Washington Editor

Genzyme Corp. is tightening its Synvisc business.

The Cambridge, Mass.-based company entered an agreement with Wyeth Pharmaceuticals to buy back rights for the osteoarthritis product in the U.S. and five European countries. As a result, Genzyme will receive all end-user revenue in those territories for Synvisc (hylan G-F 20), the top-selling viscosupplementation product for pain due to osteoarthritis of the knee in the U.S. and Canada.

The product has an estimated 65 percent share in the U.S. and is a leading product in that category in Europe. Genzyme has forecast worldwide sales of about $240 million this year.

"We're investing in a pipeline that will drive this franchise forward over the next decade," Ann Merrifield, president of Genzyme Biosurgery, told BioWorld Today. "With that level of R&D investment, it didn't really make sense to be in a situation where we were sharing profit margin with another party. Wyeth does a nice job with sales and marketing, but this was not a central focus for them in terms of R&D investment, so it was almost a mutual agreement, as our strategy is here and theirs is moving in a different direction."

Terms of the breakup call for Genzyme to make a $121 million up-front cash payment to Wyeth for Synvisc's marketing rights in the U.S., Germany, Poland, Greece, Portugal and the Czech Republic. Furthermore, Genzyme will make a series of milestone payments based on sales volume that could extend to June 2012 or could total $294 million, whichever comes first.

Per terms of the now-dissolved agreement, the parties split Synvisc revenue. It was approved in August 1997 in the U.S., and two years earlier in the European Union. Genzyme, which manufactured the product for Wyeth, acquired it as part of its purchase of Biomatrix Inc., of Ridgefield, N.J., in 2000. The company merged Biomatrix with existing tissue repair and surgical products divisions to create Genzyme Biosurgery. (See BioWorld Today, March 7, 2000.)

Once the transaction closes, Genzyme will be the only company to manufacture, distribute and sell the product in the U.S. and major European countries.

Genzyme said Synvisc, which has been used to treat more than 3 million patients worldwide, has enjoyed popularity in the market for a variety of reasons. Because of its local delivery, Synvisc avoids some of the associated side effects of traditional non-steroidal anti-inflammatory drugs and Cox-2 agents. At the same time, it can provide up to six months of osteoarthritis knee pain relief, with the fewest number of injections per treatment regimen with any viscosupplement on the market.

"Orthopedics and osteoarthritis are one of five key areas of disease focus within the corporation," Merrifield said. "We are investing in each of these franchises to help us keep our 20 percent growth over the next decade as we move forward."

Madison, N.J.-based Wyeth will continue to fully support all aspects of the Synvisc business until the transaction closes, at which time Genzyme will take full responsibility for selling and supporting the product.

Genzyme also agreed to offer employment to Wyeth's 95-person, U.S.-based Synvisc sales force and its 10 district sales managers. Genzyme already employs a 36-person U.S. sales team that is dedicated to Synvisc and Carticel (autologous cultured chondrocytes), a cell-therapy product used to repair injuries to articular knee cartilage that have not responded adequately to prior treatment. Together, the company expects a combined sales force to broaden its orthopedic market reach.

"It's a very talented sales team, and a piece of Wyeth that attracted some of their specialty sales talent," Merrifield said. "And for us to have a seamless transition for our customers, to bring over the sales team as part of the transaction, was crucial."

Genzyme also plans to further invest in the product to expand its market.

In the European Union and Canada, Synvisc also is approved for use in the hip, and Genzyme is treating patients in a U.S.-based study for the hip indication. Open-label trials in osteoarthritis of the shoulder and ankle also are under way in Europe.

On its own, Genzyme will continue to pursue next-generation formulations, which Merrifield said would have fallen under the previous agreement with Wyeth. For its part, Wyeth will continue to market and distribute Synvisc in Turkey under a new agreement.

"If you feel, as I do, that our biomaterials capability going back two decades is going to help us drive real competitive advantages by having superior products, then you want not only to have all the margins, but you also want to control the sales and marketing piece of the equation," Merrifield said. "I think we do best when we're fully integrated from research all the way to the customer, getting feedback from the market back into our research programs. That whole cycle works more effectively."

Genzyme also is focused on expanding the product's geographical reach. The company expects to receive Japanese approval next year, and continues to evaluate a partnering strategy in that country, which represents a market of about $300 million.

In all, Synvisc is sold in more than 60 countries, and Genzyme already sells and distributes it directly in the UK, France, Canada and Australia. The product contributed $24.6 million to Genzyme Biosurgery in the third quarter. (See BioWorld Today, Oct. 21, 2004.)

Other established revenue drivers at Genzyme include Cerezyme (imiglucerase for injection), an enzyme-replacement therapy for Type I Gaucher's disease; Renagel (sevelamer hydrochloride), a phosphate binder for end-stage renal disease; and Fabrazyme (agalsidase beta), an enzyme replacement for Fabry's disease. And the company's Pompe's disease treatment, Myozyme, is nearing the market.

The Wyeth transaction is expected to close in January and will be accretive to Genzyme, which plans to issue specific guidance related to the deal as part of its annual guidance early next year.

On Thursday, its stock (NASDAQ:GENZ) gained 84 cents to close at $54.87.