Genzyme General's first-quarter revenue blossomed nicely and the company hit its earnings-per-share estimates, but the revelation of a data delay from a Renagel trial dropped the company's stock Wednesday.
Emphasizing a "very strong quarter," Genzyme Chairman and CEO Henri Termeer said in a conference call that the results demonstrate the "good fundamental growth in the businesses you are all familiar with."
That growth was clearly evident in sales figures. Revenues totaled $314 million for the quarter, up 30 percent from the year-ago period. The net income for Cambridge, Mass.-based Genzyme was $61.9 million, or 28 cents per diluted share, up from $30.7 million and 14 cents in 2002. Excluding amortization, net income increased to $68 million, or 31 cents per diluted share, in line with Thomson First Call estimates.
Sales of Cerezyme, an enzyme replacement therapy for Type I Gaucher's disease, grew 13 percent to $167.2 million. Fabrazyme, for Fabry's disease, not yet approved in the U.S. but given the nod in 27 countries, pulled in $11.8 million. The FDA is expected to act on Fabrazyme by April 24 and Genzyme is seeking accelerated approval for the drug.
In a research note from Leerink Swann & Co., Bill Tanner wrote that at the FDA advisory panel meeting members "seemed desirous that the ongoing Phase III trial be completed before the drug be granted formal approval," although Tanner wrote the FDA would not be "retreating from the notion that Fabrazyme should ultimately be approved."
Yaron Werber, analyst with SG Cowen Securities Corp., sees eventual approval, but also thinks the FDA might want more.
"The discussions with the FDA were going well, but I feel the FDA is conflicted because I think they want the study completed," he told BioWorld Today. "I'm expecting Genzyme will get a complete response letter and get another review cycle." That would allow the trial to progress further, Werber said, and allow for approval in the fourth quarter.
Sales from Thyrogen, WelChol, diagnostic products and services and other products were $76.2 million. The company saw impressive growth in Renagel, a phosphate binder for patients with end-stage renal disease on hemodialysis. Its sales grew to $58.8 million, up from $29.5 million for the first quarter of 2002. But Renagel provided negative news, too, as the company disclosed that there was a snag in the Dialysis Clinical Outcomes Revisited trial comparing Renagel and calcium-based phosphate binders. The trial began in November 2001 and called for an interim analysis by a data monitoring board. The board reviewed the first 12 months of the study and found the aggregate mortality rate was lower than anticipated. Thus, the board recommended extending the trial to increase the possibility of demonstrating a statistically significant difference in mortality. Genzyme now estimates reporting data in mid-2005.
Werber said that while the data are delayed, there is no hint as to what the data show.
"We don't know what the data are yet, but it is pushed back another year," he said. Investors didn't like the news, as Genzyme's stock (NASDAQ:GENZ) dropped $2.28 Wednesday to close at $33.51.
But Werber said that reaction was unwarranted.
"I think everyone is assuming that the trial has failed and making a conclusion that sales might be hurt in the future," he said. "I think that is probably premature."
Looking ahead, Genzyme expects the FDA to take action on the Aldurazyme biologics license application by April 30. The product, designed to treat mucopolysaccharidosis I, is being developed with BioMarin Pharmaceutical Inc., of Novato, Calif. The European Commission is expected to act on the Aldurazyme application in the next two months. The companies completed their rolling BLA filing in July. (See BioWorld Today, July 30, 2002.)
Genzyme had about $1.2 billion in cash at the end of the first quarter, and it based its EPS figures on 220 million weighted average shares outstanding, diluted. It gave second-quarter guidance of 28 cents to 30 cents per diluted share; excluding anticipated amortization and figuring a 36 percent tax rate, it expects second-quarter earnings per share of 31 cents to 33 cents. For the year, Genzyme sees earnings of $1.25 to $1.35, excluding amortization. Nice numbers, and Werber, for one, is on board.
"I think, fundamentally, [Genzyme] is looking better than the recent past and pretty good for the year," he said. "I think this quarter was the first in a while that it made its numbers and I think that has really bolstered people's confidence."