Genzyme Reports Solid Financial Results for the First Quarter of 2009
Reiterates Outlook for the Year
Genzyme Corp. (NASDAQ: GENZ) today reported that first-quarter revenue rose to $1.15 billion, compared with $1.10 billion in the same period a year ago, an increase of 4 percent. Including the $66 million impact of unfavorable currency exchange rates, revenue grew 10 percent in the first quarter.
GAAP net income rose 35 percent to $195.5 million, or $0.70 per diluted share, compared with $145.3 million, or $0.52 per diluted share, in the first quarter of 2008. Non-GAAP net income grew 10 percent to $288.1 million, or $1.04 per diluted share, compared with $260.9 million, or $0.95 per diluted share, in the same period last year.
Genzyme generated approximately $350 million in cash predominantly from operations during the first quarter. The company used $162 million for continued investments in manufacturing infrastructure, $107 million to repurchase 2 million shares as part of a stock buyback program, and $23 million to acquire intellectual property and common stock from Exact Sciences Corp.
Based on the expected growth rates of the company’s businesses and the anticipated impact of several key growth drivers, Genzyme reaffirmed its revenue and earnings guidance for 2009. The company expects 2009 revenue of $5.15 – $5.35 billion and non-GAAP earnings per share of $4.58.
“We came through the first quarter well despite the weak economy and unfavorable exchange rates, and we are on track to meet our financial objectives this year,” said Henri A. Termeer, Genzyme’s chairman and chief executive officer. “Our broad geographic and product diversification, as well as the clinical value of our products, position us to manage through this period and continue to grow. We will see further progress and results over the coming months from our R&D investment in late-stage programs.”
Genzyme expects a number of catalysts to help drive growth during 2009, including the impact of revenue from two oncology products the company is acquiring from Bayer HealthCare and additional revenue from Campath® (alemtuzumab) as a result of that agreement; the reacceleration of Myozyme® (alglucosidase alfa) sales in Europe; the U.S. approval of alglucosidase alfa; and the ongoing launches of Mozobil® (plerixafor injection), Synvisc-One™ (hylan G-F 20) and Renvela® (sevelamer carbonate).
First Quarter Results
Within the Genetic Disease segment, Myozyme revenue was $67.4 million, compared with $67.3 million in the same period last year. Revenue reflects the company’s inability to sell the product for use by late-onset Pompe patients in the United States, and a global supply management program under which adults with Pompe disease temporarily missed doses in order to preserve constrained supply for infants and children.
In February, Genzyme received European Commission approval of Myozyme produced at the 4000 L scale, which is enabling patients to resume regular infusion schedules. With the new supply in place, Genzyme has also resumed promotion of the product in European countries. During the second half of this year, the company will begin preparations to add a third 4000 L bioreactor to its Belgium facility to support Myozyme’s growth over the longer-term. It is anticipated this bioreactor would be approved for commercial production in mid-2011.
In the United States, Genzyme remains on-track to submit an sBLA for the 4000 L product this quarter based on its comparability to the approved 160 L product, and the company has a meeting scheduled with the FDA to discuss this filing before it is submitted.
Genzyme has completed all the measures required to respond to the FDA warning letter regarding the company’s Allston manufacturing facility, aside from one additional filling study for Aldurazyme® (laronidase). Genzyme is now awaiting the FDA re-inspection of the plant.
Genzyme is also in regular communication with the agency regarding the complete response letter for Lumizyme™ (alglucosidase alfa). The company has received final comments from the agency regarding the Risk Evaluation and Mitigation Strategy for the product, the verification study, and the label. Once the FDA inspection of the Allston facility is completed and Genzyme’s corrective actions are deemed adequate, the agency will formally review the company’s submission addressing all the items in the complete response letter. Genzyme anticipates approval late in the second quarter or in the third quarter.
Also in the Genetic Disease segment, Fabrazyme® (agalsidase beta) revenue was $122.2 million, up 5 percent from revenue of $116.5 million during the first quarter of 2008.
Cerezyme® (imiglucerase for injection) revenue was $296.0 million, compared with $304.3 million in the same period a year ago, reflecting the impact of foreign exchange. Genzyme continues to see growth in the number of patients initiating therapy. Sales of Aldurazyme were $36.8 million, compared with $37.0 million in the first quarter of 2008.
