Genzyme Corp. beat consensus earnings estimates for the third quarter, without taking into account the company's purchase of SangStat Medical Corp., and raised its fourth-quarter and year-end financial outlook.
Absent the acquisition, Cambridge, Mass.-based Genzyme produced net income of $84.6 million, or 37 cents per diluted share. Consensus estimates had anticipated earnings of 34 cents per share for the period ended Sept. 30.
"This was not really surprising, because to me just beating the number is a sign of so many moving parts," Tom Shrader, analyst with Harris Nesbitt Gerard in New York, told BioWorld Today. "We're neutral on Genzyme, which says that it is moving in place with a very hot sector. The difference is that Genzyme is doing it based on sales, while other companies are doing it based on their pipelines. Were the sector to turn, I would expect Genzyme to outperform, because things are really going well."
In last year's third quarter, Genzyme General recorded net income of $53.4 million, or 25 cents per diluted share. This quarter's results are the first reported since the company consolidated its tracking stock structure, effective July 1. (See BioWorld Today, May 12, 2003.)
Going forward, a bullish Genzyme said it expects an annual earnings-per-share growth rate of about 20 percent, adding that it will exceed this year's full-year revenue and earnings guidance. The company expects fourth-quarter earnings per share to range from 35 cents to 37 cents before amortization, with full-year earnings to range from $1.37 to $1.39.
"It was a very strong quarter, and can only be characterized in that way, and has been strong from many points of view," Henri Termeer, Genzyme's chairman and CEO, said during a conference call. "These results are driven by very strong, broad-based, top-line growth."
Including the SangStat purchase, the company posted a net loss of $95.7 million, or 43 cents per share. Genzyme, which paid $600 million in cash for SangStat, recorded several special items related to the acquisition and to its divestiture of certain noncore businesses. (See BioWorld Today, Aug. 5, 2003.)
Shrader, who noted that he owns no shares of Genzyme and doesn't have a banking relationship with the company, said the acquisition provides decent revenue drivers going forward. SangStat's sales and marketing personnel will be retained, as will its manufacturing facility in Lyon, France, though Genzyme plans to close SangStat's Fremont, Calif., headquarters March 31.
Genzyme's earnings were driven by a surge in total revenues, which reached $437 million, up from $272.8 million recorded by Genzyme General last year.
Sales of Cerezyme (imiglucerase for injection), an enzyme replacement therapy for patients with Type I Gaucher's disease, reached $189.2 million, a 20 percent increase from a year ago. Sales of Renagel (sevelamer hydrochloride), a phosphate binder for patients with end-stage renal disease on hemodialysis, totaled $75.5 million, more than 100 percent higher than the $37 million recorded a year ago. The company, which said that 200,000 to 220,000 patients are using Renagel worldwide, expects those figures to continue to grow given recently issued clinical practice guidelines from the National Kidney Foundation and FDA approval of a manufacturing facility in Waterford, Ireland.
Revenue related to Synvisc (hylan G-F 20), its biosurgery product, totaled $29.8 million. Sales of Fabrazyme (agalsidase beta), an enzyme replacement therapy for Fabry's disease, were $21.5 million, including about $6.5 million in U.S. revenue following product launch in the second quarter. Revenue from Thyrogen (thyrotropin alfa for injection) rose to $11.4 million. Genzyme's sales of Thymoglobulin (anti-thymocyte globulin) and Lymphoglobuline (anti-thymocyte-globulin, equine), which SangStat developed to manage acute rejection following a kidney transplant, were $4.9 million for the last 19 days of the quarter, representing postacquisition revenues.
Sales of the Sepra family of biosurgery products rose to nearly $12 million, while sales of diagnostic products and services reached $46.6 million.
Revenue from a partnered product, Aldurazyme (laronidase) enzyme replacement therapy for patients with MPS-I, totaled $3.4 million. Aldurazyme is being commercialized under a joint venture with Novato, Calif.-based BioMarin Pharmaceutical Inc.
"It looks like they're doing a good job with Aldurazyme," Shrader said. "To get 100 patients in a quarter is probably a reasonable rate. You'll probably see about 100 new patients per quarter for two years, which is nice, constant growth."
The company ended the quarter with reserves of about $870 million in cash and marketable securities.
Genzyme continues to move forward with drug development. The company disclosed that it has expanded its clinical development program for Myozyme, an enzyme replacement therapy for Pompe disease.
"I think that Genzyme is largely a Myozyme story now," Shrader said of the program, which includes two trials involving patients younger than 3 years old with infantile-onset Pompe disease. He added that, although the company has much that is doing well, "the real home run on their plate is Myozyme."
The company is planning to begin further studies involving older children and adults, and to create special access programs that will increase the availability of Myozyme to patients who are unable to participate in clinical trials.
"I see this indication as twice as big as Cerezyme," Shrader said. "The question was whether they can make enough enzyme to dose adult patients, who are a large part of this population. And it looks like they can."
Other ongoing development programs include CAT-192, a human anti-TGF beta monoclonal antibody being investigated for scleroderma in collaboration with Cambridge Antibody Technology Group plc, of Cambridge, UK. Patient enrollment is complete in a Phase I/II trial of the product. A Phase I study of GENZ 29155, a small molecule for multiple sclerosis, is expected to begin around the end of the year.
Genzyme also recently entered an agreement with longtime rival Transkaryotic Therapies Inc., also of Cambridge, to develop I2S, an enzyme replacement therapy for Hunter syndrome, in Japan and the Pacific Rim. A pivotal trial of the product is under way in the U.S. The companies also agreed to settle their longstanding legal patent issues. (See BioWorld Today, Oct. 10, 2003.)
Genzyme's stock (NASDAQ:GENZ) gained $1.59 Wednesday to close at $51.58.