Genzyme Corp. Chairman and CEO Henri Termeer was in a "very bullish mood" as he recapped the Cambridge, Mass.-based company's first quarter financials in a conference call Wednesday morning.
And he had every reason to be. First quarter revenues hit an all-time high of $883.2 million, beating analyst estimates of $875.3 million, breaking the previous record of $854.2 million set in prior quarter, and topping by 21 percent the $730.8 million posted in the first quarter of last year.
Non-GAAP earnings of $210.7 million, or 78 cents per share, also beat analyst estimates of 74 cents per share. On a GAAP basis, Genzyme reported earnings of $158.2 million, or 57 cents per share.
"In hindsight, we probably have to say we were too careful" in providing financial guidance, Termeer said, confirming projected earnings per share of between $3.20 and $3.30 for the full year.
Investors took all the good news in stride, pushing Genzyme's shares (NASDAQ:GENZ) up a modest 96 cents on Wednesday to close at $65.07. The company's stock price received a boost earlier this week following AstraZeneca plc's $15.2 billion offer to acquire MedImmune Inc. (See BioWorld Today, Apr. 24, 2007.)
Much of Genzyme's revenue growth - both recent and planned - hinges on market expansion.
For example, Myozyme (alglucosidase alfa), the first drug to treat the lysosomal storage disorder Pompe disease, posted higher-than-expected first quarter sales of $37.9 million. Since its U.S. approval in mid-2006, Genzyme has steadily grown the franchise by gaining reimbursement for the drug in 28 countries worldwide. Approval in Japan came last week, and Genzyme expects to launch there this quarter. (See BioWorld Today, May 1, 2006.)
As for future market expansion, Genzyme is well on its way to launching an improved formulation of serum phosphorus control drug Renagel (sevelamer hydrochloride), which posted first quarter sales of $137.4 million. While Renagel is approved only for patients on dialysis, Renvela (sevelamer carbonate) will target the larger market of chronic kidney disease. Genzyme submitted the Renvela NDA late last year and announced positive Phase III data last week. (See BioWorld Today, Dec. 22, 2006.)
Genzyme's oncology franchise, with first quarter sales of $22.4 million, also is ripe for expansion. Clolar (clofarabine) is approved for the treatment of children with refractory or relapsed acute lymphoblastic leukemia, and Genzyme is conducting trials in acute myelogenous leukemia and other indications to grow the franchise. Similarly, Campath (alemtuzumab for injection) is approved for relapsed B-cell chronic lymphocytic leukemia, but Genzyme sees potential for the drug in a first-line setting as well as in non-Hodgkin's lymphoma and multiple sclerosis.
Genzyme also hopes to grow thyroid cancer recurrence diagnostic Thyrogen (thyrotropin alfa for injection) by gaining an FDA approval in thyroid ablation, as well as kidney disease drug Hectorol (doxercalciferol), which is slated for international expansion. Even the recently acquired Mozobil (plerixafor), now in pivotal studies for transplantation, may be applicable in chemosensitization, cancer diagnostics, cardiac and other tissue repair and restenosis.
Beyond its many franchise growth plans, Genzyme also provided updates on some of its new drugs during the quarterly earnings call. Chief among those were GENZ-112638 for Gaucher disease and tolevamer for Clostridium difficile-associated diarrhea.
As a small molecule, GENZ-112638 may offer the convenience of oral dosing for patients with Gaucher disease, and Genzyme discussed positioning the drug both as a long-term maintenance treatment after patients have stabilized their disease using Cerezyme (imiglucerase for injection) as well as for those who simply prefer an oral formulation. Preliminary data from a Phase II study are expected in May.
Tolevamer, which Termeer characterized as a "disruptive" technology, could become the first non-antibiotic treatment for its indication. Data from two Phase III trials are expected in the second half and could support approval in 2009. (See BioWorld Today, April 5, 2005.)
Genzyme's strong revenue growth came with higher expenses, but the company pointed to a decrease in the percent of revenue spent on non-GAAP selling, general and administrative expenses as evidence of improved cost control. Termeer also attributed the improved gross margin to the ability to leverage a global commercial infrastructure, noting that several manufacturing facilities that cost money last year are "paying off" now.
Genzyme ended the first quarter with a hefty $1.5 billion in cash, prompting Bear, Stearns & Co. analyst Mark Schoenebaum to ask if the company is considering a stock buy-back. Termeer replied that while a buy-back is a "pragmatic way to use cash" and will continue to be discussed among the board of directors, he prefers to spend money on acquisitions.
Last year, Genzyme spent big bucks to acquire AnorMED Inc. for $580 million, demonstrating that it fears neither premium prices nor public bidding wars. Termeer indicated that investors can expect additional acquisition activity in 2007. (See BioWorld Today, Oct. 18, 2006.)