Genzyme Corp. reported third-quarter numbers that beat consensus estimates, and the diversification plans the company put in place over the past year are taking hold, it said.
The quarter was "very robust and very solid," said Henri Termeer, the company's chairman and CEO - one in which Genzyme turned in $569.2 million in revenue, a 30 percent increase from the $437 million it reported in the year-earlier period. Excluding amortization and special items, net income rose 37 percent to $115.9 million, or 49 cents per diluted share. The company had estimated earnings of 42 cents to 44 cents per share, and analyst estimates had EPS pegged at 44 cents.
The company provided three main reasons for beating even its own best guess: higher product sales, expense control and the delay in closing the ILEX Oncology Inc. merger, which now is expected in the fourth quarter.
"Definitely the quarter was backed by a strong top-line and controlled expenses," said Sena Lund, analyst with Cathay Financial LLC in New York. "Due to the delay in the [ILEX] expenses to the next quarter, they outperformed my and [consensus] expectations."
Genzyme, of Cambridge, Mass., predicts earnings guidance for the year of $1.65 to $1.75 per share, and Termeer said the company should land in the high end of that range. He also reiterated that Genzyme would hit its goal of 20 percent earnings growth for 2005, based on the "momentum" the company "has in hand now."
Those controlled expenses - selling, general and administrative - were $147.9 million, down from the second quarter of the year. The decrease, Genzyme said, was due to "efficiencies gained in the integration of SangStat, Impath's oncology testing unit and the consolidation of Genzyme's former tracking stocks."
Genzyme consolidated in May 2003 its three businesses - Genzyme General, Genzyme Biosurgery and Genzyme Molecular Oncology - into one stock (NASDAQ:GENZ), which fell 48 cents Wednesday to close at $52.01. (See BioWorld Today, May 12, 2003.)
Genzyme said in late February it was buying the oncology company ILEX for about $1 billion. That purchase, along with the acquisitions of Fremont-Calif.-based SangStat Medical Corp. for about $600 million in 2003 and the Physician Services unit of Impath Inc., with its oncology diagnostic capabilities, for about $215 million in March of this year, is part of Genzyme's strategy to branch into new areas and increase revenue.
Revenues Powered By Drug Sales
The company had strong product sales in the third quarter. Cerezyme (imiglucerase for injection), an enzyme-replacement therapy for Type I Gaucher's disease, led the way, bringing in $208.4 million, up from $189.2 million in 2003's third quarter. Termeer noted the increase, but pointed out that Cerezyme's revenue made up just 37 percent of the company's total for the quarter, down from 58 percent of total revenue two years ago - a sign of Genzyme's successful diversification, he said.
Fabrazyme (agalsidase beta), an enzyme replacement for Fabry's disease, sold $58 million, up from $22.1 million. Sales of Aldurazyme (laronidase), for mucopolysacchariodosis-1 patients, were $10.3 million, up from $3.4 million, although that revenue is not included in the total for Genzyme, as the drug is partnered with BioMarin Pharmaceutical Inc., of Novato, Calif.
Renagel (sevelamer hydrochloride), Genzyme's phosphate binder for end-stage renal disease, grew 24 percent in sales, up to $93.3 million, from the year-earlier period, and Termeer said "interesting progress" was being made in Japan with the product.
Thyrogen (thyrotropin alfa for injection) sold $15.4 million, an increase of 35 percent. The Biosurgery unit brought Genzyme $56.8 million, slightly less than a year prior - mainly because of Synvisc sales, which fell from $29.8 million to $24.6 million, due to "competitive pressures in the U.S. market," Genzyme said. The product is used for knee pain associated with osteoarthritis.
Ahead: Clofarabine, Myozyme Launches?
The acquisitions and tracking stock consolidation have worked well, Lund said, mentioning the potential launch of clofarabine, acquired through the merger with San Antonio-based ILEX, in the U.S. in 2005 as a coming milestone. The drug is on file at the FDA for the treatment of refractory or relapsed acute leukemia in children.
But most investor buzz circulates around Myozyme.
Termeer called it "the most important program I often refer to" in earnings calls. Myozyme, a treatment for Pompe's disease, is nearing the market, as Genzyme plans to submit a filing package in the European Union in December and hopes to file in Japan and the U.S. in 2005. It's for another rare disease with a small patient population, but if things go well, the drug could bring in revenue similar to Cerezyme.
Lund said there are perhaps 5,000 to 10,000 cases of Pompe's disease worldwide. Nothing is known about a potential price for Myozyme, but Lund anticipates it will price similar to other Genzyme enzyme-replacement drugs - around $175,000 annually to the patient. He pointed out that Cerezyme was approved 14 years ago, is aimed at about 5,000 patients and "does $200 million a quarter." Myozyme could follow suit, he said. In fact, Lund sees little to worry about with Genzyme at the moment.
"I didn't see anything to clearly focus on," he told BioWorld Today. "Renagel I want to keep a close eye on. The market is maturing for that, although they are trying to expand the label. Aldurazyme and Fabrazyme, as management said, are for rare diseases, and as they find new patients, and as the treatments establish themselves, should grow."
The consolidation and the acquisitions are paying off, Lund said.
"I think the new strategy, since late last year, gives the company enough engines to drive the growth going forward," he said.