Updated from 10:48 a.m. EDT

Genzyme General

(GENZ)

shares rose more than 8% Monday even though the company issued yet another sales and earnings warning.

For the third time since March, Genzyme reduced 2002 sales estimates for Renagel, a drug used by kidney dialysis patients. The culprit, again: slower-than-expected patient demand and inventory levels that are too high. With Monday's warnings, Genzyme is now a company officially moving in the wrong direction: Renagel sales and the company's profits will fall below 2001 levels.

But investors looked beyond today's bad news and saw an opportunity to buy what could be a cheap biotech stock. Shares of Cambridge, Mass.-based Genzyme opened Monday down about 5%, but then quickly rose into positive territory, closing the day up $1.55, or 8.4%, to $19.95. Still, the stock has lost about 65% of its value this year.

Sales of Renagel are now expected to be between $155 million and $165 million this year, down from July's forecast of $200 million to $210 million. Of course, that's lower than the $260 million to $280 million range given by the company at the beginning of the year.

Renagel notched sales of $177 million in 2001.

Genzyme says it now expects current-year earnings of $1.08 to $1.11 per share, compared with the previous expectations of $1.18 to $1.23 per share. Analysts were looking for the company to earn $1.16 per share this year, according to Thomson Financial/First Call. Genzyme earned $1.17 per share in 2001.

For the year, Genzyme expects total revenue in a range of $1.05 billion to $1.10 billion, compared with a previous forecast of $1.10 billion to $1.15 billion. Genzyme also generates revenue from Cerezyme, a drug used to treat the genetic disorder Gaucher's disease. Renagel, however, is the company's main growth driver.

Third-quarter earnings estimates were also taken down to 26 cents to 28 cents per share, from 31 cents to 33 cents per share, with Renagel sales totaling $36 million to $40 million, the company said.

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, Genzyme has gotten in trouble because it was "stuffing the channel" -- which means the company was selling product to distributors and wholesalers that wasn't needed on the basis of actual patient demand.

Earlier this year, Genzyme said it was taking steps to reduce Renagel inventory levels from as high as 12 weeks to about four to six weeks. Monday, the company said that process is still under way; inventory levels should reach five to six weeks during the current quarter, down from eight weeks in July. By the end of the year, those levels should reach four to five weeks, the company said.

Genzyme CEO Henri Termeer said Monday that patient demand for Renagel is still growing and that the company expects the drug's sales growth to reaccelerate next year, once inventory levels return to normal levels. Of course, that's what Termeer said this year, too,

SG Cowen biotech analyst Yaron Werber says the latest Genzyme warning didn't come as a surprise to Wall Street, given that many analysts, like himself, had already cut sales and earnings estimates below company guidance. And at its current price level, Genzyme is trading at around 17 times 2002 earnings -- cheap compared with other profitable biotechs. This was enough to get some investors interested in buying Monday, he believes.

Werber, however, remains very cautious on the stock, despite his outperform rating. On Sept. 26, Genzyme goes in front of an Food and Drug Administration advisory panel to discuss Fabrazyme, its experimental drug to treat Fabry disease, a genetic disorder. The following day,

Transkaryotic Therapies

(TKTX)

will bring its competing drug, Replagal, to the same advisory panel. Werber believes Transkaryotic's drug has a better shot at FDA approval. His firm has strong buy rating on Transkaryotic and has performed underwriting for the company. SG Cowen doesn't have a banking relationship with Genzyme.