Within the Cardiometabolic and Renal segment, sales of Genzyme’s sevelamer therapies, Renvela and Renagel® (sevelamer hydrochloride), were $170.6 million in the first quarter, compared with $168.7 million in the same period last year.
This month the European Medicines Agency’s Committee for Human Medicinal Products adopted a positive opinion for the marketing authorization of Renvela for use in patients with chronic kidney disease, including patients not on dialysis with serum phosphorus levels ≥ 1.78 mmol/L (5.5 mg/dL). A final decision by the European Commission is expected at the end of next month.
Genzyme continues to work with the FDA regarding the potential expansion of Renvela’s U.S. indication to include the treatment of hyperphosphatemic patients with chronic kidney disease who are not on dialysis, and anticipates that a label expansion could occur by mid-2009.
Sales of Thyrogen® (thyrotropin alfa for injection) grew 15 percent to $38.8 million, compared with $33.8 million in the first quarter of 2008, driven by increased utilization of the treatment in thyroid remnant ablation procedures.
Revenue from the company’s Hematologic Oncology segment increased 50 percent in the first quarter to $35.9 million, from $23.9 million in the same period last year. This was driven by the launch of Mozobil, which is being broadly adopted by transplant centers, and by a significant increase in U.S. sales of Clolar® (clofarabine). Mozobil sales in the first quarter are tracking to the company’s guidance of $40 – $50 million for the year. European approval of Mozobil is anticipated in the second half of this year.
Genzyme expects to close the transaction with Bayer this quarter, which will further expand the company’s commercial presence in the oncology field and leverage its existing infrastructure. The transaction will add additional revenue from Campath, and new revenue from Fludara® (fludarabine) and Leukine® (sargramostim), treatments that complement Clolar and Mozobil.
Within the Biosurgery segment, sales of Synvisc® (hylan G-F 20) increased 13 percent to $63.2 million, from $56.1 million in last year’s first quarter. Future growth will be driven by the U.S. launch of Synvisc-One, which is expanding the benefits of this therapeutic approach to a broader set of patients by reducing the burden and cost of multiple injections.
Sales of Sepra® products grew 12 percent to $34.4 million compared with $30.6 million in the same period last year, driven by increasing use of Seprafilm® adhesion barrier in larger markets such as C-section and other gynecologic procedures.
Other segment revenue grew 8 percent to $213.4 million from $197.8 million. This segment includes the company’s Transplant, Genetics and Diagnostics businesses. Genetics revenue increased 23 percent to $91.1 million from $74.3 million, driven by solid growth in reproductive and oncology testing services. Within the Transplant business, sales of Thymoglobulin® (anti-thymocyte globulin, rabbit) were $49.6 million, a 17 percent increase over $42.3 million in the same period last year.
Genzyme’s non-GAAP operating expenses (which include non-GAAP SG&A and R&D) in the first quarter were $469.3 million, a 1 percent decrease from $475.8 million in the same period last year. This quarter’s expenses represent the company’s strong financial discipline during the challenging economic environment and its ability to prioritize expenditures in areas that will drive sustainable long-term growth.
Genzyme continues to make a significant investment in research and development, and is currently conducting approximately 100 clinical trials. Genzyme’s pipeline includes a group of major late-stage programs with the potential to sustain the company’s future growth, and a number of mid- and early stage programs that may provide new treatment options for a wide range of unmet medical needs.
Genzyme anticipates FDA action on Clolar as a first-line therapy for adult acute myeloid leukemia during the second half of this year. Clolar is currently approved in the United States and Europe for the treatment of acute lymphoblastic leukemia in relapsed or refractory pediatric patients.
Genzyme has completed enrollment in the first of two phase 3 trials of alemtuzumab, which has the potential to set a new standard of care in the treatment of multiple sclerosis. Enrollment in both studies accelerated following the October 2008 publication of positive phase 2 results in the New England Journal of Medicine, and enrollment in the second study is expected to be completed by the end of this year. Genzyme anticipates approval of alemtuzumab in 2012.
Genzyme and Isis Pharmaceuticals Inc. are collaborating on mipomersen, and expect top-line data from the first phase 3 study of the treatment in patients with homozygous familial hypercholesterolemia this quarter. The companies have made significant progress on their development plan and have begun four studies of the product during the past year.
