CAMBRIDGE, Mass., Oct. 24 /PRNewswire-FirstCall/ -- Genzyme Corporation today reported a significant increase in third-quarter non-GAAP profit. The increase was driven once again by strong sales and continued operating leverage. Revenue grew 19 percent to $960.2 million from $808.6 million in the same period a year ago, reflecting continued momentum across most product areas.
GAAP net income rose to $159.3 million, or $0.58 per diluted share, compared with $16.0 million, or $0.06 per diluted share, in the quarter a year ago.
Non-GAAP net income grew 23 percent to $241.3 million, or $0.90 per diluted share, from $195.9 million, or $0.73 per diluted share, in the same period last year. Non-GAAP figures for this year’s third quarter exclude pre-tax stock-compensation expenses of $44.4 million, amortization of $49.8 million, a charge of $19.2 million related to the acquisition of Bioenvision Inc., a manufacturing-related charge of $11.8 million, and the effect of contingent convertible debt.
Genzyme said in July that it expects non-GAAP earnings to grow at a compound average of 20 percent during the five-year period from 2006 through 2011. The company added today that it expects non-GAAP earnings to increase to approximately $4.00 per diluted share next year and that earnings are projected to rise to approximately $7.00 per diluted share by 2011. Genzyme’s growth over this period is being led by three key drivers: increasing sales of existing products, the launch of new products now approaching the market, and continued operating leverage from the company’s global infrastructure.
“We grew earnings at a compound average of more than 20 percent over the past decade, and we are committed to delivering a similarly strong rate of growth over the next five-year period,” said Chairman and Chief Executive Officer Henri A. Termeer.
During the third quarter, Genzyme generated approximately $280 million in cash from operations. The company is using a portion of its cash from operations to repurchase shares under a three-year program intended to reduce the dilutive effect of equity compensation programs. Since the program began in the second quarter, the company has spent $181.2 million to repurchase 2.8 million shares.
Genzyme continues to make excellent progress in building its businesses to drive future growth, and the past three months have been particularly productive. The company obtained marketing approvals for three new products; expanded its oncology franchise by securing worldwide rights to its leukemia drug clofarabine; and reported highly encouraging results for the two most prominent product candidates in its pipeline- Mozobil(TM) (plerixafor) and alemtuzumab for multiple sclerosis. Highlights for the period include the following:
-- The FDA approved Renvela(R) (sevelamer carbonate) for chronic kidney disease patients on dialysis, marking the first step in Genzyme’s program to expand the use of sevelamer to a broader set of patients and drive the product’s long-term growth. The company expects to launch Renvela for dialysis patients during the first quarter of next year. It also plans to seek FDA approval in the first half of next year for Renvela’s use by patients with earlier stages of chronic kidney disease. An FDA advisory committee voted this week to recommend that the agency extend the indications for phosphate binders to include pre-dialysis patients with hyperphosphatemia.
-- Genzyme is preparing to launch two products that will add incrementally to the top line while primarily utilizing existing sales and marketing resources. Specifically, the company won approval in Japan to market Elaprase(TM) (idursulfase) for the treatment of Hunter syndrome. Elaprase is being commercialized by Genzyme in Asia under an agreement with Shire Human Genetic Therapies Inc. In addition, Genzyme obtained European Union clearance to market Cholestagel(R) (colesevelam hydrochloride), a cholesterol-lowering agent for the treatment of primary hypercholesterolemia.
-- Genzyme completed its acquisition of Bioenvision following a favorable merger vote by Bioenvision shareholders earlier this week. The transaction provides Genzyme with worldwide rights for clofarabine, which is currently approved in the United States for the treatment of acute lymphoblastic leukemia in relapsed and refractory pediatric patients. Genzyme is developing clofarabine for significantly larger indications, including use as a first- line therapy for the treatment of adult acute myeloid leukemia. The company expects to file for such an indication in the United States next year.
-- The FDA approved expanded labeling for Campath(R) (alemtuzumab) to include first-line treatment of B-cell chronic lymphocytic leukemia, significantly increasing the number of patients eligible to receive the product. European approval of an expanded indication is expected this year, following the positive opinion issued this month by the Committee for Medicinal Products for Human Use.
