By Randall Osborne

Powered by sales of its lead enzymes for Gaucher's disease, Genzyme Corp. chalked up revenues of $156 million for the fourth quarter of 1997, an 8 percent increase over the same period the previous year, and reported total revenues surging ahead of 1996's numbers by 17 percent, to $597 million.

The enzymes, Cerezyme and Ceredase, produced record fourth-quarter sales of $90 million, up 25 percent from 1996's fourth-quarter sales of $72 million. Cerezyme (recombinant glucocerebrosidase) eventually will replace Ceredase, the natural version of the enzyme, which is derived from human placenta.

"Cerezyme sales accounted for 67 percent of total revenues, as the conversion continues very nicely," said David McLachlan, CFO of Cambridge, Mass.-based Genzyme. The conversion is virtually complete in the U.S., and will be nearly complete worldwide by the end of 1998.

The company posted fourth-quarter net income before special charges of $26.3 million, up 26 percent, and a total year's net income before charges of $95.1 million, a 16 percent rise.

"We ended 1997 with a cash balance in excess of $193 million, and our operating cash flow continues to grow," McLachlan said.

Cutting into 1997's net income were charges related to the surgical products and pharmaceuticals business units, amounting to $17.7 million in after-tax provisions.

In the surgical products unit, the charge came when the company stopped development of Sepracoat, a hyaluronic acid solution to prevent scarring, following its rejection by an FDA advisory panel. Growth in the pharmaceuticals unit was slowed by the company's bulk pharmaceuticals line and its fine chemicals production, which Genzyme said it would eliminate in favor of a focus on higher-value products for drug delivery. (See BioWorld Today, May 6, 1997, p. 1, and Jan. 7, 1998, p. 1.)

After the charges, net income was $8.6 million for the fourth quarter of 1997, or $0.11 per share, and net income for the year after charges was $77.4 million, or $0.98 per share.

"Although we haven't talked about it, in 1997 the strong dollar had a fairly significant impact on our revenue line," McLachlan said. Revenues for 1997 would have been $2.5 million higher in the fourth quarter and $10 million higher for the year, if exchange rates had stayed the same as they were at the start of 1997, he said.

"All in all, I think we had a good, solid fourth quarter, right along everyone's expectations," McLachlan said, adding that 1997 also was "very good."

Peter Drake, an analyst with Vector Securities International Inc., of Deerfield, Ill., said expectations for Genzyme have been hard to come by, until recently.

"This is a company that has not been known for guiding Wall Street specifically to a number early in the year," he said. This year, however, Genzyme said it could achieve $1.45 earnings per share (EPS) in 1998.

"That's very significant," Drake said, calling the coming year "critical" in the overall development of the company.

Drake said Genzyme likely will have two products approved by the end of 1998. One is Thyrogen (recombinant human thyroid stimulating hormone), the new drug application (NDA) for which has been given priority review status by the FDA. (See BioWorld Today, Dec. 19, 1997, p. 1.)

The other is RenaGel, a polymer-based drug that controls elevated phosphorous levels in dialysis patients. In June 1997, Genzyme entered a collaboration with Waltham, Mass.-based GelTex Pharmaceuticals Inc. to bring RenaGel to market. An NDA for the drug was submitted last November. (See BioWorld Today, Nov. 4, 1997, p. 1.)

"I'm a bull on this story," Drake said. "I like [Genzyme's] management a lot, and I like the diversity in their business, and I really like their capital structure."

Genzyme's stock (NASDAQ:GENZ) closed Thursday at $30.125, down $1.062. *

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