Genzyme submits to $175M fine, FDA consent decree

It's official: Genzyme (NASDAQ: GENZ) is now under an FDA consent decree. After repeated manufacturing snafus, the company has agreed to pay a $175 million federal fine and operate under agency supervision for an expected seven or eight years.

Genzyme has been working for 15 months to resolve all its manufacturing issues. It had to stop production at a key Boston-area plant last summer after the facility was contaminated with a virus. The shutdown touched off shortages of Genzyme's drugs for rare genetic disorders Gaucher disease and Fabry disease, and naturally took their toll on sales.

The shutdown also opened the door for competing therapies allowed onto the market on an emergency basis. And initial efforts to clean up the plant's problems ended in more FDA citations. Some big investors castigated the company and agitated for change. Now, one of those shareholders, Relational Investors, has been nominated to the company's board, and Genzyme faces a third proxy battle with vocal critic Carl Icahn (photo).

Genzyme is fighting Icahn's nominees while trying to demonstrate that it's open to shareholders' ideas; CEO Henri Termeer (photo) has expressed willingness to consider selling off assets, for example. And just today, the company won a long-sought FDA approval for Lumizyme, its Pompe disease drug produced in Belgium. That's a big win at a time when Genzyme really needed one.

The company's agreement with FDA can also be seen as a big step forward--at least for now. The company has to meet specific milestones as part of the consent decree, and if it fails to meet those deadlines, it faces further fines. As analysts are saying, Genzyme's performance on those milestones will be closely watched: "One of the key questions continues to be whether management can meet deadlines," RBC Capital Markets analyst Michael Yee tells Bloomberg.

- read the FDA's release
- check out Genzyme's release

- find the release on Lumizyme
- see the Boston Globe coverage
- get more from Bloomberg