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Executives

Patrick Flanigan – Senior Director, IR

Henri Termeer – Chairman, President and CEO

Michael Wyzga – EVP, Finance and CFO

John Butler – SVP, President, Cardiometabolic & Renal

Mark Enyedy – SVP, President, Oncology & Multiple Sclerosis

Geoff McDonough – SVP, GM, LSD Therapeutics

David Meeker – EVP, Therapeutics, Biosurgery & Corporate Operations

Pam Williamson – Global Regulatory Affairs

Analysts

Davis Bu – Goldman Sachs

Brian Abrahams – Oppenheimer & Co

Michael Yee – RBC Capital Markets

Jim Birchenough – Barclays Capital

Eun Yang – Jefferies

Geoff Meacham – J.P. Morgan

Michael Aberman – Credit Suisse

Navjet [ph] – Citi

Salveen Kochnover – Collins Stewart

Geoff Porges – Sanford Bernstein

Aaron Reames – Wells Fargo Securities

Phil Nadeau – Cowen & Co

Bill Tanner – Lazard Capital Markets

Rachel McMinn – Bank of America

Omar Faruqui [ph] – Deutsche Bank

Shiv Kapoor – Morgan Joseph

Jon Stephenson – Summer Street Research

Genzyme Corporation (GENZ) Q4 2009 Earnings Call Transcript February 17, 2010 11:00 AM ET

Operator

Good day, and welcome to the Genzyme Corporation’s fourth quarter financial results conference call. All participants will be in a listen-only mode until the question-and-answer session. (Operator instructions). Also this call is being recorded. If you have any objections you may disconnect at this time.

I would like to turn the call over now to Mr. Patrick Flanigan, Senior Director of Investor Relations. Sir, you may begin.

Patrick Flanigan

Thanks Julie and welcome everyone to Genzyme Corporation's fourth quarter and year-end 2009 earnings conference call. On this call, we will be making forward-looking statements including those regarding our 2010 financial guidance, our Cerezyme and Fabrazyme resupply plans, our manufacturing plans, our product development plans and regulatory timetables, and our assessment of the future of the business.

These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. Please refer to the Risk Factor section of our September 30th 10-Q on file with the SEC for more information on these risks. These statements speak only as of today's date, and we undertake no duty to update or revise them.

I will now hand the call over to Genzyme's Chairman and CEO, Henri Termeer.

Henri Termeer

Thank you Patrick, and thank you everybody participating this morning. I have with me, Michael Wyzga, our Chief Financial Officer. Also Geoff McDonough, our Genetic Diseases area. He will be making some comments. John Butler, the renal area, and Mark Enyedy of the oncology and transplant area. All of them will make some comments. David Meeker is here. He will make -- he will respond to comments related to manufacturing and other matters, and Pam Williamson, who is the head of our regulatory, global regulatory affairs side, and she will make comments on anything related to regulatory affairs.

2009 was a challenging year, and I think all of us are very familiar with how challenging it was. It was a year where the challenge was extremely well identified and very well-defined. So we knew what we had to do, and we knew what we had to overcome. And 2010 is a year where we are very significantly recovering from the effects of this manufacturing interruption that we experienced.

There were three areas that were impacted particularly here. One was Cerezyme, where we could not continue to supply all patients through last year. We restarted production of Cerezyme in the August-September timeframe, and we started to get our product out. We started to ship the new product to patients in the December timeframe, and we now two months into that experience, and I have to say this is a very good experience. 85% of the patients in the US are back on therapy, and we expect that to continue to grow.

We are experiencing good manufacturing productivity, and we expect that also to continue to grow through this year, but it was a very good start-up after this moment of sanitizing this plant, extremely good result. We are introducing an inventory buffer into the system that allows us to better work with patients in over 100 countries to schedule their infusions and so on. All in all a very, very positive moment of recovery here that bodes well for the remainder of the year, bodes well for the market share of Cerezyme in this space.

Fabrazyme has a slower recovery cycle mainly because of the low productivity after the restart of the production of Fabrazyme. We talked about this together a few times, and we worked, of course, all along extremely hard to precisely identify what it is that was causing this low productivity as compared to our historical experience. We identified that the working cell bank is the culprit here. And we introduced a new working cell bank into the production of Fabrazyme in the early part of last year, and we have been working now very hard since September last year in a very comprehensive way to develop a new working cell bank that is more productive.

We think we have succeeded, and we have now introduced this new working cell bank into the 2000 liter reactor, one of them and we will also put it into the next one once that is over again. And that will make if we do get the kind of productivity that we are experiencing at a much smaller scale that is very, very significantly changing the picture on Fabrazyme. And actually it will turn that picture around materially. And we would expect the output of this new cell bank first to become available in the June timeframe as output of this first reactor is becoming released product.

We need to work with regulators around the world to make sure that everybody is comfortable with this change, the change that we did make was really based on how we used to do things in the past. So we expect that we will get a pretty good hearing on this. In any case, we are confident enough that we are actually implementing this new cell bank at this time. And so that is a very important development around Fabrazyme that I feel extremely encouraged about, and I'm sure the marketplace patients are also looking forward to the results of this.

The third element was Lumizyme. Lumizyme was delayed for a number of years. We have all talked about it many times. It was a very expensive delay. We are supplying products free of charge to very severely impacted Pompe patients in the US now for a few years, and then we were unable to file in December again an BLA and modified BLA that was based on the earlier filings, and we got a new PDUFA date of June 17 for this year.

We are basing our assumptions for Myozyme and Lumizyme revenues in the guidance that you have seen on introduction of -- in an approved state of Lumizyme in the United States starting in July. So we look forward to no changes that I have become aware of in this in terms of the interaction with the FDA. We are very confident that indeed this is very good possibility that we will get approval at the June timeframe, and maybe whenever everybody is ready because in talking with the FDA about a need for this product to become more broadly available in the United States, I have to say it is -- we're very much aligned with the agency to make sure that we do what is right to make this product available. So hopefully we can do it even potentially a little bit earlier than the June timeframe.

So these are the three things that held us back. It was the Cerezyme picture, the Fabrazyme picture, the Lumizyme picture, and I think all of them at this stage compared to 6 months ago, our oldest stage, are finding very good traction, and that bodes well for 2010. But of course -- it also causes of course is a relatively steep curve on the earnings side during the year and that was described in the press release. We would expect to exit the year at about $1 a share non-GAAP, but including amortization, and that clearly is on the steep curve versus the earlier part of the year.

And we worked very hard also on improving our ability to -- and increasing our capability to manufacture both in terms of basic capacity and redundancy of capacity that is requiring investments both in people and in equipment and plant, and we are quite determined to make sure that whole manufacturing picture is at the complete different level once we are done with this. And so we don't have the kind of interruption that we experienced last year.

We changed the leadership of the manufacturing operations, and you heard announcements around that. Ron Branning joined us from Gilead, where he was chief compliance officer in quality [ph] control efforts. He was also 6, 7 years with Genentech. Excellent individual with a lot of experience in very complex manufacturing circumstances. We also were very fortunate to attract Scott Canute, who was president of manufacturing operations for Eli Lily and helped guide them through a very difficult period when they had their challenges. And he will be on board with us March 1st.

So, beyond the things that I mentioned, which are all (inaudible) LSD products, they are a number of other things, and they hopefully will come up during today’s call because they are a remarkable. As you see from the guidance, the Heme/Onc business or the GTO business, the oncology business including Thymoglobulin, which is a big oncology component globally is closing in on $800 million next year. Very positive growth rate and becoming very material, and it is actually the first year that it is starting to make a significant bottom-line contribution to the corporation.

