of about $1 billion. Eventually, Myozyme will be approved, hence, we maintain Genzyme’s target price of $79.

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