After its train wreck of a year, Genzyme
Yesterday, the company disclosed that it has contracted with Hospira to provide "fill and finish manufacturing services" for four of Genzyme's drugs. That means putting the drug in the vial, sealing it up, and slapping a label on it. Pretty basic stuff … except when your machinery is accidentally leaving bits of steel, rubber, and fiber in the vials.
Outsourcing the fill and finish isn't an ideal situation. It'll presumably cost the company more than an in-house operation, and Genzyme will have to spend time and money getting Hospira's plant approved by the Food and Drug Administration to complete the manufacturing process.
Still, what other choice does Genzyme have? The outsourcing will allow the company to get its aging fill-and-finish equipment updated, and eventually bring the process back in-house. The contract with Hospria runs through 2015.
Hospira is certainly capable of doing the job. The company is a grab-bag spinoff of products that Abbott Labs
Outsourcing only alleviates half of Genzyme's manufacturing woes. The company stopped production last summer after a viral contamination mucked up the manufacturing of the drug. Genzyme has a test to try and prevent the virus from entering the manufacturing process again, but investors should remain worried until the company shows otherwise.
Genzyme may end up being a great turnaround story, but cautious investors would be better off taking a "show-me" attitude, and confirming that Genzyme is once again headed in the right direction. In the meantime, look at other midsized drug companies like Gilead Sciences