-- Genzyme reported top-line three-year results from a completed Phase 2 clinical trial comparing alemtuzumab with Rebif(R) (interferon beta-1a) for the treatment of multiple sclerosis. The study showed that patients taking alemtuzumab experienced at least a 73 percent reduction in the risk for relapse and at least a 70 percent reduction in the risk for progression of clinically significant disability after three years of follow up, when compared to patients treated with interferon beta-1a. The data also showed that mean disability scores improved from baseline in the alemtuzumab patients and declined in the Rebif patients. Genzyme and Bayer Schering Pharma AG, Germany, have begun enrolling patients in two Phase 3 trials examining the safety and efficacy of alemtuzumab for the treatment of multiple sclerosis.
-- Genzyme also reported that both of its pivotal trials of Mozobil met their primary endpoints and that the company would file in the first half of 2008 for U.S. and European approval for the product’s use in treating patients with multiple myeloma and patients with lymphoma. Genzyme plans to launch the product early in 2009. Mozobil is an innovative product intended to facilitate and improve the outcome of stem-cell transplantation procedures. Genzyme expects peak sales of Mozobil in the transplant setting of $400 million, and the company is exploring additional indications for the product, including chemosensitization procedures. Results from the pivotal studies of Mozobil will be presented at the American Society of Hematology annual meeting in December.
Therapeutics
Sales of Myozyme(R) (alglucosidase alfa) rose to $53.6 million, compared with $20.4 million in the same period a year ago. Genzyme expects to submit an application to the FDA by the end of this month for approval of a larger scale manufacturing process to supply Myozyme for the U.S. market. An agency decision is expected in the first quarter of next year. Production at this larger scale is already approved by more than 30 countries. To ensure that treatment is available to all U.S. patients who need it, Genzyme is managing a temporary clinical access program through which patients may receive Myozyme produced at the larger scale. The study of Myozyme involving patients with late-onset Pompe disease will conclude this year, and results will be submitted to regulatory authorities by the middle of next year.
Sales of Fabrazyme(R) (agalsidase beta) increased 12 percent to $104.6 million, compared with $93.2 million in the same quarter last year. Sales of Cerezyme(R) (imiglucerase for injection) grew 13 percent to $286.1 million, compared with $252.2 million in the third quarter a year ago. Sales of Aldurazyme(R) (laronidase) grew 29 percent to $32.3 million, compared with $25.0 million in last year’s third quarter. Aldurazyme is marketed through a joint venture with BioMarin Pharmaceutical Inc.
Genzyme has completed enrollment in the Phase 2 trial of the small molecule Genz-112638, a novel oral therapy being developed for the treatment of Gaucher disease. Initial observations from the first group of patients enrolled in this open-label study were highly encouraging, and Genzyme has requested a meeting with the FDA to discuss an expedited development strategy. The company believes this product could reach the market within 3-4 years and provide an additional treatment option for physicians and Gaucher patients.
Sales of Thyrogen(R) (thyrotropin alfa for injection) grew 20 percent in the third quarter to $26.8 million, compared with $22.4 million in the period a year ago. Genzyme expects U.S. approval for Thyrogen’s use in thyroid cancer remnant ablation procedures this year.
Renal
Within the Renal business, sales of Renagel(R) (sevelamer hydrochloride) rose 14 percent to $154.2 million, up from $134.7 million in the third quarter a year ago. The clinical evidence supporting Renagel is allowing the product to retain pricing power and increase market share in the competitive and growing market for phosphate binders. Results from the Dialysis Clinical Outcomes Revisited (D-COR) study of Renagel were published online in Kidney International in August and in the journal itself this month. The study compared mortality and morbidity outcomes for patients on Renagel and patients receiving calcium-based phosphate binders.
Sales of Hectorol(R) (doxercalciferol) rose 19 percent to $30.3 million from $25.5 million a year ago. The most significant growth was in the 0.5 microgram capsule, the dose indicated for chronic kidney disease patients who are not on dialysis. Hectorol is enabling Genzyme to establish itself in this market prior to the introduction of Renvela for a pre-dialysis indication.
