Genzyme Reports Strong Third-Quarter Sales and Earnings Growth
Company Expects 2009 Non-GAAP EPS of Approximately $4.70
Genzyme Corporation (NASDAQ: GENZ) announced today that third-quarter revenue rose 21 percent to $1.160 billion, compared with revenue of $960.2 million in the same period a year ago. The increase was driven by double-digit growth in every Genzyme business unit.
GAAP net income was $119.6 million, or $0.42 per diluted share, compared with $159.3 million, or $0.58 per diluted share, in last year’s third quarter. Net income in this year’s third quarter reflects a $100 million licensing fee for rights to PTC124, a promising genetic disease drug in late-stage development.
Non-GAAP net income rose 20 percent to $289.8 million from $241.3 million in the third quarter last year. Non-GAAP earnings grew 16 percent to $1.04 per diluted share compared with $0.90 per diluted share.
During the third quarter, Genzyme generated approximately $481 million in cash from net income prior to one-time events and proceeds from the issuance of common stock. The company has increased its cash position to approximately $1.5 billion while making investments to support long-term growth, including investments to expand manufacturing capacity, to offset dilution by repurchasing shares, and to complete strategic transactions that strengthen its late-stage pipeline.
“The third quarter was a very strong quarter financially and also extremely productive in terms of building for the future,” said Henri A. Termeer, chairman and chief executive officer of Genzyme Corp. “Our broad geographic diversification, solid cash position, and group of market-leading products will allow us to sustain our growth through the current financial environment and over the longer term.”
Genzyme is on track to meet its goal of 20 percent compound average non-GAAP earnings growth from 2006 through 2011. For 2009, the company expects non-GAAP earnings to increase to approximately $4.70 per diluted share. Non-GAAP earnings are projected to rise to approximately $7.00 per diluted share by 2011.
These estimates include the impact of Genzyme’s redemption of its convertible senior notes. The company plans to redeem all $690 million of these notes as of December 1, 2008. The notes are redeemable in cash or can be converted to common stock at the option of the noteholders at a conversion price of $71.24 per share.
Genzyme anticipates a number of potential approvals for new products or broader indications for existing products over the next several quarters. These catalysts will provide significant near term momentum:
FDA action on the BLA for Myozyme® (alglucosidase alfa) produced at the 2000L bioreactor scale is expected by November 29, 2008. An FDA advisory committee yesterday affirmed that the Late Onset Treatment Study established the clinical effectiveness of alglucosidase alfa produced at this scale.
European approval for 4000L-scale production of Myozyme is expected in the first half of next year.
FDA action is expected by December 16, 2008, on Genzyme’s marketing application for Mozobil™ (plerixafor), a product intended to prepare patients with certain types of cancers for a stem-cell transplantation. The application has priority review status. European approval of Mozobil is anticipated during the first half of next year.
Genzyme expects that the U.S. labeling for Clolar® (clofarabine) will be expanded by the middle of next year to include the treatment of adults with acute myelogenous leukemia. E.U. approval for this expanded indication is expected later in 2009.
In addition, Genzyme continues to work with the FDA toward a label expansion in mid-2009 for Renvela® (sevelamer carbonate) to include the treatment of chronic kidney disease. European approval of Renvela is also expected by the middle of next year.
FDA action on Genzyme’s marketing application for Synvisc-ONE™ (hylan G-F 20) is anticipated by December 23, 2008. The agency is expected to convene an advisory committee in December to discuss the marketing application.
Genzyme also anticipates achieving a number of important milestones within its late-stage pipeline that will have a significant near-term business impact. These include the initiation or completion of pivotal clinical studies and the publication of key study results. These milestones are detailed after the following summary of third-quarter sales.
Third-Quarter Product Sales
Within the Therapeutics business, Myozyme revenue increased to $76.7 million, 43 percent greater than revenue of $53.6 million in the same period last year. U.S. Myozyme sales have been constrained by the delay in approval for 2000L-scale production. Yesterday, the Endocrinologic and Metabolic Drugs Advisory Committee affirmed by a vote of 16-1 that the LOTS study established the clinical effectiveness of alglucosidase alfa produced at the 2000L scale. Genzyme expects FDA action on its BLA for this product by the PDUFA date of November 29. Approval of 2000L-scale production is needed to provide broader access to treatment for patients with late-onset Pompe disease in the United States.
