Financial News

LONDON (ShareCast) - Problems at biotech firm Genzyme (NASDAQ: GENZ - news) , which has ceased production at its Allstan plant in Boston until at least the end of July, could prove a boon to Shire Pharmaceuticals, which has a product which competes outside the US with Genzyme's Fabrazyme.

Genzyme said it would dip into drug stockpiles while its plant is sanitised after contamination by a virus, but there would not be enough to go round.

Citigroup (NYSE: C - news) has calculated that Shire (LSE: GB00B0KQX869.L - news) 's Replagal could generate up to $85m of additional revenue on the assumption that Genzyme loses three months of supply of Fabrazyme.

'Assuming a 60% contribution margin, we estimate every $10m of incremental Replagal sales (taxed at 23%) would add 1% to 2009 earnings per share,' Citi said.

The US bank went on to add that it believes Shire is well placed to meet the long term challenges faced by the industry. 'Management need to [make the] transition through the loss of Adderall XR in 2009/10 but are armed with a portfolio of patent-protected growth drivers (46% of product sales) and an internal pipeline generator in the shape of its speciality biologics business, HGT,' Citigroup said.

Swiss bank UBS (Virt-X: UBSN.VX - news) is also bullish on the stock, claiming it has been oversold on concerns about lower than expected sales of Adderall XP in the second quarter.

'While we expect weak second quarter 2009 numbers for Adderall XR, we believe this fear is overly priced in the current share price, which offers an appealing buying opportunity,' UBS said.