Zacks_Analysts' Blog : Sanofi Gets Nod for Framingham Unit - Analyst Blog

Sanofi’s (SNY) subsidiary Genzyme recently announced that it has received approval for the production of Fabrazyme (agalsidase beta) at its Framingham manufacturing facility from the European Medicines Agency (“EMA”).



The approval of the Framingham plant comes as a relief for Genzyme, which has been facing supply problems ever since manufacturing issues cropped up at its Allston Landing plant in the US in June 2009.

The Allston manufacturing facility used to produce Genzyme’s key products -- Cerezyme for patients suffering from Gaucher disease and Fabrazyme for patients suffering from Fabry disease. The production issues led to an acute shortage of Fabrazyme and Cerezyme, which in turn affected Genzyme’s top-line and overall financial performance.



Genzyme plans to use the Framingham manufacturing facility for the production of Fabrazyme, following which the company will use the Allston manufacturing facility, primarily for the production of Cerezyme.



Fabrazyme supplies are expected to return to normal levels during the year.



Our Take



Fabrazyme was one of the leading products at Genzyme. However, due to manufacturing issues, Fabrazyme sales slipped. This opportunity was well used by Shire plc. (SHPGY), which projected its product Replagal as an alternative to Fabrazyme.

In March 2011, Shire presented data that suggested that it was safe for patients suffering from Fabry disease to switch to Replagal from Genzyme’s Fabrazyme. Currently, Replagal has established a solid position in the market and it will be challenging for Fabrazyme to recapture the lost market share.



Our Recommendation



We currently have a Neutral recommendation on Sanofi. The stock carries a Zacks #5 Rank (strong sell rating) in the short run. We expect 2012 earnings to be hit by the loss of US exclusivity on Plavix and Avapro.

While new product launches should make significant revenue contributions in the long term, we expect Sanofi to continue to contain operating costs in order to grow earnings in the face of weakening sales of some of its biggest products. We also expect the company to grow through partnering deals and acquisitions.