By Lisa Seachrist
Cerezyme and Ceredase continued to fuel earnings growth as Genzyme General announced that, by the end of the second quarter, shareholders will receive a dividend of shares in the newest division of Genzyme Corp., Genzyme Surgical Products.
The Cambridge, Mass.-based company, which is the main division of Genzyme Corp., is moving its surgical products to a division with its own tracking stock, which will begin trading in the second half of this year, in an effort to highlight the profitable therapeutics business.
¿This allows shareholders to more clearly see that Genzyme General¿s focus is on therapeutics,¿ said Henri Termeer, chairman and CEO of Genzyme Corp. ¿For the new surgical division, in contrast to start-up companies, it will start with a significant shareholder base. We expect those to be redistributed, but we hope in the end a number will keep their interest.¿
Compared to the first quarter of last year, Genzyme General reported that earnings were up 23 percent, to $0.38 per diluted share, and net income was up 30 percent, to $32.5 million, for the first quarter 1999. Total revenues for the quarter topped out at $178.1 million and gross profits came in at $125.0 million ¿ increases of 16 and 27 percent, respectively.
Overall, the company slightly exceeded earnings expectations, said Jon Alsenas, managing director at ING Baring Furman Selz LLC, in New York.
¿The company¿s earnings were within people¿s expectations,¿ Alsenas said. ¿What¿s been hurting them is that the market doesn¿t like uncertainty and, until the analysts¿ meeting in May, we won¿t know how the new surgical division will affect Genzyme General.¿
Termeer maintains that creating Genzyme Surgical Products, which ¿ like Genzyme Molecular Oncology and Genzyme Tissue Repair ¿ will have its own tracking stock, will ensure that Genzyme General¿s earnings aren¿t pulled down by the more developmental-stage products on which the surgical division is focusing.
The revenues from therapeutics were up 24 percent, to $118.9 million, for the first quarter of 1999, compared to $95.6 million in the first quarter of 1998. The enzyme replacement therapies for Gaucher¿s disease, Cerezyme and Ceredase, accounted for $113.8 million, a growth of 22 percent. The recombinant Cerezyme has almost completely replaced the natural version of the enzyme, Ceredase, and accounted for 95 percent of these sales.
Other therapeutic sales include Thyrogen, a diagnostic tool for thyroid cancer screening, which is co-marketed in the U.S. with Knoll Pharmaceutical Co., of Mt. Olive, N.J., and was launched in January. RenaGel Capsules for end-stage renal disease, and lipids and peptides for drug delivery, were also parts of the $4.9 million in revenue not associated with the Gaucher¿s products.
First-quarter revenues from surgical products grew 18 percent compared to the same period last year, to $30.1 million. Sales of Sepra products for the prevention of surgical adhesions, including Seprafilm Bioresorbable Membrane, increased 58 percent this quarter compared to first quarter last year.
When the company creates Genzyme Surgical Products, Sepra products will be part of the new division. The new division will focus on cardiovascular disease and ¿biosurgery,¿ said Duke Collier, president of Genzyme Surgical Products.
Collier said that, for coronary artery disease, the solutions are largely mechanical, such as coronary bypass surgery and angioplasty. For congestive heart failure, the treatments are largely palliative. However, many research groups in academia and industry as well as at Genzyme have begun looking toward cellular and genetic treatments to increase the contractility of heart muscle or to increase blood flow to the heart.
¿Most of the new cellular and genetic therapies are going to be used in conjunction with mechanical interventions,¿ Collier said. ¿Biosurgery is the convergence of mechanical and biological approaches to surgery and interventional procedures.¿
Collier said Genzyme is well-suited to taking a lead in this burgeoning field of medicine, because the company has an established medical device business and top-notch biotechnology. The company produces instruments for minimally invasive surgery, and is developing a cell therapy that transplants a patient¿s own heart cells to aid a failing heart. It is also conducting Phase II studies of GeneGraft, a product designed to promote the growth of blood vessels in heart tissue that has been deprived of oxygen. ¿We have a blended portfolio that really takes some of the best of both worlds,¿ Collier said.
In addition to revenues generated from therapeutics and surgical products, Genzyme General posted revenues of $28.6 million in the first quarter of 1999 for diagnostic products and services. This figure is down from $30.5 million in the same quarter of 1998 because Genzyme sold its research products business to Techne Corp., of Minneapolis, in July 1998. Excluding the research products, the diagnostic product sales increased 17 percent .
Genzyme Molecular Oncology (GMO), a division of Genzyme Corp., posted earnings of $1.6 million, compared to $2.6 million in the first quarter of 1998. GMO had a net loss of $7.1 million, or $0.56 per share, compared to $6.5 million, or $1.66 per share, for the first quarter of 1998.
Genzyme General¿s stock (NASDAQ:GENZ) closed Thursday at $39.687, down $0.562. Genzyme Molecular Oncology¿s stock (NASDAQ:GZMO) ended the day at $3.312, down $0.25. n