Genzyme is also preparing to seek clearance from European authorities for 4000L-scale production of Myozyme at its manufacturing facility in Belgium. The company has successfully completed the required three consecutive process validation runs. In addition, preliminary data on the comparability of 4000L product with 2000L product are encouraging. Genzyme anticipates submitting an application for 4000L production in early January, and EMEA approval is anticipated during the first half of next year. Approval of 4000L-scale production will be necessary to meet the anticipated global demand for Myozyme. Product supply is expected to remain tight until the 4000-L process is approved.
Third-quarter sales of Fabrazyme® (agalsidase beta) increased 20 percent to $125.6 million from $104.6 million, driven primarily by an increase in the number of patients beginning therapy. Enrollment has begun in the post-marketing FIELD study of Fabrazyme, which is exploring additional dosing options that may facilitate early treatment of Fabry disease. Third-quarter sales of Cerezyme® (imiglucerase for injection) rose 8 percent to $309.3 million, compared with $286.1 million in last year’s third quarter. Sales of Aldurazyme® (laronidase) were $38.2 million, 18 percent higher than sales of $32.3 million in the same period a year ago. Aldurazyme sales in last year’s third quarter were recorded as joint venture revenue.
Sales of Thyrogen® (thyrotropin alfa for injection) rose 42 percent to $38.2 million from $26.8 million, driven by a significant increase in the use of the product in thyroid remnant ablation procedures and substantial international growth.
Within the Renal business, sales of sevelamer therapies Renagel® (sevelamer hydrochloride) and Renvela grew 11 percent to $171.0 million from $154.2 million in the third quarter of last year. Sevelamer’s share of the competitive U.S. market for phosphate binders continues to grow, with slightly more than half of all prescriptions within this market now written for sevelamer therapies. The March launch of Renvela in the United States is contributing to this growth. The product is now included in most health plan formularies. Discussions with the FDA continue regarding broadening Renvela’s use to patients with chronic kidney disease. Genzyme, along with two other companies, submitted a position paper to the FDA in June regarding the expanded use of phosphate binders. Genzyme is continuing to provide the FDA with additional information and anticipates that this indication will be added to Renvela’s labeling by the middle of next year. Also next year, Genzyme expects to begin the international introduction of Renvela and to initiate enrollment in a clinical study of its next-generation advanced phosphate binder.
Within the Transplant business, third-quarter sales of Thymoglobulin® (Anti-thymocyte Globulin [Rabbit]) and Lymphoglobuline® (Anti-thymocyte Globulin [Equine]) rose 11 percent to $45.5 million from $41.0 million in last year’s third quarter. Construction is well underway on a new manufacturing plant for Thymoglobulin in France to meet the anticipated long-term demand for the product. Regulatory approvals of the facility are expected beginning in 2010, and production at the plant is expected to begin in 2011.
Preparations continue for the 2009 launch of Mozobil in the United States and Europe. Genzyme expects FDA approval of the product by December 16, and European approval is expected next year. Mozobil is designed to mobilize stem cells from the bone marrow into the bloodstream where they can be collected, making it more likely for patients with lymphoma or multiple myeloma to receive a successful transplant.
Upon approval, Mozobil will be sold by Genzyme’s newly formed bone marrow transplant sales force, with support from the company’s Oncology sales force. Approximately 55,000 stem cell transplants are performed each year globally for multiple myeloma, Hodgkin’s and non-Hodgkin’s lymphoma, and other conditions. Genzyme expects that, over time and with further clinical development, Mozobil will be used in the majority of these procedures, and peak sales of the product in the transplant setting are projected to reach $400 million annually. In addition to its expected benefits for patients, Mozobil may offer significant economic benefits for transplant centers. The product has the potential to decrease the number of apheresis days and provide transplant centers with more predictable and efficient use of the apheresis center, while reducing the number of patients who require a second mobilization procedure after failing to mobilize sufficient numbers of cells initially. More than 900 patients have already received Mozobil through a compassionate use program in the United States, and similar compassionate use programs have recently begun in Europe.
Oncology revenue rose 49 percent to $34.0 million, compared with $22.7 million in the third quarter last year, driven primarily by increasing sales of Clolar. The growth also reflects the addition of European sales of Clolar, which Genzyme began recording following its acquisition of Bioenvision Inc. late last year. Genzyme is working to introduce Clolar worldwide as well as expand its indications. The product is currently approved as a third-line treatment for pediatric patients with acute lymphoblastic leukemia. Genzyme is developing the product for use globally as a first-line therapy for adult AML and myelodysplastic syndromes, significantly larger indications that are expected to drive peak annual sales of the product to approximately $600 million. The company expects to submit a supplemental biologic license application this year to expand Clolar’s U.S. labeling to include adult AML. FDA action is expected by the middle of 2009. A similar submission in Europe is expected during the first half of 2009.
