BioWorld International Correspondent

LONDON - A £6.8 million (US$12.3 million) fine against Genzyme Corp.'s UK subsidiary related to its Gaucher's disease treatment Cerezyme has been slashed on appeal to £3 million, plus interest.

In its appeal Genzyme argued that the size of the original fine could undermine orphan drug research in new drugs for rare diseases.

The UK Competition Appeal Tribunal (CAT) upheld the main finding of the original judgment from April, which said that in pricing Cerezyme to include home delivery and home-infusion services, Genzyme was preventing competitors from buying the drug from a distributor and offering the same services.

CAT concurred with that finding, saying, "It seems abundantly clear to us that Genzyme's whole strategy was predicated on the assumption that Genzyme Homecare would in due course take over the entire supply of home-care services to Gaucher's patients." That also would make it difficult for a new intravenous treatment for Gaucher's disease to become established in the UK market.

However, CAT did not uphold a second finding that "bundling" the supply of services within the list price Genzyme charged the National Health Service for Cerezyme was market abuse.

The tribunal also said that it was difficult to show Genzyme has made a significant gain from the infringement and, as a result, the fine was reduced. However, the requirement of the initial ruling that Genzyme offer Cerezyme to distributors at an appropriate margin was upheld.

In total, 190 patients in the UK are treated with Cerezyme, with about 55 receiving home-infusion services. Genzyme's offense dates from May 2001, when the company set up its own home-nursing services, rather than providing home care through a contract agency. Although the number of Gaucher's patients is small, Genzyme planned to extend its home-nursing service to patients receiving enzyme replacement therapy for other lysosomal storage disorders.

As a result of the action, Genzyme revised its fourth-quarter and year-end earnings that it reported last month. Accounting rules require that the decision's impact be reflected in the company's financial results for 2003.

Genzyme's fourth-quarter sales of Cerezyme fell to $192.6 million from a previously reported figure of $197.7 million, reflecting a reserve to provide for any additional liabilities related to the tribunal's decision. Cerezyme sales for the year were $733.8 million rather than $738.9 million.

Total revenue for the fourth quarter was $476.1 million, compared with $481.2 million, reflecting the adjustment to Cerezyme sales.

Genzyme adjusted its fourth-quarter GAAP (generally accepted accounting principles) net income to $57.3 million, or 25 cents per diluted share, from $66.7 million, or 29 cents per diluted share. For the year, GAAP net income was $94.3 million, or 42 cents per share, rather than $103.7 million, or 46 cents per diluted share. Earnings per share before special items and amortization were unchanged from previously reported figures for both the fourth-quarter and full-year periods.

Selling, general and administrative expenses for the fourth quarter were $147.6 million, up from the previously reported amount of $141.6 million. Such expenses for the year were $455.4 million, up from $449.3 million. The change reflects the $5.8 million fine and accrued interest Genzyme has been ordered to pay by the appeal tribunal.