Renvela in Europe, where we have the approval for CKD, has a very interesting route ahead of it. The genetic diagnostic business has grown double-digit over a number of years, and again we are predicting that to happen this year. Very interesting Synvisc costs, and we are noticing increasing interest by many of you in that product, which has longways to go in terms of its growth rate, in terms of its market penetration, and we will hear some comments about that today as well.

And our number of late stage programs that are making progress, and we are investing in them. You know, there are some significant R&D increase year-on-year, and part of that is the investment in these late stage programs. Alemtuzumab is one year away from opening up the first Phase 3 clinical trial that we hope will confirm the tremendous results that we have seen in the Phase 2. So next year, and during this year already we're starting to prepare ourselves to develop that market. There is a very significant change in the market place going to once a year treatment versus the current practices.

We reported (inaudible) earlier this quarter, and we have two more trials that we will report on by midyear. We will see the (inaudible) results sometime in the first half of this year, and we saw and noted the excitements of the small molecules for Gaucher disease and that where we're doing two Phase 3 clinical trials.

So the core of the company and the new areas of the company are both -- they fit extremely well, and they are very robust in the way that they are coming forward now. We are investing in those areas of the company that you know, we are not likely at this time to go outside for new investments, until we really are well on track with the businesses that we have already within the corporation at this time.

So with that let me ask Michael Wyzga to run us through the financial results.

Michael Wyzga

Great. Thank you Henri. As Henri mentioned 2009 was a year of significant challenges for Genzyme. As we previously reported, our full year revenue decreased by approximately $90 million on a year-to-year basis. Just to put this a little bit in perspective, our volume reductions associated with the supply interruptions reduced our top line by over $430 million year-to-year, unfavorable currency impact further reduced the top line by an additional $115 million.

We did have increases in all other areas which helped us mitigate both the impact and soften the blow of the volume reductions as well as the unfavorable currency. So our revenue came on as a decrease of approximately 2%. As you can see from our earnings per share crosswalk, during the fourth quarter our GAAP net income was $23 million. Now included in our GAAP net income is a negative impact of approximately $21 million in pre-tax manufacturing discrete items. These items predominantly relate to the manufacturing inventory write-offs.

Our revised GAAP to non-GAAP crosswalk now excludes only the impact of acquisition related charges that were associated with the oncology assets from Bayer that was $47 million again on a pre-tax basis, as well as 123 (NYSE:R) stock option expenses of $48 million.

Our Q4 non-GAAP net income was $83 million or $0.31 per diluted share, and for the full year, our non-GAAP net income was $621 million or $2.27 per diluted share. We already preannounced our top line revenue at JP Morgan, and those numbers haven't materially changed. But let me touch on a few of the key points. The Genetic Diseases segment, our largest segment was significantly impacted by the manufacturing supply interruption, and that decreased 20% year-to-year.

Within the Cardiometabolic & Renal segment, including Thyrogen, an increased by about 6% on a year-on-year basis, including the transition of Renvela. Thyrogen’s revenue increased by 15% and ended the year with $171 million as Thyrogen is quickly becoming the standard of care for thyroid cancer testing.

The Synvisc franchise as Henri touched on increased by about 25%, and that was due to the strong Synvisc-One sales. Since its introduction in the United States Synvisc-One is of a very, very strong start, and we expect to see that continue into 2010. In the Heme/Onc oncology area, the revenue increased predominantly due to the Bayer transaction, as well as the strong Mozobil revenue increases. This segment ended 2009 with revenue of about $300 million.

As I mentioned in my opening, all the other segments increased by approximately double digits of revenue on a year-on-year basis, Genetics and Diagnostics by 13%, transplant by 17%. So, again it is a nice balance. Our non-GAAP gross margin for the full-year decreased to 71%, largely associated with the Allston plant shutdown and the restart.

Setting aside the manufacturing discrete item, our gross margin would have been approximately 73%. Within our operating expense, our full-year non-GAAP R&D expenses were $804 million. The growth in R&D expenses focused on the two Phase 3 studies associated with MS as well as the Cerezyme small molecule study.

Our full year non-GAAP SG&A expenses were approximately $1.3 billion. Increases in SG&A include the field sales and marketing components of the Bayer transaction, as well as expenses associated with the Synvisc-One launch. Our non-GAAP tax rate was 25% for the year. Our Q4 tax rate looks a little odd, because it represents the true up for the full-year amount as well as the impact of the lower profits compared to our fixed tax benefits.

Capital expenditures for the year was $662 million. Capital in 2009 was focused on our manufacturing infrastructure of Thymoglobulin, the cell culture expansion and the expansion of our fill and finish line in Waterford, Ireland. We ended the year with cash and marketable securities of approximately $1.1 billion in cash. Our stock repurchase for 2009 was 7.9 million shares for approximately $414 million. This leaves us with about 7 million shares remaining under our board authorized repurchase.

So, that closes the books on 2009. Let me add a little bit of color on the 2010 guidance. As we move through our recovery period, and we gained our momentum during the course of the year, we expect total revenue to increase to approximately $5.2 billion to $5.5 billion. We set the upper and lower range very purposely this year. The upper range of the revenue represents increased yield in Fabrazyme, accelerated approval of Lumizyme and maintenance of the Cerezyme market share. At the bottom end of our range, we exclude among other items, the decrease in the budgeted euro rate.

Our budgeted rate at that time that we set our budgets was 1.5 on the euro. The bottom end of our range represents an estimated 1.4. So that sort of gives you the bookends.

Within the Genetic Diseases segment, we expect to resupply and maintain Cerezyme as the market leader for the treatment of Gaucher disease, and we expect the revenue to come in between $980 million and $1.04 billion. The Fabrazyme base revenue assumes the lower yields of the current cell line. Again, increased yields will move this revenue to the high end of our guidance, and perhaps a little beyond.

Our revenue guidance in Fabrazyme is $360 million to $380 million. Lumizyme approval in the United States is another key event for us. As Henri mentioned, our PDUFA date is in June. With approval, we eliminate the costs associated with the supply of free drugs as well as capture the margins here in the United States. Our Lumizyme and Myozyme guidance for 2010 is $470 million to $500 million.

Synvisc has provided a strong revenue growth for us, as I mentioned for 2009, and we expect that momentum to continue through 2010. Guidance in the Synvisc area is $430 million to $450 million. With the ongoing roll out of Renvela worldwide, we expect the revenue to increase in this area approximately 6%, and that is in the range of $740 million to $770 million.

The full-year impact of the Bayer transaction and the Mozobil revenue will drive the Heme/Onc area to $775 million to $810 million, and again that includes Thymoglobulin. I should note that there are five products within this segment with revenue expectations in excess of $100 million in 2010. So we're really getting a lot of momentum there.

There are a number of moving parts affecting our gross margin estimates. We are making significant investments. As Henri mentioned, the improvement of our manufacturing operations. Now these include quality and process improvements, additional headcount, and adding redundancy in most of the aspects of our supply chain. And while these improvements are expected to gain us both stability and productivity over the long haul. In the short term these costs will impact our margins.

The expenses as well as the product mix changes will impact our margins in 2010, and we expect our non-GAAP gross margin to be approximately 71% to 73% of revenue. We are also focusing on non-GAAP SG&A expenses in a few major areas. One key initiative is the strengthening of our global sales and marketing around Fabrazyme and Cerezyme. We are also preparing for the launch of Lumizyme here in the United States.

