By Mary Welch
Spurred on by strong sales of Cerezyme, its treatment for Gaucher's disease, Genzyme Corp. reported earnings per share of $0.39 for the second quarter of 1998, an increase of 30 percent from the $0.30 per share for the same period last year.
For the first six months of 1998, the Cambridge, Mass., company reported earnings per share of $0.72, compared with $0.59 for the first six months of 1997.
Total revenues for the quarter increased 14 percent to $169 million from $147.6 million for the second quarter of 1997. For the first six months of this year, revenues are $323.1 million vs. the 1997 six-month total of $292.2 million.
"It was a very nice quarter," said David Stone, managing director of Cowen & Co., in Boston. "Their earnings per share was $0.39 vs. [Wall Street analysts' consensus of] $0.34 and our $0.33. Those results were driven by better than expected top-line growth in all but the surgical products division. That division grew, but less than anticipated."
Net income for the quarter was $31.2 million, an increase of 34 percent from $23.3 million in the second quarter of 1997. Year-to-date figures are $56.1 million, compared with $44.5 million for the first six months of 1997.
"Gross profits for the second quarter increased 21 percent (to $110.8 million vs. $91.5 million for the same quarter last year), which means that the gross margin was 66 percent, an increase of three percent over last year," said Stone. "Expectations were about one percent."
Therapeutics Sales Up 25 Percent
Leading the financial charge was Genzyme's therapeutics division, which saw quarterly revenues increase 25 percent to $102.5 million from $81.8 million for the second quarter of 1997. Sales of Cerezyme and Ceredase produced combined revenues of $98.6 million, a 23 percent increase over the same period last year. Cerezyme (recombinant glucocerebrosidase) eventually will replace Ceredase, the natural version of the enzyme, which is derived from human placenta.
"The conversion over to Cerezyme continues to be successful. It makes up about 83 percent of the combined revenues (of the two drugs) this quarter," Stone said.
The company also reported therapeutics revenues were at a record high this quarter due to the production and delivery to an unnamed customer of a proprietary peptide that will be used as a therapeutic. Revenues from that order were not revealed.
Genzyme's surgical products unit reported quarterly revenues of $29 million, up slightly from $28.4 million for the same period last year. During this quarter, the company received approval in Japan to sell Seprafilm, a bioresorbable membrane, for use in gynecological surgery. It will be marketed there by Kaken Pharmaceutical Co. Ltd. of Tokyo. Seprafilm approval in Japan for use in abdominal surgery is expected in the fourth quarter.
U.S. sales of Seprafilm jumped 33 percent this quarter over the first quarter of 1998. Of 350 targeted hospitals, 70 percent have placed at least one order for Seprafilm during the second quarter vs. 55 percent in the first quarter of 1998.
On the diagnostic side, revenues grew to $31.3 million this quarter from $30.7 million in the same quarter last year. On July 1, Genzyme completed the sale of primary assets of its research products business, which had 1997 revenues of approximately $17 million, to Techne Corp., of Minneapolis, for $65 million in cash. The after-tax gain of $20 million will be recorded in the next quarter.
"The company declined to increase its [annual] earnings per share estimate of $1.45, saying they expect an increased expense as they prepare new products for marketing in the second half of the year," Stone said. "That's a good problem to have."
Those products are RenaGel, a non-absorbed phosphate binder for the control of elevated phosphate levels in dialysis patients, and Thyrogen, a recombinant thyroid stimulating hormone for thyroid cancer.
RenaGel is currently under review in the U.S., Europe and Canada. Genzyme and GelTex Pharmaceuticals Inc., of Waltham, Mass., which developed RenaGel, will commercialize the product worldwide, except in the Pacific Rim.
The FDA extended its timetable to Sept. 15 for acting on Genzyme's new drug application (NDA) for Thyrogen, in order to complete a review of an amendment relating to the chemistry and manufacturing portion of the NDA.
Genzyme also has entered into two joint ventures to strengthen its pipeline for developing treatments for mucopolysaccharidosis I (Hurler syndrome) and Pompe disease, which like Gaucher's disease are lysosomal storage disorders.
The company has teamed with BioMarin Pharmaceutical, Inc., of Novato, Calif., to develop and market the enzyme alpha-L-iduronidase for Hurler and Hurler-Scheie syndromes, which are fatal childhood genetic disorders.
And Genzyme invested $14 million to form a joint venture with the Pharming Group N.V., of Leiden, the Netherlands, to develop and commercialize the enzyme alpha-glucosidase as a treatment for Pompe disease.
"They've got two new products coming on line and two new partnerships that may result in new products," Stone said. "Conceptually, the business is doing well and the extra operating costs that the company has been controlling may be offset by new expenses. But if those expenses result in new products and successful sales, I think we'll see a strong future for the company."
Genzyme's stock (NASDAQ:GENZ) closed Thursday at $28.25, up $0.125. *