Genzyme Reports Significant Earnings Growth in Second Quarter
Expects Compound Earnings Growth of 20 Percent over Next Five Years
CAMBRIDGE, Mass., July 25 /PRNewswire-FirstCall/ -- Genzyme Corporation
(Nasdaq: GENZ) reported today that strong revenue growth and solid
operating leverage drove a significant increase in second-quarter non-GAAP
profits, continuing the momentum of the past several quarters. Revenue rose
18 percent to $933.4 million from $793.4 million in the same period a year
ago, driven once again by growth in most product areas.
GAAP net income rose to $139.9 million, or $0.51 per diluted share,
compared with $134.5 million, or $0.49 per diluted share, in the quarter a
year ago.
Non-GAAP net income grew 32 percent to $238.7 million from $181.2
million in the same period last year. Non-GAAP earnings rose 30 percent to
$0.88 per diluted share from $0.68. Non-GAAP figures for this year's second
quarter exclude pre-tax stock-compensation expenses of $71.8 million,
amortization of $49.5 million, a $25 million milestone payment to Ceregene
Inc., and the effect of contingent convertible debt.
Genzyme expects to exceed its 2007 non-GAAP earnings guidance of
$3.20-$3.30 per diluted share, given its strong results in the first half
of the year. The company now expects non-GAAP earnings of $3.35-$3.40 per
diluted share.
Based on its strong and consistent performance, the potential of its
deep product portfolio, and the leverage from its global infrastructure,
Genzyme anticipates that non-GAAP earnings will grow at a compound average
of 20 percent annually from 2006 through 2011.
"We are confident about the current strength of the company and have a
bullish view of our future," said Genzyme's Chairman and Chief Executive
Officer, Henri A. Termeer. "We remain focused on our goal of sustaining a
20 percent earnings growth rate. We evaluate every decision we make about
internal programs and acquisitions in the context of this goal."
During the second quarter, Genzyme generated approximately $290 million
in cash from operations and increased its cash position to approximately
$1.5 billion. The company has begun using a portion of its operating cash
flow to repurchase up to 20 million of its outstanding common shares over
the next three years to reduce the dilutive effect of its equity
compensation programs. In the second quarter, the company repurchased
approximately 1 million shares.
Genzyme has reported pivotal trial results this year for many
late-stage development programs. These results provide greater clarity and
certainty about the promise of a number of potential new products that the
company expects will contribute to its growth over the longer term. Based
on the results of these studies, Genzyme anticipates that during the next
six to twelve months it will do the following:
-- Apply for approval to market Mozobil(TM) (plerixafor), an innovative
product intended to facilitate and improve the outcome of stem-cell
transplantation procedures. In the pivotal trial of Mozobil involving
patients with non-Hodgkin's lymphoma, the product showed a treatment
effect that was three times greater than the current standard of care.
In the first half of next year, Genzyme intends to apply for U.S. and
European approval to market Mozobil for a lymphoma indication. The
company will also seek a multiple myeloma indication for Mozobil if
the soon-to-be-released results from a second phase 3 trial are also
favorable. Genzyme's global presence in the transplant field will
provide an excellent platform for the anticipated introduction of
Mozobil.
-- Launch Renvela(R) (sevelamer carbonate) in the United States. Renvela
is a second-generation, buffered form of Renagel(R) (sevelamer
hydrochloride) that will enable Genzyme to expand the market for its
phosphate binder by reaching patients with chronic kidney disease who
have not progressed to dialysis. The FDA is currently reviewing
Genzyme's application for Renvela's use by dialysis patients. The
company expects to subsequently pursue a chronic kidney disease
indication and to file for approval of a powder form of Renvela that
may make it easier for patients to comply with their prescribed
treatment program.
-- Gain approval for Campath(R) (alemtuzumab) as a first-line treatment
for B-cell chronic lymphocytic leukemia (B-CLL). The product is
currently indicated for the treatment of B-CLL in patients who have
been treated with alkylating agents and who have failed fludarabine
therapy. Genzyme has filed to expand Campath's U.S. and European
labeling to include first-line treatment, which would significantly
increase the number of patients eligible to receive the product. FDA
action is expected in the third quarter.