With the success that we have seen to date in Synvisc-One, we will be investing in a highly targeted effort such as in-house sales expansion as well as consumer level of marketing. As you know, we also incurred the full impact of the oncology products that we acquired from Bayer. With that all said, we expect our SG&A to increase to between $1.51 billion to $1.54 billion in 2010.

Our non-GAAP R&D is expected to be in the order of $945 million to $960 million, and again this is highly focused on the late stage MS trials, as well as Gaucher small molecule. With the increasing utilization of our foreign manufacturing, we expect our non-GAAP tax rate to come into a range of 27% to 28% on a profit before tax basis.

Our weighted average shares are expected to be approximately 272 million to 274 million shares. Our capital expenditures will come in about $600 million, and those will be focused on infrastructure builds. We continue to focus and monitor our capital and return on capital. So that will be a major focus for us this year. We expect our cash flow return on capital to be coming in around 13%.

And while we expect Q1 to be relatively flat with Q4, our earnings growth, as Henri mentioned, is expected to follow a steep curve throughout the year. Now before turning you back over to Henri, I like to remind you that you can find the line-item detail of revenue and expense on our press release, and also on our website. With that let me stop and turn it back to Henri.

Henri Termeer

Thank you Mike. Let me first turn to John Butler to talk about the Cardiometabolic & Renal area.

John Butler

Thanks Henri. The Cardiometabolic & Renal business is positioned to continue to provide significant growth in 2010. Sevelamer revenue is expected to grow by more than 6%, but this number really doesn't reflect the strong underlying growth in demand. Volume in 2010 is expected to grow by more than 9% versus 2009. This lower revenue growth reflects lower net pricing in the US due to accelerating conversion to Renvela and a lower price in Brazil, where our generic entrants have recently been introduced.

Now volume growth in Brazil will remain strong as Renagel has been awarded essential [ph] supply contract with the federal government. The majority of the volume growth is coming from markets like Europe, launching Renvela with the CKD non-dialysis indication in Latin American and Asian markets like Venezuela, Mexico, Russia and India, all still at very low penetration rates.

The US market will continue to grow from increased penetration of Renvela, including the new powder formulation. We continue to work in the US towards a final rule regarding phosphate binders in the dialysis payment bundle. The dialysis community remains opposed, and agree that in the best interests of the patient is served the physicians can continue to select the product they believe is most appropriate clinically.

However, we believe that we will be able to compete effectively in an environment, where binders are included in the bundle. On the product development side, we now have two positive Phase 3 three studies for mipomersen, and we will report data from the next two Phase 3 studies by the middle of this year. We continue to work towards regulatory filings in the US and Europe by mid-2011. As a reminder, our first filings are targeting the homozygous FH patients, as well as severe hypercholesterolemia.

Our market we estimated over 25,000 patients in the US and topped by the EU countries. We believe that data from our first two Phase 3 trials, the safety, tolerability and particularly the efficacy continues to support this strategy. We will discuss this strategy with the FDA, after we have all our Phase 3 studies complete.

While we spoke with European authorities about the initial filing, we will seek formal scientific advice for a study that will be necessary to expand our label to the heterozygous FH population. We continue to do precommercialization activities globally, and we look forward to bringing this important product to patients in need. Henri?

Henri Termeer

Thank you John. And Mark Enyedy.

Mark Enyedy

Thanks Henri. 2009 marked a year of significant progress in each of our businesses, and transplant, oncology, MS, and genetic services. And we look forward to continuing that momentum in 2010. Starting first with our hematologic oncology business, during the last 12 months we solidified our base with the integration of transplant and oncology businesses, and the addition of three products from Bayer to create a single operating unit with six marketed products sold in over 90 countries around the world, generating in excess of $500 million in revenue.

Going forward, as Mike mentioned we will report revenues from this unit on a consolidated basis. In addition, we advanced this portfolio on multiple fronts in 2009 from a development perspective with new data, including 90 abstracts at ASH, 40% of which were oral presentations. We substantially improved our financial picture with over 60% top line growth driven by the successful launch of Mozobil, the incremental revenue from Bayer, and the significant growth of both Thymoglobulin and Clolar.

So as we move into 2010, we look to build upon these positive trends with a focus on following areas. First, expanding global access for Mozobil through new registrations, name patient programs, and enhanced support for our existing markets. To this end, the Mozobil launch continuous to exceed our expectations in both the US and the EU with Q4 revenue up almost 50% over Q3 driven by the UK, Germany and the Nordic region, where we have obtained official reimbursement.

We have also seen strong named patient sales ahead of formal reimbursement authorization in several key markets, which we expect to obtain during 2010 including France, Italy and Spain. In the US, we have penetrated almost 100% of our target accounts, and reorders now account for roughly 75% of our business with an increasing share in the frontline setting. With regard to the reminder of the portfolio, in Q4, we saw more than 20% increases in the volume for both Campath and Fludara, as well as increased Leukine revenue during the quarter even as we work through the inventories we inherited from Bayer.

We look to continue these trends in 2010 by repositioning Campath for high risk patients, and following FDR combination therapy in CLL, supporting the conversion of IV to oral Fludara in key markets, and providing new data for Leukine. We have also furthered our efforts to optimize the price for Thymoglobulin in selected geographies. A substantial share of our business outside of the US is in the hematology space, and we look to lever our existing infrastructure to increase adoption in emerging markets such as China and Brazil. And we will continue the ongoing development of fludarabine in multiple indications and support expanded access around the globe.

Regarding multiple sclerosis, with enrolment completed ahead of schedule, we remain on track to make available data from our Phase 3 program next year. In the interim, we will continue to publish long-term data from our Phase 2 expenses, which will include data at AAN in the second quarter with respect to the proportion of our patients that were clinically disease free at 4 years, mechanism of action studies with alemtuzumab and 4 year follow up data on the ITP cases from the Phase 2 study.

Lastly with regard to genetic services, we saw significant top line growth in each of our key segments, reproductive and oncology testing during 2009. We expect this trend to continue in 2010 with multiple new test offerings in each segment, coupled to the improvements in our delivery platform. We will also look to further integrate this business with our therapeutic portfolios to enhance the strategic value to the corporation.

So we generated significant momentum with these businesses over the last year and look forward to updating you as these efforts progress in 2010.

Henri Termeer

Thank you Mark. Geoffrey.

Geoff McDonough

Thank you Henri. In making some comments about the Genetic Diseases business, I will speak in turn today about Cerezyme, Fabrazyme, and Myozyme. We are obviously working through a dynamic period of recovery and activity in this marketplace. So my comments can be comprehensive, but I will highlight the areas of focus for us. Cerezyme closed the year with revenues of $793 million. The fourth quarter marked the return of newly produced Cerezyme to the market, ending a period of several months of short supply for most patients, with shipments at the end of December.

As we said in December, the shipments were made to end the shortage period as quickly as possible for patients without a substantial working inventory position. We alerted the community to the risk of delays in the first quarter as we work to manage returning production with global demand from 5500 patients in over 100 countries.

In the first six weeks of the year, we have seen strong demand for Cerezyme driven by a rapid return to therapy for patients worldwide. As we mentioned in the release, we estimate this number to be about 85% of patients originally on Cerezyme. To give some insight to the way that that figure rolls up at a country travel, the US had approximately 1500 patients on commercial Cerezyme therapy before this crisis began, up from -- about 150 have switched, 90 are undecided and roughly 1260 or 85% have returned -- returned to Cerezyme. These are estimates because we do not have perfect insight to patient numbers and treatment status. And note that we will not report this level of detail on patient numbers going forward, but I wanted in this period to provide transparency to the state of affairs in the marketplace.