In mid-2009, Genzyme plans to initiate two phase 3 studies of Genz-112638, a potential oral therapy for Gaucher disease. One trial will include untreated patients, and the other will be a switch trial in which patients who have achieved their therapeutic goals with Cerezyme will be transitioned to the new therapy. Positive phase 2 results were presented in February at the Lysosomal Disease Network WORLD meeting.
Genzyme and Osiris Therapeutics Inc. are in a collaboration to commercialize the adult stem cell treatment Prochymal™. Enrollment has been completed in the two phase 3 studies of Prochymal in graft vs. host disease and data are expected in the second half of 2009.
Genzyme and PTC Therapeutics Inc. are collaborating on ataluren, a novel oral therapy for the treatment of genetic disorders due to nonsense mutations. A pivotal phase 2b trial of ataluren in Duchenne muscular dystrophy is fully enrolled and results are expected in the first half of next year. A phase 3 trial in cystic fibrosis is expected to begin this quarter.
Genzyme has begun a pivotal trial of an advanced phosphate binder (APB) for patients with renal disease. The APB is designed to more effectively bind phosphate for a substantial improvement in potency over existing therapies while maintaining all the benefits of sevelamer. The company anticipates that the APB would be approved by the time the core patent estate for sevelamer expires in 2014.
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 11,000 employees in locations spanning the globe and 2008 revenues of $4.6 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 approximately 100 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 immune disease, and diagnostic testing. Genzyme’s commitment to innovation continues today with a substantial development program focused on these fields, as well as cardiovascular disease, neurodegenerative diseases, 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 without limitation: its projected 2009 revenues for the company, as well as the anticipated drivers of 2009 revenue growth; its YE 2009 EPS guidance; the expected timing of receipt of FDA approval for alglucosidase alfa produced at the 2000L scale; its plans to seek US approval of the product produced using the 4000L scale process; its plans to expand Myozyme manufacturing capacity at its Belgium facility and the timing thereof; its expectations regarding regulatory action on its marketing applications for other existing products, including Renvela in Europe, Renvela in the US for use in CKD patients not on dialysis, Mozobil in Europe, Clolar in the US for use in adult patients with AML, and alemtuzumab for MS; its plans and estimated timetables for new and next-generation product clinical trials, filings or approvals, including for mipomersen, Genz-112638, Prochymal, ataluren, and APB; and the expected timing to close the transaction with Bayer. 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: the ability of Genzyme and its collaboration partners to successfully complete preclinical and clinical development of new products, including mipomersen, Prochymal, Genz-112638, and ataluren; Genzyme’s ability to expand the use of current and next-generation products in existing and new indications, including Renvela, Synvisc-ONE, Mozobil, Clolar, alemtuzumab-MS and the APB; Genzyme’s ability to obtain and maintain regulatory approvals for products and manufacturing facilities, including alglucosidase alfa produced at the 2000L and 4000L scales, 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; the outcome of the FDA’s re-inspection of Genzyme’s Allston facility; that the transaction with Bayer does not close within the timeframe expected by the company; Genzyme’s ability to successfully integrate the products and development program acquired from Bayer; Genzyme’s ability to maintain and enforce intellectual property rights; Genzyme’s ability to successfully identify and market to new patients; the availability and extent of reimbursement from third party payers; 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 Annual Report on Form 10-K for the period ended December 31, 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®, Renagel®, Renvela®, Thyrogen®, Mozobil®, Campath®, Synvisc®, Sepra®, Seprafilm®, Thymoglobulin®, and Clolar® are registered trademarks and Synvisc-One™ and Lumizyme™ are trademarks of Genzyme Corporation or its subsidiaries. Fludara® and Leukine® are registered trademarks of Bayer Schering Pharma AG. Prochymal™ is a trademark of Osiris Therapeutics Inc. All rights reserved.
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.
Conference Call Information
Genzyme will host a conference call today at 11:00 a.m. Eastern. 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 www.genzyme.com. Replays of the call and the Webcast will be available until midnight on April 29, 2009.
Genzyme will host a conference call on July 22 at 11:00 a.m. Eastern to discuss financial results for the second quarter of 2009. 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 203-369-1321. 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 July 29, 2009.
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