Within the Biosurgery business, sales of Synvisc® (hylan G-F 20) and Synvisc-ONE rose 10 percent to $67.5 million from $61.2 million in last year’s third quarter. This growth was driven primarily by the increasing strength of Synvisc in the U.S. market. Genzyme is introducing Synvisc-ONE in a growing number of European and Southeast Asian countries. The product is designed to simplify osteoarthritis pain management and thereby reach a broader set of patients. Genzyme’s marketing application for Synvisc-ONE will be the subject of an FDA advisory committee meeting in December. The panel is expected to discuss the clinical data Genzyme submitted to support the approval and labeling of the product. The FDA is expected to act on the application by December 23.
Also within the Biosurgery business, third-quarter sales of Sepra® products rose 25 percent to $33.0 million, compared with $26.4 million in the same quarter a year ago. Sales have been consistently strong over recent quarters, driven by the expanded use of Seprafilm® adhesion barrier in C-section and other gynecological procedures.
Third-quarter revenue for the Genetics business increased 12 percent to $82.1 million, compared with $73.1 million in last year’s third quarter. This growth was driven in part by the continuing demand for prenatal screening for genetic conditions. Additionally, Genzyme is experiencing increasing demand for its diagnostics tests that assist oncologists in selecting the appropriate treatment for patients with certain types of cancer. The increasing recognition of the value of diagnostics in personalized medicine will continue to fuel organic growth in the Genetics business.
Third-quarter non-GAAP SG&A expenses were $306.9 million, compared with $245.2 million in the same period last year. GAAP SG&A expenses in this year’s third quarter were $331.2 million. Non-GAAP R&D spending in the third quarter rose to $190.6 million, or 16 percent of revenue, compared with $162.3 million, or 17 percent of revenue, in the third quarter last year. GAAP R&D spending in this year’s third quarter was $305.2 million.
The non-GAAP tax rate for the third quarter was 27 percent, reflecting some benefit from Genzyme’s investment in manufacturing infrastructure outside the United States. Going forward, the company expects the full-year non-GAAP tax rate to be 29 percent. The GAAP tax rate for the third quarter was 34 percent.
Key Pipeline Highlights
Genzyme continues to enroll patients in two ongoing Phase 3 trials of alemtuzumab for the treatment of multiple sclerosis. Final results from the Phase 2 CAMMS 223 study comparing alemtuzumab with Rebif® (interferon beta-1a) for the treatment of relapsing-remitting multiple sclerosis are expected to be published imminently in a top medical journal. Publication of the study results underscores the potential of alemtuzumab for patients with MS and should support enrollment in the two ongoing Phase 3 studies.
Genzyme and Isis Pharmaceuticals Inc. are developing the novel lipid-lowering drug mipomersen for patients with high-cholesterol who are at high risk for cardiovascular disease. The companies have completed enrollment in the Phase 3 trial involving patients with homozygous familial hypercholesterolemia, a genetic disorder that causes exceptionally high levels of LDL cholesterol. Results from the study are expected in mid-2009, and the submission of a U.S. marketing application for this indication is anticipated during the second half of 2010. The companies in August began a Phase 3 study of mipomersen that involves patients with heterozygous familial hypercholesterolemia, and three additional trials evaluating mipomersen’s safety and efficacy in reducing LDL cholesterol in high-risk patients are expected to begin by the end of this year. Data from the trials will also inform the design of a morbidity and mortality outcome study.
Genzyme expects to begin two Phase 3 studies during the first half of next year of GENZ-112638, an investigational oral therapy for Gaucher disease. Final results from the open-label Phase 2 study of the compound are expected to be available early next year. Preliminary results from an interim analysis were consistent with those observed for patients beginning enzyme replacement therapy, and they highlight the potential of this compound to provide a convenient treatment alternative for patients and a broader range of treatment options for physicians.
Genzyme and PTC Therapeutics formed a global collaboration in July to develop and commercialize PTC124, PTC’s novel oral therapy in late-stage development for the treatment of genetic disorders due to nonsense mutations. PTC124 is currently being evaluated in a Phase 2b trial for Duchenne muscular dystrophy. A Phase 2b trial in cystic fibrosis is expected to begin by the end of this year, following the August publication of a proof of concept study in the Lancet.
Gene therapy for cardiovascular disease
Genzyme anticipates presenting final results from its Phase 2 study of HIF-1a for patients with peripheral arterial disease at a major medical meeting early next year. The study enrolled nearly 300 patients at approximately 40 medical centers in the United States and Europe and explored the treatment’s potential to promote the growth of new blood vessels and improve circulation in patients’ limbs.