As Henri mentioned, production of Cerezyme in the bioreactor is up and running successfully, with productivity levels above historical averages. Because we have build time into the manufacturing schedule to make system improvements and have increased the quality oversight process, fill/finish and quality inspection time for Cerezyme have been extended, resulting in relatively less Cerezyme being available for distribution in this early period of this year than we had anticipated.

In late January, early February these longer manufacturing timelines for Cerezyme did cause a temporary disruption in our ability to ship Cerezyme for patients. The shipping delay caused some confusion and treatment interruption for many. It is critical that patients be able to depend on the regular availability of Cerezyme, and it is clear from this initial experience in the year that we cannot reliably meet that goal working with little inventory.

Therefore we believe the best way to address this issue is to ship approximately 50% of current global demand for an 8-week or 4 infusion periods. By taking this step now proactively, we expect to build enough inventory to allow predictable schedules for Cerezyme delivery in the coming months and throughout the remainder of 2010. In the coming days, we will be working with physicians, patients, and regulatory authorities around the world to ensure that this shipping plan over the next four infusions is implemented as smoothly as possible.

Shipments at full dose and normal intervals are expected to resume after this 8-week or 4 infusion periods. Beyond supply, there has been an active period in the broader Gaucher space, as many of you know the recent world meeting in Miami provided greater insight to the evolving landscape of therapeutic options for Gaucher disease. From the perspective of ERTs [ph] top line from the ERTs in development did not provide any surprises. Given the timelines necessary to demonstrate clinical impact on bone disease, we continue to believe that the current evidence base for Cerezyme will support its place as a gold standard in this field.

There was considerable emphasis on the apparent differences in antibody formation among the enzymes, and we expect that when the antibody assay methodology is clarified, and ultimately standardized that these comparisons will become informative. We don't believe that there is an unmet need from a safety perspective, when we review the over 40,000 patient years of experience with Cerezyme today.

Finally, the world meeting provided a venue for the two year data on eliglustat tartrate, formerly known as Genzyme 112638, our capsule in development for Gaucher disease. We were pleased to announce that follow up data on 20 patients at 2 years demonstrated a continued improvement in all endpoints when compared to baseline, with special emphasis on the impact on the bone.

We observed a consistent response in both the mineral and marrow compartments as measured by bone density in marrow dark matter on MRI. The changes observed were comparable to results achieved historically with Cerezyme is 4 to 6 years. The Phase 3 studies for eliglustat tartrate are currently enrolling, and we believe that eliglustat tartrate -- I am sorry, leaves our Gaucher portfolio well positioned to maintain our leadership in this field going forward.

With respect to Fabrazyme we closed the year with revenues of $430 million. As Henry mentioned, we continue to work through a series of interventions to restore productivity, which will be available by early May this year. I believe we can gain confidence from the fact that we now understand the productivity problem, and have taken definitive steps to address it.

In the meantime, the combined effects of longer manufacturing cycle times and the time required to restart fill/finish operations at Allston, have caused us to expand the period of 30% allocation through the end of May this year. As I mentioned in December last year, we have seen a number of early switches to (inaudible), physicians work to conserve Fabrazyme dosing to supply 1 mg per kg for the most severely affected patients.

We have seen a small incremental number of switches as physicians respond to disease progress in some patients on lower doses, and we now estimate that number of switches to be approximately 300 worldwide. During this period, we have seen a strong reinforcement of the need for full dose Fabrazyme in the community, and we are very focused on returning to full supply as quickly as possible.

More formal treatment expectations continue to emerge in the field, with recent publication of guidelines from an expert group appearing in C Jayson [ph] online in late December of 2009, reinforcing the expectation that a normal rate of renal progression for example, can be achieved with early and effective intervention.

The field study designed to evaluate the impact of lower dose Fabrazyme in children is continuing to enroll, and we expect to complete enrolment in the second quarter of this year.

On the Myozyme front, we finished 2009 with revenues of $324 million with growth of 10% year-over-year on the revenue line, supported by volume growth of almost 18% year-on-year. 2009 was a dynamic year for Myozyme with a dip in growth outside the United States in the first quarter as we managed a tight period of supply, followed by resumption in growth in the subsequent quarters.

This growth has been driven by continued awareness in the neuromuscular community, especially around the impact of testing adult patients with muscle weakness, using dry blood spot enzyme assays. We would expect this element to play in the preparation and development of the US market later this year as well.

In addition, on the infantile side of the equation, we are seeing the first evidence that newborn screening can meaningfully improve outcomes in patients treated in the early newborn period with the Taiwan experience appearing in a literature with follow up data up to 3 years in 6 patients. We expect that newborn screening will gain additional traction as the results of this experience are digested.

In the near term, we are seeing an increased depreciation of the importance of earlier treatment for all patients including adults. We have no updates to report regarding the PDUFA date for Lumizyme in the US, and believe that the review is proceeding normally. The ATAP program as Henri mentioned has been open to new patients in this interim period, and of the approximately 50 patients who were formerly in our system, 20 were eligible for ATAP, and of those 11 have so far enrolled, and we expect an additional 10 to 20 patients will enroll in the coming months.

Finally, just to reinforce Henri’s comment that we do expect to see top line data from the registration trial for ataluren in nonsense-mutation Duchenne Muscular Dystrophy in the first half. Thanks.

Henri Termeer

Thanks Geoff. Operator, now we can move to Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator instructions). Our first question today comes from Davis Bu with Goldman Sachs.

Davis Bu - Goldman Sachs

Thank you for taking the question. You know, I think I'll start off actually on the expense side, and maybe if you can just comment on your philosophy here, in particular if the revenues come in like, you know, are you -- does that affect the way you think about the expenses, and there have been some push about taking about expenses from a return on capital term or investment standpoint. I was wondering if you could sort of comment on how you think about the expense plans for 2010?

Henri Termeer

The expenses obviously are a very important component in terms of earnings, and if revenues are materially different from what we are projecting, we will react on the expense side, and so that is a little bit -- apple pie I'm afraid. We have a very, I think a very strict base to look at expenses. You know, investments very similarly if earnings don't allow or results don't allow investments then we won't do it. There is one broad exception that I make at this time, we are making deep investments in the manufacturing side, and I think we been talking about a profile and actually we are making deep investment in two elements that come, that were caused by this interruption to create a recover that is absolutely sustainable.

We are making investments in manufacturing both in terms of equipment and then personnel, and upgrading old operations in that area, and we are making investments in the -- on the marketing side of the equation to make sure that we are fully in touch with the marketplace as we reintroduce both these treatments into the field, and I think these are very good investments to make. It takes extra time to come back from a moment like this, and we are not going to shortcut what is needed to make this successful. So, but broadly on the philosophy of how we look at expenses they have to be related to the overall results, and in order to get some level of predictability in terms of our earnings.

Davis Bu - Goldman Sachs

Thank you.

Operator

Our next question comes from Brian Abrahams with Oppenheimer & Co.

Brian Abrahams - Oppenheimer & Co

Hi. Thanks for taking my question. So it sounds like your guidance implies a fairly significant year-over-year Myozyme growth, and you mentioned also timely approval of the 4000 liter material. Just wondering what are you expecting to be the relative contributions from European growth versus US growth, as I'm trying to get a sense of how much of your expected revenues assume timely Lumizyme approval and what proportion may be at risk if there is any delay? Thanks.

