West Coast Editor
Genzyme Corp.'s stock dipped on word that first-quarter revenues came in lower than expected, though the $730.8 million number represents a 16 percent rise over the same quarter last year.
Selling below hoped-for levels were Fabrazyme (agalsidase beta) for Fabry's disease, Synvisc (hylan G-F 20) for osteoarthritic knee pain, and Hectorol (doxercalciferol) for secondary hyperparathyroidism in patients on dialysis, and chronic kidney disease, though Genzyme said in a press release that all are "expected to strengthen in the quarters ahead."
The company's stock (NASDAQ:GENZ) closed Wednesday at $60.65, down $5.13.
Many Fabrazyme patients started treatment near the end of the first quarter, so the earnings will show up later. Synvisc use is seasonal, but should grow "solidly" in the second and third quarters, Cambridge, Mass.-based Genzyme predicted. And "strong underlying demand" will drive Hectorol sales, affected during the first quarter by a $3 million non-recurring contractual allowance charge.
"There's a tendency still on The Street not to take them on their word," said Christopher Raymond, analyst with Robert Baird & Co. in Chicago. "People have a longer memory with this stock than with some others," he added, referring to 2001's inventory screw-up and temporary shortage of Renagel (sevelamer hydrochloride), Genzyme's phosphate-binding tablet for patients with end-stage renal disease on hemodialysis. "Do I take them at face value? Yes," Raymond said. "I have not seen them misrepresent anything."
The market, he said, overreacted to the Genzyme news. "Amgen is not necessarily putting up stellar numbers [see below], and Genentech sold off on its earnings, even though it was a fairly strong quarter," Raymond said. "People are saying, 'I'm going to head for the hills on a miss.'" South San Francisco-based Genentech Inc. reported its first-quarter results about a week ago. The tendency for less-than-remarkable news from a few companies to effect the whole sector is "not as pronounced as it used to be, but most of [the companies I cover] are red today."
Genzyme partly blamed the current first-quarter results on investments in late-stage clinical programs, as well as manufacturing scale-up and preparations to launch Myozyme (alglucosidase alfa), the enzyme-replacement therapy for Pompe disease, approved in Europe earlier this month and awaiting action by the FDA.
Renagel is among the success stories, selling $118.7 million, an increase of 19 percent from $99.4 million in the same quarter last year. In quarters ahead, key drivers for Renagel sales will be the implementation of the Medicare prescription drug benefit and upcoming clinical data, Genzyme said, noting the publication due later this year of the Dialysis Clinical Outcomes Revisited trial, which compared morbidity and mortality outcomes of patients on Renagel with those on calcium-based phosphate binders.
Though likely to continue growing only modestly in the future, sales of the flagship Cerezyme (imiglucerase for injection) for Type 1 Gaucher's disease hit $239 million in the first quarter, compared with $226 million in the same period a year ago, an increase of 6 percent. The firm reiterated its full-year revenue guidance of $3.1 billion to $3.3 billion, and its earnings guidance per diluted share of $1.78 to $1.88 (GAAP) and $2.65 to $2.75 (non-GAAP).
In other earnings news:
• Amgen Inc., of Thousand Oaks, Calif., also reported first-quarter numbers. Adjusted earnings per share, excluding stock option expense, totaled 91 cents for the first quarter, an increase of 26 percent compared to 72 cents during the first quarter of 2005, with adjusted net income, excluding stock option expense, increasing 19 percent to $1.1 billion, compared to $924 million in the first quarter of 2005. During the first quarter, total product sales increased 14 percent to $3.1 billion from $2.7 billion in the first quarter of 2005, Amgen reported.
The company's stock (NASDAQ:AMGN) closed Wednesday at $68.30, down $2.67.
Rating the firm an "outperformer," New York-based CIBC World Markets analyst Bret Holley noted the Wall Street consensus had put Amgen's EPS at 89 cents, and the company has raised its guidance, expecting an EPS of between $3.60 to $3.70, excluding the dilution caused by acquiring Abgenix Inc., of Fremont, Calif., in a deal completed earlier this month, for a total cash consideration of about $2.2 billion plus assumed debt. Product revenues, though, totaled $3.13 billion, below CIBC's $3.26 billion estimate. "This was primarily due to lower than expected Enbrel and Neulasta sales; however, product sales across the board, with the exception of Sensipar, were slightly below expectations," Holley wrote in a research report.
Worldwide sales of Sensipar (cinacalcet HCl), the oral therapy for secondary hyperparathyroidism, increased 126 percent to $61 million in the first quarter of 2006 vs. $27 million during the first quarter of 2005. In explaining the lower-than-anticipated sales, Amgen cited shipping shortages related to the year-end holidays and inventory buy-ins tied to contractual discount incentives, and changes in foreign exchange rates. Enbrel (etanercept), approved for rheumatoid arthritis, psoriasis and psoriatic arthritis, was hit hard by Medicare complications, and by competition from Humira (adalimumab), from Abbott Park, Ill.-based Abbott Laboratories, and Remicade (infliximab) from Malvern, Pa.-based Centocor Inc.
Still, Baird's Raymond was impressed. "People buy these names because they're primarily growth stocks, but most impressive is the operating leverage. Amgen beat by 2 cents on a relatively light revenue quarter. That's a pretty big deal."
• Gilead Sciences Inc., of Foster City, Calif., topped Wall Street's estimates with its first-quarter earnings, reporting a non-GAAP EPS of 59 cents on sales of $693 million, compared to Thomson First Call's forecast of 53 cents and revenue of $621 million. Credited for the good news were a boost in sales of the HIV therapies Viread (tenofovir disoproxil fumarate) and Truvada (a combination of Viread and emtricitabine, sold by Gilead as Emtriva), as well as higher royalties from the influenza drug Tamiflu. Gilead raised its guidance for total HIV sales this year, predicting sales of about $1.82 billion to about $1.87 billion.
The company "continues to exceed high expectations, with exceptional HIV product sales," wrote CIBC's Holley, describing Gilead as being "on course for an outstanding 2006" while warning that the firm will be hard put to sustain such growth without more in the pipeline or a three-drug combo launch "that surpasses our high estimates."
Gilead's stock (NASDAQ:GILD) closed Wednesday at $65.13, up $3.29.