Growing product sales and an expanding pipeline led Genzyme Corp. to report solid earnings for the second quarter, once again beating consensus estimates.
The Cambridge, Mass.-based company posted total revenues of $668.1 million for the three months ending June 30, an increase of 22 percent from the $549.6 million reported during the same quarter of 2004. Non-GAAP net income rose 46 percent to $149 million, or 57 cents per share. The consensus estimate for the quarter was 53 cents per share.
GAAP net income, which includes amortization and the impact of convertible debt, totaled $123.6 million, or 46 cents per share, compared to $78.2 million, or 33 cents per share reported one year ago.
The company, which slightly increased its 2005 guidance after reporting first-quarter results in April, made a further adjustment to non-GAAP estimates for the year, raising guidance from $2.12 to $2.18 earnings per share to $2.20 to $2.25. Genzyme's stock (NASDAQ:GENZ) gained $3.97 Thursday to close at $65.30.
"In a lot of ways, this represents a bit of vindication for [Genzyme President and CEO] Henri Termeer and the management team," said analyst Christopher Raymond, of Robert W. Baird & Co. Inc. in Chicago.
"They've been, I think, criticized by a lot of purists for their acquisitions strategy," he told BioWorld Today.
While Genzyme has a promising late-stage pipeline of its own making - led by Myozyme, a Phase III product for patients with Pompe disease that is expected to be submitted for regulatory approval this year - the company has gained a number of its products through purchase. Most recently, the company acquired Middleton, Wis.-based Bone Care International Inc. for $600 million, which added Hectorol, a complementary product to Renagel, to Genzyme's product list. That transaction completed July 1. (See BioWorld Today, May 5, 2005.)
Earlier this year, it bought Leverkusen, Germany-based Verigen AG for $10 million, plus a potential $40 million more linked to development and commercial milestones for Verigen's cell therapy product, Matrix-induced Autologous Chondrocyte Implantation. (See BioWorld Today, Feb. 9, 2005).
"The cornerstone of the company is that it's a good mix," Raymond said. "It's not completely dependent on its own discovery or on licensing deals."
During the company's conference call Thursday morning, Termeer said Genzyme's success is "a result of major investments over a long period of time," that brought together "a portfolio of programs and products and capabilities that are now starting to contribute very significantly to the profitability of the corporation."
Product sales increased in each area. Sales of Renagel, a phosphate binder for patients with end-stage renal disease on hemodialysis, grew by 15 percent to total $100.8 million, up from the $87.6 million. In therapeutics, Fabrazyme, an enzyme-replacement therapy for Fabry's disease, increased by 50 percent to $74.4 million, while Cerezyme, an enzyme-replacement therapy for Type I Gaucher's disease, totaled $236 million, up 13 percent from the $209.4 million reported in the same period a year ago. Sales of Aldurazyme, for MPS I patients, were $19.2 million, compared to $9.2 million in 2004's second quarter.
Genzyme's recently acquired product Synvisc reported sales of $58.8 million, more than doubling its revenue. Synvisc is a viscosupplementation product to treat pain caused by osteoarthritis of the knee. Genzyme agreed last year to buy back all the rights to Synvisc from Madison, N.J.-based Wyeth Pharmaceuticals. (See BioWorld Today, Nov. 5, 2004.)
Transplant products Thymoglobulin and Lymphoglobulin combined for sales of $33.6 million, while revenue from the company's diagnostics and genetics business rose 7 percent to total $76.5 million.
Not all areas in the firm are contributing, though, Termeer said, referring to its "fairly new" oncology area, developed through two transactions last year, including the purchase of ILEX Oncology Inc., of San Antonio, for $1 billion.
"We are making very material investments in oncology at this time," he said, and the company is "confident that [those products], too, will make important contributions."
Research and development spending for the quarter totaled about $122 million, compared to $99 million in the same quarter a year ago. Genzyme attributed the increase to development in the oncology area, including trials evaluating the potential for expanded applications of Campath and Clolar, both of which came through the ILEX purchase, as well as trials in early stage products such as tasidotin HCL, which is in Phase II trials.
Genzyme has an ongoing Phase III trial of tolevamer, a non-absorbed polymer therapy to treat Clostridium difficile-associated diarrhea, and expects to initiate, along with partner Dyax Corp., a Phase III study of DX-88 in hereditary angioedema.
Termeer said the company expects to report results of its Dialysis Clinical Outcomes Revisited study soon. Designed as a label-expansion trial for Renagel, the study is examining the difference in mortality and morbidity outcomes for patients receiving Genzyme's drug compared with those receiving calcium-based phosphate binders.
Raymond said that the company appeared to be on the right track, and does not seem to face any overwhelming competition in the future, though some investors were concerned with threats from Cambridge, Mass.-based Transkaryotic Therapies Inc. and Basingstoke, UK-based Shire Pharmaceuticals Group plc, which merged earlier this year in a $1.6 billion deal. (See BioWorld Today, April 22, 2005.)
"That was a concern, but I really don't see a lot of major issues," he said.
Genzyme ended the quarter with about $1.6 billion in cash and marketable securities.