Transplant
Sales of Thymoglobulin(R) (anti-thymocyte globulin, rabbit) and Lymphoglobuline(R) (anti-thymocyte globulin, equine) rose 9 percent in the third quarter to $41.0 million, compared with $37.6 million in the same period last year.
Biosurgery
Within the Biosurgery unit, third-quarter sales of Synvisc(TM) (hylan G-F 20) grew 9 percent to $61.2 million, compared with sales of $55.9 million in last year’s third quarter. Genzyme anticipates U.S. and European regulatory action this year on its marketing applications for the single-injection regimen Synvisc-One(TM). The company is confident that this product-delivered through a single knee injection-will simplify osteoarthritis pain management, reduce the overall cost of therapy and offer a treatment option that may dynamically expand the benefits of viscosupplementation to a broader number of patients.
Additionally, Genzyme plans to pursue CE Mark approval for hylastan in the European Union. Hylastan is an alternatively formulated viscosupplementation product that, like Synvisc-One, was designed to simplify osteoarthritis pain management by reducing the number of required knee injections. Genzyme expects to submit an application to European regulatory authorities in the first half of next year.
Sales of Sepra(R) products rose 25 percent to $26.4 million in the third quarter, up from $21.1 million in last year’s third quarter. This increase is somewhat greater than in previous quarters and reflects the growing use of Seprafilm(R) adhesion barrier in larger markets such as gynecologic surgery. Genzyme’s expanded U.S. Sepra sales force is helping to broaden use of the product
Genetic Diagnostics
Genetics revenue grew 19 percent in the third quarter to $73.1 million, up from $61.4 million in the same quarter last year. The Genetics business has been experiencing strong growth, driven by an increasing demand for diagnostic testing services. Genzyme is investing in additional information technology and infrastructure to continue to strengthen the competitive advantages the Genetics unit has created.
Other
Other revenue increased 25 percent in the third quarter to $82.3 million, compared with $66.1 million in the same quarter last year. Other revenue includes sales of diagnostic products and pharmaceutical intermediates, royalties from the sale of WelChol(R) (colesevelem hydrochloride), and oncology revenue.
Oncology revenue increased 38 percent to $22.7 million from $16.5 million in the third quarter a year ago. Oncology revenue includes sales of Clolar(R) (clofarabine for injection) and profits and royalties for Campath.
Expenses
Third-quarter non-GAAP operating expenses increased 14 percent compared with the same quarter last year, while revenue grew 19 percent, underscoring the leverage Genzyme is gaining from its global commercial infrastructure. Non-GAAP selling, general and administrative expenses were $245.2 million compared to $214.9 million in the third quarter last year. Non-GAAP SG&A spending represented 26 percent of revenue in the quarter, down from 27 percent in the third quarter last year.
Non-GAAP research and development spending rose to $162.3 million in the third quarter, up from $143.0 million in last year’s third quarter, reflecting increased spending on late-stage programs. Non-GAAP R&D spending represented 17 percent of revenue, consistent with recent quarters.
As noted, Genzyme recorded an $11.8 million manufacturing-related charge during the quarter, which reflects the write off of four finished lots of Thymoglobulin that did not meet the company’s specifications. Several additional finished lots of the product are currently under review to determine whether they meet quality specifications.
About Genzyme
One of the world’s leading biotechnology companies, Genzyme is dedicated to making a major positive impact on the lives of people with serious diseases. Since 1981, the company has grown from a small start-up to a diversified enterprise with more than 10,000 employees in locations spanning the globe and 2006 revenues of $3.2 billion. In 2007, Genzyme was chosen to receive the National Medal of Technology, the highest honor awarded by the President of the United States for technological innovation. In 2006 and 2007, Genzyme was selected by FORTUNE as one of the “100 Best Companies to Work for” in the United States.
