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Mark Mitchell
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I am a former Equity Research Associate (Canaccord Adams, Toronto) with experience covering both Canadian and US-based life sciences companies. Despite falling victim to the global economic downturn in 2008, I remain interested in covering the life sciences sector with the goal of providing... More
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  • Anxious investors await FDA decision on Lumizyme

    Later today, The FDA could release its decision to approve, or not approve Genzyme's potential blockbuster Pompe disease drug Lumizyme. The pending FDA action date (PDUFA date) for this drug is tomorrow; Saturday, November 14th. The FDA may release it's decision today in advance of the PDUFA date, or it may choose to release its decision next week. Alternatively, it may delay it's decision beyond next week, but I don't see this as likely given the significant unmet medical need within the Pompe disease community.

    This is technically the company's third try for approval of Lumizyme. The first try, the drug was branded Myozyme. The second try, it was branded Lumizyme, but received an Approvable Letter from the FDA in March 2009. The main reason for the
    difficulties with respect to gaining approval is that Lumizyme, which is intended to be the same drug as the company's FDA approved Pompe disease drug Myozyme, is developed from a different bioreactor (2000L at Allston) than Myozyme, and has been considered by the FDA to be substantially different biologically from Myozyme that it required a new application for approval (BLA) and a new brand name. 

    I note that following potential approval of this Lumizyme product, Genzyme intends to submit a supplemental BLA (sBLA) for its 4000L bioreactor-produced Lumizyme. The company expects a 4-month review, which would result in a potential approval of this 4000L product in Q1/10. If approved, the 4000L product will be the sole source of Lumizyme. The company also plans to transition US patients from its temporary access plan using product from the 2000L scale to its 4000L scale, with data from the 4000L scale being used to support this transition.

    My take on the Lumizyme PDUFA date; leaning more towards approval:

    Reasons for approval:

    • Temporary access plan is not accepting any new Pompe disease patients in the US, leaving a potential 50-150 very sick patients without treatment. Of note, there are no competitor products that can be tentatively approved to provide treatment for these unfortunate patients.
    • The FDA agreed that Genzyme’s Complete Response (to the FDAs Approvable Letter back in March) could fulfill the requirements for a verification study to demonstrate the clinical benefit of Lumizyme. The company's response to the FDA also included a Risk Evaluation and Mitigation Strategy (REMS), which was asked to be finalized in the Approvable Letter from the FDA.
    • In conjunction with the Approvable Letter for Lumizyme back in March, the FDA issued a warning to Genzyme related to its Allston plant, which is where this particular Lumizyme product (that is up for potential approval) will be manufactured. The European Medicines Agency (EMEA) also issued a similar warning related to keeping with good manufacturing practices in September. However, the EMEA very recently gave the Allston plant the OK to manufacture product for sale in Europe. This is good news for Genzyme, and I believe that this is a precursor for what we could expect to hear from the FDA following its recent inspection of the plant. If the FDA follows the EMEA, I believe that this could increase the likelihood of Approval for Lumizyme.
    • Potential impact to shares of Genzyme: I believe that an Approval will add some spark to GENZ, potentially boosting shares to the $55.00 - $60.00 range, and maybe as high as $65.00.

    Reasons for non-approval:

    • As indicated above, the FDA has pre-existing concerns with the Allston manufacturing facility, and has previously issued warning letters to Genzyme asking that it address deficiencies at the plant. The FDA is likely finished with its recent inspection of the plant; HOWEVER, the final reports from these types of inspections are not typically completed until approximately 3 months after inspection, which would suggest a response from the FDA in January/February 2010. If a formal response from the FDA is required following its inspection of the Allston plant before approving any new drug produced at the plant, investors could expect Genzyme to receive another Approvable Letter for Lumizyme by November 14th. The result could be another 4-6 month delay in approval in both the 2000L product and the impending sBLA for the 4000L product.
    • Potential impact to shares of Genzyme: I believe that an Approvable Letter could bring the shares back down to 52-week lows, between the $45.00 - $50.00 range.