-- Seek U.S. approval for the use of Clolar(R) (clofarabine for
injection) as a first-line treatment for adult patients with acute
myeloid leukemia (AML). Clolar is currently indicated for the
treatment of acute lympblastic leukemia in relapsed and refractory
pediatric patients. Genzyme is conducting two trials of Clolar
involving adult patients with AML and expects to pursue an expanded
U.S. indication next year.
-- Launch Synvisc-One(TM), an investigational combined-dose regimen of
Synvisc(R) (hylan G-F 20) provided in a single injection. Genzyme is
confident that a viscosupplementation product that can be delivered
through a single knee injection will simplify osteoarthritis pain
management, reduce the overall cost of therapy and offer a treatment
option that may expand the benefits of viscosupplementation to a
broader number of patients. The company has submitted U.S. and
European applications for Synvisc-One, and action on both is expected
this year.
-- Apply for CE Mark approval of hylastan(TM) in the European Union.
Hylastan is an alternatively formulated viscosupplementation product
that, like Synvisc-One, was designed to simplify osteoarthritis pain
management by reducing the number of required knee injections. The
pivotal trial of hylastan showed that the product reduced knee pain in
a significant and clinically meaningful way, and Genzyme believes that
this result will support a CE Mark approval in Europe. The pivotal
study of hylastan did not meet its primary endpoint of showing that
the product can provide superior pain relief to steroids.
Therapeutics
Sales of Genzyme's four treatments for lysosomal storage disorders
showed continued strength in the second quarter, driven by the growing
number of patients receiving therapy. Sales of Myozyme(R) (alglucosidase
alfa) rose to $46.7 million, compared with $6.5 million in the same period
a year ago following product launch. Last month, Genzyme launched Myozyme
in Japan, and the company is preparing for approval in Brazil, another key
market. Genzyme is pursuing FDA approval of a larger scale manufacturing
process to supply Myozyme for the U.S. market, and an agency decision is
now expected in the first half of next year. Production at this larger
scale is already approved in 28 countries. The company is accelerating
efforts to optimize product supply for the U.S. market until the FDA
approves the larger-scale process. These efforts include temporarily
transitioning some patients to a clinical access program through which they
may receive Myozyme produced at the larger scale. The study of Myozyme
involving patients with late-onset Pompe disease will conclude this year,
and results will be available in the first part of next year for submission
to regulatory authorities.
Sales of Fabrazyme(R) (agalsidase beta) increased 17 percent to $104.3
million, compared with $89.0 million in the same quarter last year. Sales
of Cerezyme(R) (imiglucerase for injection) grew 11 percent to $283.0
million, compared with $254.0 million in the second quarter a year ago.
Sales of Aldurazyme(R) (laronidase) grew 24 percent to $29.1 million,
compared with $23.5 million in last year's second quarter. Aldurazyme is
marketed through a joint venture with BioMarin Pharmaceutical Inc.
Genzyme expects that it will receive approval to market Elaprase(TM)
(idursulfase) in Japan by the end of this year. Elaprase is an enzyme
replacement therapy for the treatment of the lysosomal storage disorder MPS
II, also known as Hunter syndrome. Genzyme is commercializing Elaprase in
Asia under an agreement with Shire plc.
Genzyme has completed enrollment in the open-label Phase 2 trial of the
small molecule Genz-112638, a novel oral therapy being developed for the
treatment of Gaucher disease. Based on positive results seen in the trial
to date, the company intends to meet with regulatory agencies in the coming
weeks to discuss an expedited development strategy. Initial observations
for the first five patients were presented at Genzyme's Analyst Day meeting
in May and suggest that Genz-112638 may produce a rapid and meaningful
impact on important clinical endpoints including reductions in spleen and
liver volume, and an increase in platelet counts and hemoglobin
concentration. Results for the sixth patient enrolled in the study have now
been analyzed and are consistent with observations for the first five
patients.
Sales of Thyrogen(R) (thyrotropin alfa for injection) grew 25 percent
in the second quarter to $29.5 million, compared with $23.7 million in the
period a year ago. Genzyme expects U.S. approval for Thyrogen's use in
thyroid cancer ablation procedures this year. This indication is included
in the product's labeling in the European Union and a number of other major
markets. To potentially further broaden the use of thyrotropin alfa,
Genzyme has initiated a phase 2 study of a novel formulation of recombinant
TSH that will evaluate the product's ability to benefit patients suffering
from multinodular goiter.