With many established products and services helping patients in nearly 90 countries, Genzyme is a leader in the effort to develop and apply the most advanced technologies in the life sciences. The company’s products and services are focused on rare inherited disorders, kidney disease, orthopaedics, cancer, transplant and diagnostic testing. Genzyme’s commitment to innovation continues today with a substantial development program focused on these fields, as well as immune disease, infectious disease and other areas of unmet medical need.
This press release contains forward-looking statements regarding Genzyme’s financial outlook and business plans and strategies, including: its non-GAAP earnings estimate for 2008 and 2011; its expectation of a 20% compound average non-GAAP earnings growth rate through 2011; and its product development plans and timelines and regulatory filing and action estimates, including the timing of the launch of Renvela for dialysis patients, the timing of the US filing for the use of Renvela by patients with earlier stages of CKD, the timing of the US filing for use of Clolar as a first-line treatment in adult AML, the receipt of European approval of Campath as a first-line treatment in B-CLL, the timing of the launch of Mozobil in multiple myeloma and non-Hodgkin’s lymphoma and the expected peak product revenues in the transplant setting, the timing of GENZ-112638 product launch, the timing of the receipt of FDA approval for Thyrogen in thyroid cancer ablation, and the timing of the receipt of FDA approval for a larger-scale Myozyme manufacturing process. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those forecasted. These risks and uncertainties include, among others: Genzyme’s ability to successfully complete preclinical and clinical development of its products; Genzyme’s ability to expand the use of current products in existing and new indications; Genzyme’s ability to obtain and maintain regulatory approvals for products and manufacturing facilities, including the larger-scale production of Myozyme and the timing of receipt of such approvals; Genzyme’s ability to manufacture products and product candidates in a timely and cost effective manner and in sufficient quantities to meet demand; Genzyme’s ability to maintain and enforce intellectual property rights; Genzyme’s ability to successfully identify and market to new patients; the scope of third-party reimbursement coverage for Genzyme’s products and services; and the risks and uncertainties described in Genzyme’s SEC reports filed under the Securities Exchange Act of 1934, including the factors discussed under the caption “Risk Factors” in Genzyme’s Quarterly Report on Form 10-Q for the period ended June 30, 2007. Genzyme cautions investors not to place substantial reliance on the forward- looking statements contained in this press release. These statements speak only as of today’s date and Genzyme undertakes no obligation to update or revise the statements.
Genzyme(R), Myozyme(R), Fabrazyme(R), Cerezyme(R), Thyrogen(R), Renagel(R), Hectorol(R), Thymoglobulin(R), Lymphoglobuline(R), Synvisc(R), Sepra(R), Seprafilm(R), Campath(R) and Clolar(R) are registered trademarks and Mozobil(TM), Renvela(TM), Hylastan(TM) are trademarks of Genzyme Corporation or its subsidiaries. Aldurazyme(R) is a registered trademark of BioMarin/Genzyme LLC. Elaprase(TM) is a trademark of Shire Human Genetic Therapies Inc. WelChol(R) is a trademark of Sankyo Pharma. All rights reserved.
Conference Call Information
Genzyme Corporation will host a conference call today at 11:00 a.m. Eastern Time to discuss third-quarter financial results. To participate in the call, please dial 773-799-3828 and refer to pass code “Genzyme.” A replay of this call will be available by dialing 402-998-1342. This call will also be Webcast live on the investor events section of www.genzyme.com. Replays of the call and the Webcast will be available until midnight on October 31, 2007.
Upcoming Events
Genzyme Corporation will host a conference call February 13, 2008, at 11:00 a.m. Eastern Time to discuss four-quarter financial results. To participate in the call, please dial 773-799-3828 and refer to pass code “Genzyme.” A replay of this call will be available by dialing 203-369-1503. This call will also be Webcast live on the investor events section of www.genzyme.com. Replays of the call and the Webcast will be available until midnight February 20, 2008.
Genzyme’s press releases and other company information are available at www.genzyme.com and by calling Genzyme’s investor information line at 1-800- 905-4369 within the United States or 1-678-999-4572 outside the United States.
CONTACT: Media, Bo Piela, +1-617-768-6579, or Investor, Sally Curley,
+1-617-768-6140, both of Genzyme Corporation
Web site: http://www.genzyme.com/
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