Genzyme's Pipeline Hits a Snag

Earlier this week, Genzyme announced that a single-injection osteoarthritis medicine, known as hylastan, failed to show superior pain relief to steroids, a standard of care. However, Genzyme already filed for Food and Drug Administration approval of another single-injection treatment, Synvisc-One, in June, and we don't think hylastan's failure will hurt the growth of Genzyme's biosurgery segment. Genzyme is also in the midst of acquiring Bioenvision, its European partner for cancer drug Clolar, in a $345 million all-cash deal. Despite efforts by some Bioenvision shareholders to prevent the completion of Genzyme's tender offer, we expect the deal to go through, but an acquisition of this size doesn't move the meter on our fair value estimate.

Looking at the rest of Genzyme's pipeline, a Phase II trial for a rare-disease treatment appears to be going smoothly, with full results expected in mid-2008. The firm's gene therapy pipeline is starting to move forward, and Genzyme recently announced a partnership with private biotech firm Ceregene to develop and market another gene therapy candidate, CERE-120, for Parkinson's disease. We should also see progress with Campath and Mozobil, two drugs that we see as the biggest drivers for Genzyme's pipeline, by the end of the year.