Renal
Within the Renal business, sales of Renagel(R) (sevelamer
hydrochloride) rose 14 percent to $145.0 million, up from $126.6 million in
the second quarter a year ago. Renagel continues to gain market share based
on its demonstrated clinical and economic benefits. Results from the
Dialysis Clinical Outcomes Revisited (D-COR) study of Renagel have been
accepted for publication in a major nephrology journal this fall. The study
compared mortality and morbidity outcomes for patients on Renagel and
patients receiving calcium-based phosphate binders.
Sales of Hectorol(R) (doxercalciferol) rose 22 percent to $27.3 million
from $22.4 million a year ago. Hectorol is currently approved in the United
States, and Genzyme is working to make the product available
internationally.
Genzyme recently announced that the first of two phase 3 studies of
tolevamer for Clostridium difficile-associated diarrhea did not meet its
primary endpoint. This outcome changes the company's expectation about the
potential for commercializing tolevamer in the near future. Results from a
second phase 3 study will be available later this year and will help
Genzyme determine what contribution tolevamer might be able to make in
addressing this serious unmet medical need.
Transplant
Sales of Thymoglobulin(R) (anti-thymocyte globulin, rabbit) and
Lymphoglobuline(R) (anti-thymocyte globulin, equine) were $41.4 million in
the second quarter, a 4 percent increase from $39.8 million in last year's
second quarter.
Biosurgery
Within the Biosurgery unit, second-quarter sales of Synvisc were $64.9
million, 2 percent greater than sales of $63.6 million in last year's
second quarter. Genzyme is focused on changing the clinical and economic
picture in the competitive market for viscosupplementation products with
the launch of the single-injection regimen, Synvisc-One.
Sales of Sepra(R) products rose 14 percent to $25.1 million in the
second quarter, up from $22.0 million in last year's second quarter. This
increase is relatively consistent with previous quarters and reflects the
growing use of Seprafilm(R) adhesion barrier in larger markets such as
gynecologic surgery. Genzyme has increased the size of its U.S. Sepra sales
force to drive the future growth of this product.
Genetics
Genetics revenue increased by 21 percent in the second quarter, as the
business continues to gain momentum, spurred by increasing market share,
growth in its clinical trial business, and broader recognition throughout
the health care industry of the value of diagnostics in improving outcomes.
Revenue was a record $73.7 million compared with $61.0 million in the same
period a year ago.
Other
Other revenue increased 8 percent in the second quarter to $71.4
million, compared with $66.4 million in the same quarter last year. Other
revenue includes sales of diagnostic products and pharmaceutical
intermediates, royalties from the sale of WelChol(R) (colesevelem
hydrochloride), and oncology revenue.
Oncology revenue increased significantly again this quarter, growing 27
percent to $17.4 million from $13.7 million in the second quarter a year
ago. Oncology revenue includes sales of Clolar and profits and royalties
for Campath.
Genzyme announced in May an agreement to acquire Bioenvision Inc. for
approximately $345 million. The transaction process is moving forward as
specified in the merger agreement. Bioenvision is preparing a proxy
statement for its shareholders detailing the rationale for the merger and
other material disclosures. A merger vote by Bioenvision shareholders is
expected before the end of the year.
Genzyme and partner Bayer Schering Pharma AG, Germany, are moving ahead
with a major program to complete the development of alemtuzumab for
patients with multiple sclerosis. The companies have had extensive
conversations with regulatory authorities in the United States and Europe
and are preparing to conduct two phase 3 clinical trials, one involving
previously untreated patients and one involving patients receiving an
approved therapy whose disease has progressed. The former trial is expected
to begin this quarter. Three-year data from the phase 2 clinical trial of
alemtuzumab for relapsing- remitting multiple sclerosis are expected to be
available later this year.