Henri Termeer

Geoff, could you explain?

Geoff McDonough

Sure. Thanks for the question Brian. Obviously, we would expect the current growth trajectory, which has been dominated by the ex-US contributions to continue throughout 2010, and that roughly 40% would be contributed by half year launch as Henri mentioned in our timelines around Lumizyme in the US.

Brian Abrahams - Oppenheimer & Co

This is of the gross number.

Geoff McDonough

Of the gross figure, correct.

Brian Abrahams - Oppenheimer & Co

Thanks very much.

Operator

Our next question comes from Michael Yee with RBC Capital Markets.

Michael Yee - RBC Capital Markets

Yes, thanks. Question with regards to the number of patients have resumed Cerezyme ex-US. Can you put any color on that as a higher or lower than the US numbers, and then in regards to inventory buffer, what do you think in weeks of inventory, months of inventory. What kind of level there? Thanks.

Henri Termeer

Geoff.

Geoff McDonough

Thanks Michael. With respect to the ex-US experience as I noted our level of insight in the US isn't perfect, but it gets better than it is anywhere else in the world. So I can only say that this roughly matches our anecdotal experience outside the US, and I think that's relatively well supported by the fact that the greatest opportunity is to engage with alternative therapies and development has been here in the US. So I would expect that that 85% number is representative on a global basis, but I have less firm information or data upon which to give you that sense. Of course as we resume normal shipping over time, we'll get a better, better sense of that as we go forward. With respect to the buffer this for infusion program that we are implementing would allow us to operate with enough inventories to smooth deliveries, and for us over a hundred countries that's somewhere between four and six weeks of inventory.

Michael Yee - RBC Capital Markets

Okay. Thanks.

Geoff McDonough

Sure.

Operator

Our next question comes from Jim Birchenough with Barclays Capital.

Jim Birchenough - Barclays Capital

Hi guys. Just wondering if you can comment on gross margins. You've got a very high margin product and Cerezyme was covering very rapidly, but the gross margin don't seem to be improving dramatically. So I'm just wondering if you can let us know you know, what the contribution of the remediation expenses to the depressed gross margins, and how should we think about gross margins longer-term?

Henri Termeer

Mike, do you want to have a shot at it.

Michael Wyzga

Sure. We assure the gross margin in 2009 of the Allston interruption if you adjust those out it's about 73%. As Henri mentioned, we continue to invest in both manufacturing and the ramp-up on new facilities worldwide. We have (inaudible), we have the New York Avenue Biologics here in Framingham, Massachusetts. We have continued to invest in Allston [ph]. And those investments will make us sort of best in class across the board. These factors will titrate themselves out as you start to utilize that capacity. So you will see a ramp-up as you get to the back end of the year. You should also look for the lower gross margin products, such as some of the other areas outside of Cerezyme to start to kick in too. So you're going to have two separate impacts. You're going to have the impact of the additional capacity that you are utilizing which will drive the gross margin up, somewhat offset by the product mix of the lower gross margin products coming in over the course --

Jim Birchenough - Barclays Capital

And where does that net out.

Michael Wyzga

Should settle out to about 72%, as we exit the year.

Jim Birchenough - Barclays Capital

And is that a normal wise gross margin level, do you think going forward?

Henri Termeer

I don't think we give guidance beyond 2010.

Jim Birchenough - Barclays Capital

Okay, thanks.

Operator

Our next question comes from Eun Yang with Jefferies.

Eun Yang - Jefferies

Thanks very much. Question on Cerezyme. So, when you plan to ship Cerezyme at 50% of demand for the next 8 weeks, given the fact that you (inaudible), get approval by the FDA by the end of this month. Are you concerned at all about possibly risking of giving away some of your market share to competitors during that period?

Geoff McDonough

Hi, Yang. It is Geoff here. I think that's a reasonable question. It's obviously something that we’ve brought in to our thinking about this. Honestly, above all it is our commitment to provide reliability and consistency for patients that has been above all the strongest point of feedback from stakeholders in the first six weeks of the year. I think by implementing this regimen cleanly in a way that is practicable and natural and flow of clinical care. We will improve our overall position in meeting the needs of patients who depend on Cerezyme today. So I guess part of what you're asking is, are we making the better of two choices. I would answer yes in what we're doing today.

Eun Yang - Jefferies

Thank you.

Geoff McDonough

Thank you.

Operator

Our next question comes from Geoff Meacham with J.P. Morgan.

Geoff Meacham - J.P. Morgan

Hi guys. Thanks for taking my question. I wonder if you can -- if you could go into some of your assumptions for Cerezyme that will be helpful, just with respect to maybe the percent of patients going to full dose and then where you think that you could ultimately peak out at for this year in terms of the patients returning and what is kind of implied in your guidance for this year?

Henri Termeer

Geoff.

Geoff McDonough

Thanks for your question Geoff. So right now we are assuming that all patients will return to their let's say original full dose. We're prepared a course for some patients to vary above and for a few to vary below that. With respect to our assumptions in the guidance, we've taken into account a mix of our ability to supply, which we anticipate increasing through the year and a set of assumptions about a new market equilibrium as additional products become available in this market. So what you're seeing in our guidance is a net of those two interacting pieces. Of course the other important element here is eliglustat, which is actively enrolling in two Phase 3 trials, and will be an even larger alternative on a global basis as we bring a third Phase 3 trial into enrollment later in the first half of this year. So these are the dynamics that are contributing to the number that we have in the guidance today.

Geoff Meacham - J.P. Morgan

And just a follow up to that for your Myozyme guidance, is the lower end achievable if Lumizyme 4000 liters is delayed?

Geoff McDonough

I think the lower end does not account for a delay in the US, but let me come back to you as we work that through, but Geoff it assumes as it is at today at the lower end that we will get approval in the time frame of the PDUFA data. So, there would be a downside to a further delay I believe.

Geoff Meacham - J.P. Morgan

Okay. Thank you pretty much.

Geoff McDonough

Sure.

Operator

Our next question comes from Michael Aberman with Credit Suisse.

Michael Aberman - Credit Suisse

Hi guys. Can you hear me okay?

Henri Termeer

Yep.

Michael Aberman - Credit Suisse

So, going back to Cerezyme for a second, obviously the success of your oral agent, (inaudible) long-term, but I wonder if how many patients you anticipate would be enrolled in the next clinical trial both in the US and ex-US and what impact if any that has on Cerezyme sales as they go on the oral agent?

Henri Termeer

Yes, thanks for the question Michael. We would expect that the mix of enrollment will be truly global and that the balance of the trials will determine the net effect on the revenues. So for example we have a naïve trial, where new patients would be going slowly to the small molecule that's about 36 patients, and then our second registration trial is the switch, and there we would have about 186 patients randomized two to one on eliglustat tartrate to Cerezyme. So in the balance between you know, our overall ability to supply the availability of alternative therapies and this very real and exciting alternative for patients to consider this year, we haven’t been thinking about that as a significant detractor from the top line on Cerezyme. I think it's just an important part of our portfolio of offerings that we are bringing to this community.

Michael Aberman - Credit Suisse

Sorry [ph], can you clarify the FX impact if we stay at the current exchange rate on your top line guidance?

