It might be a ways off, but Genzyme execs may be able to see the end of the road for the ongoing manufacturing troubles at its troubled Allston Landing, Mass., plant. The big biotech and FDA announced finalization of a consent decree governing operations at that site on May 24, and the details largely were in line with those projected by Genzyme during an earnings call in late April.

As expected, Genzyme will have to pay $175 million upfront, representing disgorged profits from the sale of Cerezyme , Fabrazyme and Thyrogen made at Allston. The other major condition of the decree is that all fill/finish processes for those drugs must be moved out of Allston Landing by Nov. 28, 2010. If Genzyme fails to meet that deadline, FDA can take 18.5 percent of the profits generated by those three products.

Last June, Genzyme temporarily shut down the Allston plan due to the need to remediate viral contamination found in one of its bioreactors. The site was back online within six weeks, but production and availability of Cerezyme and Fabrazyme, two of the company's top sellers, have been constrained since.

FDA followed up on those problems by conducting an on-site inspection of the plant in October and November, eventually issuing a Form 483 citing dozens of deficiencies at Allston, many of them related to fill/finish procedures. Among other concerns, the agency discovered that some shipments of drugs from the plant were contaminated with bits of metal, rubber and glass.

In March, under fire from investors, including Carl Icahn who was preparing to launch a proxy fight for control of Genzyme's board of directors, the company announced that FDA had notified it of a pending enforcement action, likely a consent decree, to ensure Genzyme products comply with good manufacturing practices (Also see "Genzyme's Manufacturing Problems Lead To Enforcement Action By FDA" - Pink Sheet, 24 March, 2010.).

During a first-quarter earnings call a month later, embattled CEO Henri Termeer told investors the consent decree likely would entail a $175 million upfront payment (Also see "Genzyme, Industry Analysts Relieved By Particulars In Draft Consent Decree" - Pink Sheet, 21 April, 2010.). That and other details offered by Termeer proved to be correct, perhaps an important milestone for a company that has been plagued for nearly a year by setback after setback and delays in predicted return to normal and full production.

Most Cerezyme fill/finish work already transferred

In an interview, Pamela Williamson, Genzyme's senior VP, global head of regulatory affairs and corporate quality compliance, noted that most Cerezyme fill/finish work already has been moved to a plant in Waterford, Ireland. Fill/finish procedures for Fabrazyme and Thyrogen, meanwhile, will be moved to a contract manufacturer, Hospira in McPherson, Kan., which also will serve as a backup site for production of Cerezyme, Genzyme's top-selling product.

No new BLAs will be required to move the fill/finish processes for the three drugs, she added. Genzyme several months ago submitted a transfer and comparability protocol to FDA for the Hospira site. Approval for transfer of Fabrazyme and Thyrogen "will be based on approval of that protocol and submission of the data that come from that protocol," Williamson said.

Asked if Genzyme believes the Nov. 28 deadline for fully transferring the fill/finish work out of Allston is reasonable, she answered affirmatively.

"We believe it is," Williamson said. "We've looked at the timelines pretty carefully, and based on the protocol that we have developed and the timelines for the different process validation runs, we believe that we can begin supplying product out of the contract manufacturer by the deadline."

Genzyme will continue to make bulk material for Cerezyme and Fabrazyme at Allston Landing, and is undertaking a remediation plan co-developed with and overseen by Quantic, a third-party manufacturing consultant, at that facility. The remediation work is expected to take two to three years to complete, Genzyme says. The consent decree includes milestones for various stages of the remediation work, and if those milestones are not met, FDA can fine the company $15,000 a day per affected drug.

"The plan had been developed back in October of 2009, so the work is well underway," Williamson said. "What will happen under terms of the consent decree is we'll have Quantic do another formal baseline assessment and [if there are] any differences between the assessment that was originally done and the current state, we would supplement the remediation plan with that additional work and continue to move forward with our existing plans."

Once the remediation work is complete, FDA will require five years of oversight, with Quantic filing annual reports on the facility's operations.

Although knowing the extent of the consent decree and having its details be in line with what Genzyme had previewed to its investors should be a relief for the company, some market analysts think the enforcement action will continue as an overhang to the company's stock price.

Geoffrey Meacham of J.P. Morgan, in a same-day note, reiterated an "underweight" rating of Genzyme shares and said the consent decree details reinforce the wisdom of a cautious stance by investors.

"In our view, the transfer timelines for fill/finish may be aggressive and are a downside risk as we suspect the FDA will be very critical before signing off on other facilities," he wrote. "Additionally, the five-year oversight period upon remediation completion implies an extended [operating expense] headwind."

-Joseph Haas (j.haas@elsevier.com)

Finalized Consent Decree For Allston Largely In Line With Genzyme's Expectations

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