    Overall, I find it increasingly difficult to believe that Genzyme will not get an Approval for Lumizyme by the November 14th PDUFA date based on the analysis above. However, I suggest that investors tread carefully and do their own due diligence if buying or selling GENZ ahead of this date. Given my view that there is a good chance of Approval, I expect that shares of Genzyme will likely trade higher tomorrow as this is the last day prior to the PDUFA date.

    Disclosure: the author does not own, nor is he short shares of Genzyme

    Tags: SNY
    Nov 13 12:26 AM | Link | Comment!
  • Preliminary view of Genzyme's Q3/09 financials: negative (in my opinion)

    Preliminary view of Genzyme Q3/09 financials:

    I view this release as negative, adjusted earnings of $0.31 per share well below my modest estimate of $0.39 per share. Total revenue came in at $1.06 billion compared to my estimate of approximately $1.09 billion. This is largely due to slightly lower than expected Genetic Disease, Hematologic Oncology, and other product revenue. Also weighing down on earnings was the higher than expected operating costs, including the significantly higher COGS and SG&A (compared to my estimates).

    No significant news on the Cerezyme/Fabrazyme front, or the Clolar front, in my opinion. Lumizyme PDUFA is the next major catalyst.

    Reiterate near-term SELL recommendation based on this news.

    More to come later today.

    Disclosure: the author is not long, nor is he short shares of GENZ.

    Tags: SNY
    Oct 21 9:33 AM | Link | 2 Comments
  • Genzyme: Q3/09 Financial Estimates
    See below for my Q3/09 earning estimates for Genzyme. Earnings are expected to be announced tomorrow morning ahead of the opening bell. The company conference call is expected to follow at 11:00am EST. I will provide a brief analysis shortly after earnings are announced, and a more detailed analysis later. 

    The key driver behind these estimates is the drop in Cerezyme sales, which will be expected by the market and therefore should already be factored into the share price. However, the surprise could be in the form of additional unexpected charges and write-offs related to the company's Allston manufacturing plant shutdown and re-start. Additionally, any further setback or delay in the manufacturing and distribution of either Cerezyme or Fabryzyme (beyond that which has been publicly disclosed) will likely be viewed negatively by the market. This is especially true with Cerezyme, which now has early competition in the Gaucher Disease market. 

    These financial results will also provide us with a better glimpse of how Genzyme's products are faring in this recessionary environment. More and more Americans are unemployed, resulting in fewer Americans receiving medical insurance. However, most of Genzyme's products are used to treat serious disease/illness, and patients will likely pay out of pocket for their treatment (those that are financially able). Therefore, I do not believe that the recession will have a huge impact on Genzyme's overall product revenues in Q3/09 and beyond. 

    It is also important to note that the Euro strengthened modestly over the US dollar during Q3/09 (an average gain of approximately 1.5%). Given that roughly 50% of Genzyme's revenues are derived ex-US, Genzyme is poised to potentially record a foreign exchange gain of approximately $16 million, or almost $0.06 per share (diluted).

    Keep these thoughts in mind when reviewing tomorrow's earnings release. More to come tomorrow.

     Q2/09AQ3/09E% change Q/Q
    Group sales   
    Genetic Diseases$568,153$365,953-35.6%
    Cardiometabolic & Renal$247,992$260,2855.0%
    Biosurgery$138,457$148,1517.0%
    Hematologic Oncology$55,078$96,38775.0%
    Other$218,830$227,5304.0%
    Total Revenue (US$000s)$1,228,510$1,098,306-10.6%
        
    Expenses   
    COGS$342,148$335,439-2.0%
    SG&A$354,128$330,961-6.5%
    R&D$210,522$218,9434.0%
        
    EPS (non-GAAP)$0.85$0.39-54.0%
    *I did not compare Y/Y results due to the company's change in reporting structure.
    Disclosure: the author is not long, nor is he short shares of GENZ.
    Tags: SNY
    Oct 21 12:02 AM | Link | Comment!
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