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GENZYME ANTICIPATES CEREDASE COMPETITION WITHIN FOUR YEARS

Executive Summary

GENZYME ANTICIPATES CEREDASE COMPETITION WITHIN FOUR YEARS from as many as three or four other treatments for Gaucher's Disease, Genzyme President Henri Termeer indicated in a statement submitted for the record to the Senate Aging Committee. Commenting in writing prior to the committee's Nov. 16 hearing, Termeer noted that at least three other companies are working on competitive products to the first generation glucocerebrosidase. While Termeer did not name the competing companies, several projects have previously been disclosed. Enzon is pursuing a polyethylene-glycol modified glucocerebrosidase product; an IND was filed to start clinical trials in September of this year. Genetic Therapy Inc. is entering the clinic with a gene therapy treatment -- an ex vivo gene transfer protocol from the company was approved by NIH's Recombinant DNA Advisory Committee at its June 7-8 meeting ("The Pink Sheet" June 14, p. 6). The Michigan gene therapy company, Theragen, is working with Parke-Davis on a Gaucher's project. Ceredase has been on the market as an approved product in the U.S. for two-and-a-half years since early April 1991. By Termeer's estimate the firm will have about six to seven years of effective market exclusivity until the second wave of products (from other companies) reaches the market. Genzyme is now supplying about 1,000 patients or about 25% of the Gaucher's patients. Company execs have noted that when Genzyme brings out its recombinant form of glucocerebrosidase, the firm will initially only be able to supplement its existing market coverage. The second generation product will not initially be able to replace the high production cost first generation product, extracted from human placenta. In his submission to the Senate Aging Committee, Termeer noted that FDA approval of the second generation product "will eliminate supply problems and will ultimately make the first generation product obsolete." Genzyme filed its marketing application for the second generation product with FDA in May. Genzyme provided two benchmarks of its gross profits from Ceredase in its submission to the Senate Aging Committee. One benchmark derives from figures given for average sales per patient ($130,000) less average production costs per patient ($ 100,000). At about 1,000 patients, that would put gross annual profits from the product at about $30 mil. A second profit estimate comes from a statement by Termeer that profits from Ceredase are roughly half of the company's total R&D expenditures. The R&D number falls somewhere between $45 mil. and $100 mil. (depending on whether all of Genzyme's spinoff research expenditures are included in the annual total). That would put the gross profits for Ceredase between $22 mil. and $50 mil. Termeer contends that Genzyme's profit margins for Ceredase are below "typical pharmaceutical industry margins." The product is on track for sales of about $140 mil. in the current year or roughly 42% of the company's total revenues. Genzyme suggested that instead of using a breakthrough drug price review board to control costs, the Aging Committee and its chairman, Sen. Pryor (D-Ark.), should look more closely at outcomes research and practice guidelines. "Outcomes research -- as opposed to breakthrough drug price reviews," Genzyme said, would "not discriminate against a particular technology. Instead it looks at the outcomes from surgery, diagnostic procedures, and pharmaceuticals equally." The company also suggested that the pricing for a new drug or vaccine during its relatively limited period of exclusivity should be of less concern than the access to capital for firms funding research in that area. "Congress should be less concerned about the possibility that a company might someday charge a high price for its AIDS vaccine for the two or three years before a competing product is available," Termeer said, "than about whether that company can obtain the R&D funds needed to develop the vaccine in the first place."
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