FDA Warns Doctors of Contamination at Genzyme (GENZ) Plant; Stock Tumbles

The U.S. Food and Drug Administration found traces of steel, rubber and other particles in several drugs produced by Genzyme (NYSE: GENZ) and warned doctors of the findings on Friday.

The drugs that could potentially be contaminated are Cerezyme, Fabrazyme, Myozyme, Aldrurazyme and Thyrogen, which are all treatments for rare diseases. The FDA said that the contamination is believed to be found in 1% of the products.

Shares for Genzyme have dropped more than 7% since the report was made public.

Damages that may occur if the contaminated drugs are ingested include damage blood vessels or anaphylactic and allergic reactions.

The FDA has stated that the drugs will be allowed to stay on the market after carefully considering the potential for serious impacts to the patient from the particle contamination.

Analysts from Goldman Sachs believe the news is a significant negative surprise, and say it raises the risk to ongoing manufacturing and regulatory issues for Genzyme. The analysts note that particle contamination is probably not a rare occurrence; however the timing of this report could raise additional questions of quality control. Goldman Sachs maintains a Sell rating on Genzyme.

Deutsche Bank says that since this is not a manufacturing issue, but a fill and finish issue, there is not a serious risk of impact to the shares. However the analysts do infer that investors are going to wonder why these reports are coming out now and have not been raised before.

Shares for Genzyme are currently down 7.69% to $49.08 in late market trading.

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