Expenses
Second-quarter operating expenses increased 10 percent compared with
the same quarter last year, while revenue grew 18 percent, underscoring the
leverage Genzyme is gaining from its global commercial infrastructure. Non-
GAAP selling, general and administrative expenses were $240.2 million
compared to $220.4 million in the second quarter last year. Non-GAAP SG&A
spending represented 26 percent of revenue in the quarter, down from 28
percent in the second quarter last year.
Non-GAAP research and development spending rose to $154.3 million in
the second quarter, up from $138.6 million in last year's second quarter,
reflecting increased spending on late-stage programs. Non-GAAP R&D spending
represented 17 percent of revenue, consistent with last year's second
quarter.
About Genzyme
One of the world's leading biotechnology companies, Genzyme is
dedicated to making a major positive impact on the lives of people with
serious diseases. Since 1981, the company has grown from a small start-up
to a diversified enterprise with more than 9,500 employees in locations
spanning the globe and 2006 revenues of $3.2 billion. In 2007, Genzyme was
chosen to receive the National Medal of Technology, the highest honor
awarded by the President of the United States for technological innovation.
In 2006 and 2007, Genzyme was selected by FORTUNE as one of the "100 Best
Companies to Work for" in the United States.
With many established products and services helping patients in nearly
90 countries, Genzyme is a leader in the effort to develop and apply the
most advanced technologies in the life sciences. The company's products and
services are focused on rare inherited disorders, kidney disease,
orthopaedics, cancer, transplant and diagnostic testing. Genzyme's
commitment to innovation continues today with a substantial development
program focused on these fields, as well as immune disease, infectious
disease and other areas of unmet medical need.
This press release contains forward-looking statements regarding
Genzyme's financial outlook and business plans and strategies, including:
its non-GAAP earnings estimate for 2007; its expectation of a 20% compound
average non-GAAP earnings growth rate through 2001; its product development
plans and timelines and regulatory filing and action estimates, including
for Mozobil in multiple myeloma and non-Hodgkin's lymphoma, Renvela,
Synvisc-One, Hylastan, Elaprase, Genz-112638, Thyrogen in thyroid ablation,
TSH in multinodular goiter, Clolar in adult AML, Campath as first line
treatment in B-CLL, alemtuzumab for MS, and Myozyme's post-marketing study
in late onset patients; its planned merger with Bioenvision, including the
timing of Bioenvision's proxy solicitation process and shareholder meeting;
its estimated timeline for receipt of FDA approval for a larger-scale
Myozyme manufacturing process and its Myozyme supply optimization efforts;
and its expected drivers of future growth. These statements are subject to
risks and uncertainties that could cause actual results to differ
materially from those forecasted. These risks and uncertainties include,
among others: Genzyme's ability to successfully complete preclinical and
clinical development of its products and services; Genzyme's ability to
expand the use of current products in existing and new indications;
Genzyme's ability to obtain and maintain regulatory approvals for products
and manufacturing facilities, including the larger-scale production of
Myozyme and the timing of receipt of such approvals; Genzyme's ability to
manufacture products and product candidates in a timely and cost effective
manner and in sufficient quantities to meet demand; Genzyme's ability to
maintain and enforce intellectual property rights; Genzyme's ability to
successfully identify and market to new patients; the scope of third-party
reimbursement coverage for Genzyme's products and services; Genzyme's
success in optimizing U.S. supply of Myozyme; and the risks and
uncertainties described in Genzyme's SEC reports filed under the Securities
Exchange Act of 1934, including the factors discussed under the caption
"Risk Factors" in Genzyme's Quarterly Report on Form 10-Q for the period
ended March 31, 2007. Genzyme cautions investors not to place substantial
reliance on the forward- looking statements contained in this press
release. These statements speak only as of July 25, 2007 and Genzyme
undertakes no obligation to update or revise the statements.
Genzyme(R), Myozyme(R), Fabrazyme(R), Cerezyme(R), Thyrogen(R),
Renagel(R), Hectorol(R), Thymoglobulin(R), Lymphoglobuline(R), Synvisc(R),
WelChol(R), Sepra(R), Seprafilm(R), Campath(R) and Clolar(R) are registered
trademarks and Mozobil(TM), Renvela(TM), Elaprase(TM), Hylastan(TM) are
trademarks of Genzyme Corporation or its subsidiaries. All rights reserved.