Gene therapy for Parkinson’s disease
Genzyme is collaborating with Ceregene Inc. on CERE-120, a treatment intended to preserve neuronal function in Parkinson’s disease patients. Results from a Phase 2 study of CERE-120 are expected in early 2009. In a complementary program, Genzyme has also completed enrollment in a Phase 1 study of a treatment designed to restore the therapeutic effectiveness of levodopa, the primary treatment for Parkinson’s disease.
On September 22, Genzyme opened its new Science Center in Framingham, MA. The facility serves as a central site for early stage research. In addition, for the sixth consecutive year, Genzyme was selected by scientists as a top employer in a survey ranking the reputations of biotechnology and pharmaceutical companies. Genzyme placed third among 500 companies included in the survey, its highest ranking to date. The survey is managed by the journal Science and the American Association for the Advancement of Science.
This press release contains forward-looking statements regarding Genzyme’s financial outlook and business plans and strategies, including without limitation: its 2009 and 2011 earnings guidance and 2006-2011 CAGR guidance; its expectations for FDA action in the US on aglucosidase alfa produced at the 2000L-scale, and the timing thereof; its plans to submit an application in the EU for Myozyme produced at the 4000L-scale, its expectations for receipt of approval of that application, and the timing thereof; its assessment of the adequacy of Myozyme product supply; its plans to seek regulatory approvals of existing products for use in new indications, including Renvela for CKD patients not on dialysis and alemtuzumab for MS, the timetables therefore and the impact of such approvals on the company; its plans and estimated timetables of the receipt of clinical trial results, commencement of new trials, submission of regulatory filings, receipt of regulatory responses and product launches for new and next generation product candidates, including for Mozobil, Clolar, Synvisc-ONE, mipomersen, GENZ-112638, PTC124, HIF-1a, CERE-120 and the next generation APB; its estimate of the sales potential of Mozobil and benefits for patients and transplant centers; its estimate of the non-GAAP 2008 tax rate; its expectations for the receipt of regulatory approvals and commencement of production of Thymoglobulin at its new manufacturing plant in France, and the timing thereof; and its estimate of the sales potential for Clolar. 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 obtain and maintain regulatory approvals for products and manufacturing facilities and processes, including aglucosidase alfa produced at the 2000L scale in the US and at the 4000L scale in Europe, the timing of receipt of such approvals and the scope of such approvals; Genzyme’s ability to successfully complete clinical development of its product candidates, including Mozobil, Clolar, mipomersen, Genz-112638, PTC124, HIF-1a, CERE-120 and the next generation APB; Genzyme’s ability to expand the use of current and next-generation products in existing and new indications by receiving positive regulatory responses, including for Renvela and Synvisc-ONE; Genzyme’s ability to manufacture its products, including Thymoglobulin and its LSD therapies in a timely and cost effective manner and in sufficient quantities to meet demand; 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 2008 Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. Genzyme cautions investors not to place substantial reliance on the forward-looking statements contained in this press release. These statements speak only as of today’s date and Genzyme undertakes no obligation to update or revise the statements.
Genzyme®, Myozyme®, Fabrazyme®, Cerezyme®, Thyrogen®, Renagel®, Renvela®, Thymoglobulin®, Synvisc®, Campath®, Clolar®, Sepra®, Seprafilm®, and Lymphoglobuline® are registered trademarks of and Mozobil™ and Synvisc-ONE™ are unregistered trademarks of Genzyme or its subsidiaries. Aldurazyme® is a registered trademark of BioMarin/Genzyme LLC. All rights reserved.
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 10,000 employees in locations spanning the globe and 2007 revenues of $3.8 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.
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, cardiovascular disease, and other areas of unmet medical need.
Conference Call Information
Genzyme will host a conference call today at 11:00 a.m. Eastern to discuss results for the third quarter of 2008. To participate in the call, please dial 1-773-799-3828 and refer to passcode “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 www.genzyme.com . Replays of the call and the Webcast will be available until midnight October 29, 2008.
Genzyme will host a conference call on February 11, 2009 at 11:00 a.m. Eastern to discuss financial results for the fourth quarter of 2008, and 2009 Guidance. To participate in the call, please dial 1-773-799-3828 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 www.genzyme.com . Replays of the call and the Webcast will be available until midnight on February 18, 2009.
Genzyme’s press releases and other company information are available at www.genzyme.com and by calling Genzyme’s investor information line at 1-800-905-4369 within the United States or 1-678-999-4572 outside the United States.
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