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Lowered 2002 Guidance Hurts Genzyme; Stock Drops 23 Percent

June 21, 2002

Genzyme General's stock fell more than 20 percent Thursday following the company's announcement after the market's close Wednesday that the company is lowering its 2002 second-quarter projections, as well as guidance for the year.

Cambridge, Mass.-based Genzyme, a division of Genzyme Corp., expects total revenues for 2002 to be between $1.1 billion and $1.15 billion, a decrease of about 4 percent from previous guidance of $1.15 billion to $1.2 billion. The company now expects to earn between $1.18 and $1.23 per share for the year, down from previous guidance of between $1.40 and $1.46 per share.

News of Genzyme's warning, combined with New York-based ImClone Systems Inc.'s notice from the SEC threatening action against the company, hurt an already-suffering biotechnology sector. The Nasdaq Biotech composite dropped 23 points Thursday, or 4.5 percent. Salomon Smith Barney and Goldman Sachs downgraded Genzyme Thursday, and the company's stock (NASDAQ:GENZ) shed $6.17 Thursday, or 23.9 percent, to close at $19.70.

Genzyme attributed its new guidance to lower-than-expected sales of Renagel (sevelamer hydrochloride) for patients with end-stage renal disease - now estimated to be between $200 million and $210 million for 2002, down from its previous guidance of between $260 million and $280 million.

For the second quarter - a quarter in which Genzyme now expects to post earnings estimated at 25 cents to 26 cents per share - Renagel revenues are expected to be about $40 million.

In an SG Cowen research note, Eric Schmidt said: "While we believe [Renagel] should continue to generate significant revenues in the outgoing years, the rapid [growth] seen in 2001 in the U.S. is unlikely to be duplicated in 2002. Instead, penetration of the European market fueled by the launch of the 800-mg tablets is key to the stock success in 2002, in our opinion."

Renagel is a nonabsorbed, polymer-based phosphate binder. Genzyme said, among other things, it completed a tableting line at its manufacturing facility and expects to qualify a third tableting line at a backup contract manufacturer next quarter. Also, the company said, it expanded its Renagel sales force. Genzyme now has an 80-person Renagel squad in the U.S. and 76 people in Europe.

Genzyme raised its 2002 guidance for Cerezyme (imiglucerase) for Gaucher's disease from between $580 million and $600 million to between $600 million and $610 million. Also, its other therapeutic products and pharmaceutical intermediates are now expected to bring in combined revenue between $90 million and $105 million, which is increased from previous guidance of between $85 million and $100 million.

Revenue from Genzyme's diagnostics businesses is expected to be lower than previously thought - between $175 million and $185 million, down from $180 million to $185 million.

Genzyme Corp.'s CEO and chairman, Henri Termeer, said in a prepared statement, "The catalysts for Renagel's growth are in place. The longer-term potential for Renagel continues to be tremendous. We remain highly confident in our outlook for the product and in the fundamental strength of all of our businesses."