Henri Termeer

Sure -- I'm sorry. Yes, the easiest way to think about it is that for every penny of impact on the euro, you get a $0.07 on the bottom line. Again the way to think about it is that you have both the top line and bottom-line. A significant portion of our foreign exchanges what we call naturally hedged through a combination of both product sourcing as well as global infrastructure. So you mitigate a lot of the swings on the top line going to the bottom line, but the thing -- it could round up to approximately a penny but it is more like $0.07 for penny change on the euro FX change.

Operator

Our next question comes from Yaron Werber with Citi.

Navjet – Citi

Hi guys. It is Navjet [ph] coming in for Yaron. I think you have 7 million shares left in your repurchase with the guidance of $6.72 for shares, and doesn’t reflect any (inaudible), can you please provide some color on that?

Henri Termeer

Right, yes. I'm sorry I could barely hear you, but I think you're asking about the 7 million shares that we going to buyback. Yes, we are currently have in place a plan that allows us to buy about 20 million shares that was put in place a couple of -- almost 3 years ago now, and we have about 7 million shares remaining on that, and we fully intend to implement the plan. You know, our philosophy is that stock buybacks are a great way to redeploy the excess capital, and we continue to do that and generate returns for shareholders. Share repurchase as you know, we view it on a quarterly basis and based upon both the market conditions and internal review, we determine whether to implement those within the guidelines of the Board of Directors guidance. So we fully intend to complete the 20 million shares.

Navjet – Citi

Okay, thanks.

Operator

Our next question comes from Salveen Kochnover with Collins Stewart.

Salveen Kochnover - Collins Stewart

Thanks for taking my questions. Maybe you could just give us some color here on your guidance assumptions for Replagal as well. Do you expect patients to switch back -- I am sorry, for Fabrazyme, do you expect patients to switch back from Replagal and then in terms of Fabrazyme, how much inventory buffer you are planning on building in terms of weak demand?

Henri Termeer

Geoff.

Geoff McDonough

Thanks Salveen. So I think I understand your question well around Fabrazyme, but let me know. What we are seeing in the marketplace today is a strengthening conviction that dose is very important as a contributor to outcomes for patients with Fabry disease. The combination of dose and timing of intervention with respect to disease severity are probably two very important elements. So the early behavior that we've seen in markets that have Replagal as an option has been to take the relatively less affected patients earlier, let's say patients in the course of their disease switch them to Replagal as 0.2 mg/kg alternative for this short term period, and to consolidate the remaining Fabrazyme for the most severely or more severely affected patients, more advanced patients.

So we would expect that for physicians who are thinking in this way about providing effective, maximum effective doses to patients that many of the patients who have been switched in this interim period would switch back in the presence of adequate supply of Fabrazyme. Of course, you know, as the year unfolds we'll get a better sense of that, but the sense of treatment expectations and their relationship to timing of intervention dose is supported by a publication that I referenced in the outset here in C Jayson. So to get to your second question about inventory, the intention of the current allocation is to allow us to build a similar level of operating inventory to allow for smooth delivery of Fabrazyme going forward, but as Henri said, importantly that depends on the successful performance of the new working cell bank and the reactors and will have an update around that in early May timeframe.

Salveen Kochnover - Collins Stewart

Okay, thank you.

Geoff McDonough

Sure.

Operator

Our next question comes from Geoff Porges with Bernstein.

Geoff Porges - Sanford Bernstein

Thanks very much for taking the question. Just a follow up on Fabrazyme, about this new master cell bank. First, what is the possibility that the regulatory review of that new material from the master cell bank would take longer than you currently anticipate, up to -- and what is the likelihood that you might require to submit clinical data. Second, related to that, what is the productivity increase you expect to see in terms of the bulk manufacturing and lastly, what would you Fabrazyme guidance be if you don’t get that approval in June? Thanks.

Henri Termeer

Yes, Geoff. On the last point, let me put it this way. We are -- we have two reactors, two 2000 liter reactors that are fully dedicated suite two at Allston. One of them just went on the new working cell bank. The next one will go on the next turnaround or the new working cell bank. This will be the product that we will produce, and so we’ve obviously looked at what we were doing very, very carefully that this is the product that we will be producing going forward.

We have working cell banks -- but we would have an interruption if that were the case. That's not what we expect at all. We could have stayed with the working cell bank that we had that would have kept the productivity at a level below where we needed it to be to fully supply and continue to grow the marketplace. So to make some comments, let me ask first Dave Meeker to make a few comments about where working cell bank comes from and then Pam Williamson to talk about the regulatory risks here.

David Meeker

So Geoff, maybe the first clarification is what we put in is not a new master cell bank. It's a working cell bank. That working cell bank is derived from previous working cell bank. So part of our confidence are to Henri's point the expectation that we will be able to work through successfully from a regulatory standpoint stems from the fact that we are working with a previously known working cell bank, and we're using a methodology that is in fact the methodology that we've also previously used and had approved. So that's the basis. We put it into the reactor at risk to Henri's point because the performance that we were seeing in the small-scale reactors was significantly above the performance of what we have in there now. And as I said, the fact that we'd be going back in using a procedure that was a proven technology or proven methodology that we had used before. So that's where we're in going forward as Henri said and we're working through the regulatory pathway here which Pam can comment.

Pam Williamson

Sure. I think the context that Dave just provided here is really very important because while we are referring to this as a new working cell bank, it is the fact that Dave has mentioned was produced based on the methodology that was in the original filing. To answer your question directly, in terms of taking significantly longer or requiring clinical data, there is no reason to believe that that is something that we should expect. We actually believe we are quite well positioned to be able to begin releasing material manufactured with that working cell bank in June?

Geoff Porges - Sanford Bernstein

I am sorry, could you just answer the question on yield improvement. David perhaps?

David Meeker

Oh yes. So we -- when we originally, you know, developed our early guidance last year as we are bringing the plan back up, and then we got the feedback from the first run. That decrement was about a 30% decrement. The goal with this working cell bank is to recapture that 30% so to get back to what we had originally expected. Again I think we're all hopeful based on the early performance in the small-scale that we could potentially do better than that, but minimally we're looking to get back to those original assumptions.

Geoff Porges - Sanford Bernstein

Great. That's very helpful. Thank you.

Operator

Our next question comes from Aaron Reames with Wells Fargo.

Aaron Reames - Wells Fargo Securities

Thanks for taking my question. I just had a follow up on I guess, the velocity of the switch rate from Fabrazyme to Replagal. So, did the majority of those patients, I guess, switch early in the year and should we expect to see similar switch rate, I guess, until you have full inventory build, and you are fully supplying the market. Can you just, I guess, talk about the -- what will happen over the coming months then?

Henri Termeer

Geoff.

Geoff McDonough

Hi Aaron. Thanks for the question. So I think what we're seeing is a binary phenomenon or a biphasic phenomenon rather. So in other words in the early phase we saw a large number of switches related to the first implementation of the 30% allocation. What we've seen in the second phase happening really in the last six weeks is a much smaller and slower rate of switching that's occurring in reaction to disease depression in patients.

And again it just goes back to this idea that dose is an incredibly important component of treating these patients well and adequately. So I think that's -- those are the dynamics that we are seeing in terms of the numbers and the rate. Obviously, you know, as things progress in the coming months, I would expect that second phase to continue at a low and slow rate, but it is the case that a small minority of patients really you know, are feeling quite badly at this point on lower doses. So we are very eager to get back to that position and being able to supply full doses.

Aaron Reames - Wells Fargo Securities

Just for everybody's sake Geoff, could you briefly supply some data, some context to the dose, the point two dose on Replagal, the point three dose with Fabrazyme, how that compares and how that works for these more severe patients?

