Genzyme Corp. posted record fourth quarter and annual revenues for1995 that were in line with expectations. Projections going forward,however, may not be as clear.

The Cambridge, Mass., company reported late Wednesday thatearnings per share for the fourth quarter, before special charges,increased 43 percent, to 53 cents, compared to 37 cents a year earlier.Earnings were up 84 percent to $17.8 million from $9.7 millionbefore special charges.

The $15.2 million in charges, related in part to the purchase of theminority interest in genetic testing service unit IG Laboratories, were$15.2 million, or 45 cents per share, bringing net income down to$2.6 million, or 8 cents per share, about what they were in the fourthquarter of 1994. Net income for the year after charges was $43.7million, or $1.45 per share, compared to $32.1 million, or $1.22, in1994.

Reijer Lenstra, an analyst with New York-based Smith BarneyShearson, said the market may not be taking into account the specialcharges Genzyme has taken over the years. Cumulative charges from1992 to 1995 were $170 million while operating income for the sameperiod was $205 million. "That's a significant percentage," he said,adding that more charges related to buybacks of the hyaluronic acid-based products and the Neozyme II partnership likely are ahead.

Genzyme already offered $93 million in stock for the partnership thatfunded early development of the hyaluronic products. The lead anti-adhesion product in that line, Seprafilm, will be reviewed March 25,1996, by an FDA advisory panel. Genzyme said it may prove usefulin 5 million abdominal and gynecological surgeries in the U.S. eachyear.

Jeffrey Swarz, a director at CS First Boston Corp., in New York, saidSeprafilm "is an efficacious product I think will get smooth sailing atthe FDA. I think it will do $50 million in sales in 1996."

C. Anthony Butler, vice president of biotechnology research forRaymond James & Associates Inc., in St. Petersburg, Fla., said hisestimate of $25 million in 1996 Seprafilm sales is more conservativethan many projections. He estimated sales of $63 million in 1997,$105 million in 1998 and a potential of $215 million by the end ofthe decade.

Lenstra was less optimistic. He, too, sees approval and launch thisyear and put maximum revenues from the product at $100 million to$150 million.

He said Seprafilm has yet to show proven medical benefit, andGenzyme may run into trouble when it comes to reimbursementissues.

Genzyme's revenues in 1995 were $379 million compared to $311 in1994. Gross profit increased significantly, moving 37 percent for thequarter to $58 million. Gross margin for the quarter was 60 percentvs. 55 percent a year ago. The analysts said they all like thosenumbers.

Swarz sees earnings this year of $2.30, next year of $3.01 and $3.82in 1998. Butler, taking into account full dilution, projected earningsof $2.19 this year and $2.43 in 1997.

Lenstra predicted issues surrounding the acceptance of Seprafilm willadd volatility to Genzyme's stock price over the next year.

The stock (NASDAQ:GENZ) gained 25 cents Thursday to close at$74.50. n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.