By Lisa Seachrist

Washington Editor

WASHINGTON — In an effort to focus its surgical and pharmaceutical products division on high-value products, Genzyme Corp. has implemented a strategic restructuring that will abandon development of an anti-adhesion product and result in an $18 million after-taxes charge in the fourth quarter of 1997.

In restructuring, the company will discontinue the U.S. development of Sepracoat coating solution and stop providing bulk pharmaceuticals like clindamycin sulfate and melatonin to generic drug and supplement manufacturers. Instead, the company will focus on development and production of products such as phospholipids, peptides and hyaluronic acid for drug delivery and other purposes.

"Our strategic focus is the development of proprietary products for unmet medical needs," said Steve Push, vice president of corporate communications for the Cambridge, Mass.-based company. "For that reason we are moving away from the bulk pharmaceuticals and dietary supplements."

In abandoning the generic commodities market, Genzyme will take an $11.2 million charge against earnings as it redeploys a U.K.-based manufacturing facility from production of bulk pharmaceuticals to the manufacture of more "strategic" products. The company is not naming which products the facility will produce.

In addition, the company projects a $5 million after-tax loss for inventory and costs associated with manufacturing and selling Sepracoat in the United States.

In May 1997, an FDA advisory panel unanimously rejected Sepracoat. (See BioWorld Today, May 6, 1997, p. 1.) While finding the product safe, the panel determined the company had not shown that Sepracoat reduced the serious side effects associated with abdominal adhesions.

Sepracoat Trials Too Risky In US

Push said the company decided it would be too risky to fund an additional clinical trial to satisfy the committee and decided to stop pursuing approval in the U.S. Sepracoat is approved for use in Europe.

The company's decision has no impact on the manufacture and sale of Seprafilm, a related adhesion-fighting product, which already has been approved by the FDA for use in surgery.

The company also expects a $2 million after-taxes charge against earnings as an adjustment in the sale price of Genetic Design Inc., a paternity testing company that Genzyme sold in 1996.

Push suggested Wall Street analysts would view the company's restructuring decisions favorably.

"I don't think that there is any significant negative that can be drawn from the restructuring," Push said. "Given the expenses involved in conducting additional clinical trials to win approval for Sepracoat, I suspect most industry analysts see the decision to halt development as refusing to throw good money after bad."

Peter Drake, executive vice president and analyst at Vector Securities International Inc., in Deerfield, Ill., wrote that the moves "do not change our optimistic outlook for the company. Genzyme is a diversified human health care company, with businesses focused on therapeutics, diagnostic products, diagnostic services, surgical products and pharmaceuticals."

Drake gave Genzyme's stock (NASDAQ:GENZ) a "buy" rating. Genzyme's stock closed Tuesday at $27.937, down $0.813.

In addition to the restructuring, Genzyme announced that the new drug application for RenaGel, a treatment for chronic kidney failure being jointly developed with GelTex Pharmaceuticals, of Waltham, Mass., had been accepted by the FDA. RenaGel also received "Part B" status in Europe, which allows the companies to submit one application for approval in all 16 countries of the European Union. *