Genzyme Corp said on Wednesday it is on the way to resolving a manufacturing crisis that led to shortages of two key drugs, but said production of one of them remains below par and the company's shares fell more than 1 percent.

The Cambridge, Massachusetts-based company said it expects sales of Fabrazyme, its treatment for Fabry disease, a rare genetic disorder, will fall in 2010 as the company is currently unable to produce the drug at a level needed to fully meet demand.

It said it is implementing changes to increase productivity following a plant closure last year that led to shortages of Fabrazyme and Cerezyme, the company's treatment for Gaucher disease.

Genzyme said the supply interruption caused the company's fourth-quarter earnings to fall 73 percent to $23.2 million, or 9 cents a share, from $86.7 million, or 31 cents a share, a year earlier. Revenue declined to $1.08 billion from $1.17 billion.

Excluding one-time items, the company earned 31 cents a share. On that basis, analysts' average forecast was 28 cents, according to Thomson Reuters I/B/E/S.

Henri Termeer, the company's chief executive, said the company is moving into a recovery period, regaining momentum and getting back to delivering sustainable growth.

Genzyme said it expects 2010 revenue of $5.23 billion to $5.53 billion. Analysts expect $5.275 billion.

The company expects 2010 earnings of $2.80 to $3.20 a share excluding one-time items. Analysts on average expect $3.24.

The outlook is dependent on the company winning approval for Lumizyme, the U.S. version of its Pompe disease drug Myozyme, by June 17, the date by which the U.S. Food and Drug Administration is set make its ruling.

The company said this year it is focusing on strengthening core businesses and reducing risk by making investments to expand manufacturing capacity and improve its information technology infrastructure. The company also plans to increase sales and marketing expenditures for key products.

Genzyme said it expects capital expenditures of about $600 million this year, mainly on infrastructure improvements.

Genzyme shares fell 61 cents to $54.90 in mid-morning trading on Nasdaq.

(Reporting by Toni Clarke; editing by John Wallace, Dave Zimmerman)

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