Genzyme jettisons more subpar inventory

Genzyme (NASDAQ: GENZ) poses a sort of split-personality management challenge. On the one hand, it's being wooed by Sanofi-Aventis (NYSE: SNY), which wants to snap up its rare-disease drugs to help plug patent-cliff sales holes. On the other, it's still fighting manufacturing problems with those very drugs--problems that have idled its manufacturing lines and interfered with its ability to supply patients.

Genzyme had to toss out more batches of drugs that failed to meet its quality standards. This not only indicates that Genzyme hasn't ironed out its production problems, but it also has forced the company to restate its second quarter earnings.

Because of the discarded inventory, Genzyme will take an additional $6.5 million write-off for Q2. That's on top of the $21.9 million it already charged against the quarter. And it takes Genzyme into negative earnings territory. Rather than a quarterly profit of $23,000, it's now posting a loss of $3.8 million.

The company's manufacturing woes are one reason why Sanofi's interested. Genzyme's a lot cheaper now than it would be without those highly-publicized troubles. So the latest news may not even register. Still, it does underscore the work still required to get Genzyme back on track.

- read the Reuters story