Geoff McDonough

Sure. So I think at the outset we should say we don't have any head-to-head information comparing 0.3 to 0.2, but we do have at least one GCP study that Genzyme performed looking at the possibility of maintaining patients who had had a six-month treatment period on 1 mg followed by 0.3 mg/kg for a 12-month additional follow-up period, and in those patients who were of modest disease stage and severity, the outcomes in that paper, which is in a literature demonstrate that the majority of those patients were maintained in a relatively stable state.

There were some sub-clinical markers of accumulation or re-accumulation of GL-3, particularly in urine that have been very characteristically seen in patients treated at low doses both the Fabrazyme at 0.2 milligrams and the AMC head-to-head study and Replagal in the available literature at 0.2 mg, and I think you know, really the feel that this point is increasingly at a point where they believe that it is relatively mathematical. The amount of protein is important irrespective of product, and I think that dose at this point again irrespective of product is something that is increasingly important.

Aaron Reames - Wells Fargo Securities

Thanks. And then -- so, I guess if everything goes as planned, when would you expect to be able to add new patients to both Fabrazyme and Cerezyme therapy in the future? Thanks.

Henri Termeer

Sure. So in the case of Cerezyme, we would expect the data to be more and more possible in the back half of the year, but we're not currently making any assumption around new patients in the front half of 2010. From a perspective of Fabrazyme, we would expect the opportunity to bring drug to new patients again in the back half of the year with the dependency on recovering this productivity delta that David referred to earlier. So in the case of both products, we're initially focused on returning supply to existing patients that is by far our first priority, and then if supplies allow in the back half of the year, we will go back to offering these to new patients.

Aaron Reames - Wells Fargo Securities

Thank you for taking my questions.

Henri Termeer

Yes.

Operator

Our next question comes from Phil Nadeau with Cowen & Co.

Phil Nadeau - Cowen & Co

Good morning. Thanks for taking my question. I am just looking for an update on the resolution of the 483 issues that came in November. Where are you in that process, and has the new inspection that is scheduled to be?

Henri Termeer

Can you repeat that question because we have little interruption here, or did you get the question there?

Geoff McDonough

The question was where are we in terms of the 483 process. I'll just make a comment on the plant standpoint. Let Pam comment from the regulatory. So, obviously improving our overall quality situation has been an enormous priority, and we've been intensely focused on that. So within the plant this is ongoing. The biggest point of concern was the fill/finish area, and we've made a number of very positive changes to the fill/finish area, which is why we've again come back in to running that fill/finish area, and we're also as we committed to the FDA well advanced in the process of transferring the products that are in Allston now to the Hospira facility, and so they will be getting their engineering runs as of April, which will start the process of transferring those products over. So in terms of the communication would you like, Pam.

Pam Williamson

Sure. We continue to have routine dialogs and meetings with the FDA and the talks to our progress on commitments made following the 483 observation, I'd say that we're on track in terms of moving forward against that plan, and with respect to an additional or future inspection of Allston, there hasn't been no such inspection plan to date.

Phil Nadeau - Cowen & Co

And is it correct to assume that you don’t need all the 483s to be resolved in order to get the new cell bank approved, or is there any precedent or means by which the FDA could not approve that cell bank because of the 483 observation?

Pam Williamson

No, these two subjects are really not related. The 483 observations really are with respect to the plant operations and was mentioned earlier very specific primarily to the fill/finish area, we would not have any reasons to believe that the change in the working cell bank would be at all affected by the progress made on the 483.

Phil Nadeau - Cowen & Co

Great. Thank you.

Operator

Our next question comes from Bill Tanner with Lazard Capital Mortgage.

Bill Tanner - Lazard Capital Markets

Markets, not mortgage. But -- thanks for taking the question. Henri, you mentioned at the outset about Campath, and preparing for commercialization. I guess it will be a 2012 launch. I am wondering sort of high level view what that looks like, and is the build out, is this going to be primarily organic or de novo or do you sort of view it as maybe being a priority as the company looks to invest outside?

Henri Termeer

This is a good question. It's a very positive question because obviously we are -- this is a significant undertaking. At this time, the preparations are to understanding the markets, understanding the dynamics, understanding all the dynamics around how value gets captured, and understanding how we implement given local conditions around MS, but to comment on more details, Mark, can you give us some view on that.

Mark Enyedy

So just to remind you, the transaction that we completed with Bayer provided that they would have copromotion rights to support the products for the multiple sclerosis indications, but Genzyme controls the marketing products and the marketing plan, and establishes the field force requirements for the product on a global basis, and then on the -- with that in mind then Bayer has the opportunity to provide up to 50% of the sales force effort for the product, and the timeline for that as well in advance of an approval. So we'll have a good sense at that point of how they intend to participate if at all.

So with that as a backdrop, we are evaluating commercial approaches to the market. We keep in touch with regular market-research and are looking at various elements of commercialization from field force to medical science liaisons, as well as the background commercial infrastructure with regard to our REMS program, and how we will manage distribution in the commercial context for the product. We get a good sense of that from the developments effort in terms of patient monitoring, physician education, compliance is very high, and we believe we will come out of the development program with a strong sense of what that would look like in the commercial context. So it is an ongoing effort here from evaluating what the requirements are. We will work with Bayer to sort through the field situation, and look forward to updating you as we get close to a launch.

Bill Tanner - Lazard Capital Markets

And does is necessarily mean that the company would look for additional assets, I mean if you are establishing obviously CNS focus to neurologists, like a sales effort would there be the absolute desire or need to have something else in the bag, or could you just lever Campath alone?

Henri Termeer

Now, Campath is -- this is a very significant program, which really needs some very focused effort. It is not the product on the shelf. It is a therapy. As you know it is a once a year therapy, maybe two years in a row and then long time no therapy. It is a very different approach from what these physicians are currently used to, and so it will take an intensive in-depth work, the kind of work that we do when we set patients up for the products [ph] that we have, long term connection with the marketplace. So we're not worried that we don't have enough products in the bank. We will probably have massive products in the bank and we want to do the best possible job here. Mark.

Mark Enyedy

There is a fair degree of complimentary between what we're doing in neurology with respect to MS, although these tend to be specialists, but with PGH portfolio, and so we will see some complementarity between those businesses as that portfolio progresses.

Bill Tanner - Lazard Capital Markets

Okay, thank you.

Operator

Our next question comes from Rachel McMinn with Bank of America.

Rachel McMinn - Bank of America

Yes, thanks very much. Two questions, one when you talk about Cerezyme manufacturing continuing above normal productivity, does that mean that you have started your next site manufacturing cycle, and have a read on what your productivity levels will be later in the year, and then secondarily can you give us an update on Framingham, and when you expect to inserting [ph] commercial product in that facility? Thanks.

Henri Termeer

David.

David Meeker

Yes, so with regard to the Cerezyme productivity, there is obviously, the key thing to focus on is output. So we are running the bio-reactors now. They're in their second cycle and are running as I said that you know, slightly above historical averages. So the key now is to capture the output from that and the opportunity there is improving our performance in the downstream, and Allston is running at full capacity now, and so on the downside you know, any you know, interruptions or delays in the schedule of course ripple through to the marketplace, and that's what Geoff is trying to manage by building a small buffer of inventory.

On the upside is, you know, there is a real opportunity again to improve our ability beyond current assumptions to capture more product coming out through that output side of the equation. So, I don’t know if that answered your question, but we are running above historical averages with the goal of capturing that upside. And then the second piece of this is Framingham question, and so Framingham is proceeding on schedule, will begin engineering runs early this fall with the goal of having product approved late in 2011.