Conference Call Information
Genzyme Corporation will host a conference call today at 11:00 a.m.
Eastern Time to discuss second-quarter financial results. To participate in
the call, please dial 773-799-3828 and refer to pass code "Genzyme." A
replay of this call will be available by dialing 402-998-1342. This call
will also be Webcast live on the investor events section of
http://www.genzyme.com. Replays of the call and the Webcast will be available
until midnight on August 1, 2007.
Upcoming Events
Genzyme Corporation will host a conference call October 24 at 11:00
a.m. Eastern Time to discuss third-quarter financial results. To
participate in the call, please dial 773-799-3828 and refer to pass code
"Genzyme." A replay of this call will be available by dialing 402-998-1342.
This call will also be Webcast live on the investor events section of
http://www.genzyme.com. Replays of the call and the Webcast will be available
until midnight October 31, 2007.
Genzyme's press releases and other company information are available at
http://www.genzyme.com and by calling Genzyme's investor information line at
1-800-905-4369 within the United States or 1-703-797-1866 outside the
United States.
GENZYME CORPORATION (GENZ)
Consolidated Statements of Operations
(Unaudited, amounts in thousands,
except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Total revenues $933,419 $793,356 $1,816,602 $1,524,198
Operating costs and expenses:
Cost of products and
services sold (1) 217,612 185,333 420,075 352,283
Selling, general and
administrative (1) 283,250 273,480 552,271 504,149
Research and development
(1,2) 201,161 168,941 367,281 321,264
Amortization of intangibles 49,465 52,883 99,482 105,575
Total operating costs and
expenses 751,488 680,637 1,439,109 1,283,271
Operating income 181,931 112,719 377,493 240,927
Other income (expenses):
Equity in income of equity
method investments 5,945 3,854 11,557 6,100
Minority interest 15 2,750 3,927 5,196
Gain on investments in
equity securities (3) 143 66,967 12,931 74,909
Other (278) (319) (803) (458)
Investment income 17,246 12,563 33,465 22,641
Interest expense (3,621) (4,035) (7,809) (8,473)
Total other income
(expenses) 19,450 81,780 53,268 99,915
Income before income taxes (1) 201,381 194,499 430,761 340,842
Provision for income taxes (1) (61,432) (60,002) (132,625) (105,371)
Net income (1) $139,949 $134,497 $298,136 $235,471
Net income per share:
Basic $0.53 $0.52 $1.13 $0.91
Diluted (1,4) $0.51 $0.49 $1.08 $0.86
Weighted average shares
outstanding:
Basic 263,911 260,444 263,693 260,076
Diluted (1,4) 280,564 276,312 280,244 276,560
(1) In accordance with the provisions of Financial Accounting Standards
Board, or FASB, Statement of Financial Accounting Standards No., or
FAS, 123R, "Share-Based Payment, an amendment of FASB Statement Nos.
123 and 95," we recorded pre-tax charges for stock-based compensation
expense and related tax benefits of:
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Cost of products and
services sold $(6,879) $(4,927) $(12,775) $(7,230)
Selling, general and
administrative expense (43,018) (52,692) (65,517) (72,139)
Research and development
expense (21,862) (25,269) (34,174) (36,126)
Total pre-tax charges
for stock-based
compensation expense (71,759) (82,888) (112,466) (115,495)
Tax benefit 20,782 27,577 33,214 37,925
Stock-based compensation
expense, net of tax $(50,977) $(55,311) $(79,252) $(77,570)
Diluted earnings per share and diluted weighted average shares
outstanding for the three and six months ended June 30, 2007 and 2006
were computed according to the provisions of FAS 123R.
(2) Includes a charge of $(25,000)K for an upfront milestone payment paid
to Ceregene Inc. in June 2007 for the development and
commercialization of certain gene therapy products.
(3) For the six months ended June 30, 2007, includes a pre-tax gain of
$10,848K recorded on the sale of our entire investment in the common
stock of Therapeutic Human Polyclonals Inc. in March 2007, which had a
zero cost basis. For the three and six months ended June 30, 2006,
includes pre-tax gains of $69,359K related to the liquidation of our
investment in the common stock of Cambridge Antibody Technology
Group plc in May and June 2006.