Rachel McMinn - Bank of America

And will you be able to -- just a follow up on that, will you be able to use any of the products produced in engineering runs from Framingham to help store up inventories?

Henri Termeer

Geoff.

Geoff McDonough

The PV runs, we'll be able to take the PV runs and those will go towards inventory. So once approved, we will be able to use that material.

David Meeker

And Dave, the validation runs are expected to start --

Henri Termeer

Those will be right at the end of the year beginning of next year the goal is -- so this question just come up and it does produce inventory which is part of the background that is actually important. Good question.

Rachel McMinn - Bank of America

Thank you.

Operator

Our next question comes from Mark Schoenebaum with Deutsche Bank.

Omar Faruqui - Deutsche Bank

Hi guys. This is Omar [ph] filling in for Mark Schoenebaum. Just wanted to drill on Fabrazyme just a little bit more, specifically with respect to cell bank productivity going into Q3 and Q4, so if we use the 30% run rate up until May, and then apply sort of like a 90% precrisis normalized amount number, then is when we sort of get to your low end of full year 2010 guidance. So, am I right in thinking about 90% as the expectation of cell bank productivity going into the latter half of the year?

Henri Termeer

Geoff.

Geoff McDonough

Thanks for the question Omar. I want to be really careful to address your question methodically, because it will inevitably lead to expectations for patients and physicians with respect to dose. Today we are not setting a guidance for a percentage allocation that would result from the satisfactory performance of the new working cell bank. We know that if the working cell bank performs well that in the June timeframe we will have enough supply to enable increased dosing above the level where we are today, but we are going to wait until we know more about performance in the early May time frame to set that expectation.

Now, having said that the performance of the working cell bank if it is successful, would allow us to return to better and better levels in the back half of the year, which do allow us to cross the threshold of our lower guidance, and indeed to move through the range of the guidance that has been set for Fabrazyme. So perhaps I'll turn it over to Dave to give any further color on the working cell bank, but we would expect that in June the doses will be higher, but we do not want to set today any expectation around what that number would be.

David Meeker

Yes, I think there is not much to add. The assumptions we have now, which include being able to access the current working cell bank would put us within the guidance or as Mike highlighted earlier if we do better and there is absolutely a possibility that this working cell bank could exceed those assumptions, then that would you know, put us above it assuming we can capture that through as we go through the downstream and we're intensely focused of course on making sure that we are in a position to do that should this working cell bank perform better. So --

Omar Faruqui - Deutsche Bank

Awesome, awesome. And just a very quick follow up on Fabrazyme as well, it seems like Fabrazyme productivity sort of normalizing. So, just wanted to get a sense of -- okay, and we try to calculate again full year 2010 guidance for Cerezyme as well, and that sort of coming out at around 90% of normalized demand again. Is that a fair assumption to last the competition going forward?

Henri Termeer

Geoff.

Geoff McDonough

Yes, thanks for the question, Omar. No, I think the ability to calculate the percentage is really confounded this year, because the world is changing so quickly around us. There is the ability to supply overall with respect to Cerezyme. There is the run rate for the growth of the market overall, which has continued during this period, and it is not reflected in our current numbers. There is the availability and the timing of availability and the total capacity for alternative enzyme replacement therapies, and then there is a very real expansion of eliglustat in its development phase as an option for patients. So I think it is difficult to make any crosswalk from the current revenues to an assumed market share position, and of course as we progress through the year in our earnings calls will be able to give you a further update as we understand that market share to evolve.

Omar Faruqui - Deutsche Bank

Awesome. Thank you very much.

Henri Termeer

Okay, operator, can we have two more questions because we're a little over time now.

Operator

Yes, thank you. Our next question comes from Shiv Kapoor with Morgan Joseph.

Shiv Kapoor - Morgan Joseph

Thanks for taking my question. I have got a quick question on Mipomersen, having seen a couple of Phase 3 results from this compound, are you guys less or more concerned about the side effect profile of this compound, and overall are you less or more excited about the prospects for Mipomersen. Thanks.

Henri Termeer

John.

John Butler

Yes, thanks for the question. Again, the two Phase 3 studies that we've seen so far, we're very happy with the efficacy that we've seen and the safety and tolerability are really consistent with what our expectations were. So, you know, as I said in my remarks, we're working towards first filing in a homozygous FH and severe hypercholesterolemia, and again the data we've got, we think supports that strategy. We haven't had that conversation with FDA yet, when we have the two other Phase 3 studies, we'll have that conversation. Remember this market size, we estimate US and Europe to be about 25,000 patients total. So, you know very significant market opportunity and a very high need patient population. So the two studies we've seen so far leave us as excited as we were when we did the deal couple of years ago now.

Henri Termeer

And our last question.

Operator

Thank you. Our final question comes from Jon Stephenson with Summer Street Research.

Jon Stephenson - Summer Street Research

Thanks for taking the question. Quick question on the issue on the new working cell bank, when do you expect to put the process in place in the second bioreactor, and then a related question, obviously you stated that you expect the yields or the ability to ship a higher dose to go up, but it sounds from your body language that you still won’t be shipping at 100% of demand. So, maybe you can kind of talk to those issues logistically?

Henri Termeer

Okay. I think the hesitation that you sense is to jump too far in this communication. If we have the kind of result in this new working cell bank as we experienced at the smaller scale and if we do get the regulatory consent, which we fully expect in the June timeframe that Pam mentioned, then the yield improvement would occur, would materially get us back to where we need to be with this product, because then we have two reactors running at yield a minimum would recover the 30% that David mentioned, but potentially if we get the kind of results at a large-scale that we saw on the smaller scale more than that that would then provide the upside. So our body language is careful. It is little bit the experience where we come from, and Geoff in particular, doesn’t want to get ahead of ourselves because patients rely on these kinds of communications, but the one thing that is clear we feel very positive of having now gone beyond a low productivity situation that actually doing something that changes that picture, and potentially in a very, very constructive way. Now your question on the second reactor, when does it go on, maybe Dave you know the precise date. It must be about three weeks…

David Meeker

No, we're about halfway through the current reactor, and so it would turn itself around in about a month or so, you know, but again I wouldn't focus everybody on it. I think the take away message as Henri said is that assuming that the first reactor continues to perform well, we will then know enough about its performance to give us confidence to put it into the second reactor.

Jon Stephenson - Summer Street Research

And would you be -- would the approval on the first reactor translate to the second or would you need both reactors to get approved under the new working cell bank process? Or not -- I guess the process is the same, but the new working cell bank?

Henri Termeer

Everybody is nodding. It goes through the working cell bank, not the reactor.

Jon Stephenson - Summer Street Research

Okay.

Henri Termeer

Great. Operator that was I think the final question. We may not have been able to respond to all questions. So I encourage everybody that has left an unanswered question to make sure you connect our IR group, so we can come back to you. It is indeed a remarkable moment where many things come together as the kind of questions expressed here, but it is a very different moment than where we were three or four or five months ago. We clearly at the beginnings of an very, very exciting year of recovery. I would look forward to reporting to you the first time that will be two months from now for the first quarter in April. And I'm sure at that time much more will be known about this working cell bank question that you are so intense, and maybe as somebody else was saying that we talked about today, we'll be more clarified. So thank you very much for participating today. We'll talk to you then.

Operator

Thank you for joining today's conference. That does conclude the call at this time. All participants may disconnect.

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