(4) Reflects the retroactive application of the adoption of Emerging
Issues Task Force Issue No. 04-8, "The Effect of Contingently
Convertible Debt on Diluted Earnings Per Share," or EITF 04-8. As a
result of the adoption of EITF 04-8, the 9,686K shares issuable upon
conversion of our $690,000K in principal of 1.25% convertible senior
notes, which were issued in December 2003, are now included in diluted
weighted average shares outstanding for purposes of computing diluted
earnings per share, unless the effect would be anti-dilutive. In
accordance with EITF 04-8, interest and debt fees related to these
notes of $1.9 million, net of tax, for the three months ended June 30,
2007 and 2006 and $3.8 million, net of tax, for the six months ended
June 30, 2007 and 2006 have been added back to net income and 9,686K
shares have been added to diluted weighted average shares outstanding
for each of those periods for purposes of computing diluted earnings
per share.
GENZYME CORPORATION (GENZ)
Condensed Consolidated Balance Sheets June 30, December 31,
(Unaudited, amounts in thousands) 2007 2006
Cash and all marketable securities $1,500,148 $1,285,604
Other current assets 1,504,093 1,377,437
Property, plant and equipment, net 1,742,651 1,610,593
Intangibles, net 2,717,921 2,790,819
Other assets 192,490 126,735
Total assets $7,657,303 $7,191,188
Current liabilities $645,798 $651,439
Noncurrent liabilities 866,068 879,038
Stockholders' equity 6,145,437 5,660,711
Total liabilities and stockholders' equity $7,657,303 $7,191,188
GENZYME CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
For the Three Months Ended June 30, 2007
(Amounts in thousands, except per share data)
Dilution
Due to
Common
Stock
Equiva- Milestone Amortiza-
NON-GAAP lents Payments tion
Income Statement
Classification:
Total revenues $933,419
Cost of products and services
sold $(210,733)
Selling, general and
administrative $(240,232)
Research and development $(154,299) $(25,000)
Amortization of intangibles $- $(49,465)
Equity in income (loss) of
equity method investments $5,945
Minority interest $15
Gains (losses) on investments
in equity securities $143
Other $(278)
Investment income $17,246
Interest expense $(3,621)
Summary:
Income (loss) before income
taxes $347,605 $- $(25,000) $(49,465)
(Provision for) benefit
from income taxes $(108,940) $- $9,072 $17,654
Net income (loss) $238,665 $- $(15,928) $(31,811)
Net income (loss) per share:
Basic $0.90 $- $(0.060) $(0.121)
Diluted (1) $0.88 $(0.022) $(0.057) $(0.113)
Weighted average shares
outstanding:
Basic 263,911
Diluted (1) 270,878 9,686
FAS 123R GAAP
Expense As Reported
Income Statement Classification:
Total revenues $933,419
Cost of products and services sold $(6,879) $(217,612)
Selling, general and administrative $(43,018) $(283,250)
Research and development $(21,862) $(201,161)
Amortization of intangibles $(49,465)
Equity in income (loss) of equity
method investments $5,945
Minority interest $15
Gains (losses) on investments in
equity securities $143
Other $(278)
Investment income $17,246
Interest expense $(3,621)
Summary:
Income (loss) before income taxes $(71,759) $201,381
(Provision for) benefit from income taxes $20,782 $(61,432)
Net income (loss) $(50,977) $139,949
Net income (loss) per share:
Basic $(0.193) $0.53
Diluted (1) $(0.182) $0.51
Weighted average shares outstanding:
Basic 263,911
Diluted (1) 280,564
(1) GAAP As-Reported diluted earnings per share and diluted weighted
average shares outstanding reflect the adoption of EITF 04-8. In
accordance with the provisions of EITF 04-8, interest and debt fees
related to our 1.25% convertible senior notes of $1,886K, net of
tax, have been added back to net income and approximately 9,686K
shares have been added to diluted weighted average shares for purposes
of computing GAAP As-Reported diluted earnings per share.
SOURCE Genzyme Corporation
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CONTACT:
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Investors, Sally Curley, +1-617-768-6140, both of Genzyme
Corporation
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