Genzyme Reports Financial Results for the Second Quarter of 2010
Provides New 2010 Non-GAAP EPS Guidance of $1.90 - $2.00
Updates Product Supply Outlook
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Jul 21, 2010 - Genzyme Corp. (NASDAQ: GENZ) today reported that second-quarter revenue was $1.08 billion, compared with $1.23 billion in the same period last year, reflecting limited shipments of Cerezyme® (imiglucerase for injection) and Fabrazyme® (agalsidase beta) due to product supply constraints in 2010. The company expects to be able to increase shipments of Cerezyme and Fabrazyme during the second half of the year.
GAAP net income was $23,000, or $0.00 per diluted share, compared with net income of $187.6 million, or $0.68 per diluted share, in the second quarter of 2009. Non-GAAP net income was $47.6 million, or $0.18 per diluted share, compared with $226.6 million, or $0.82 per diluted share, in the same period last year.
GAAP and non-GAAP figures include pre-tax manufacturing write-offs of $21.9 million, or $0.06 per diluted share, primarily for material that had to be discarded following the interruption in operations at the Allston facility late in the first quarter and for costs associated with the temporary shutdown of the company's Haverhill, U.K., facility in December 2009. These figures also include a pre-tax write-down of $32.3 million, or $0.08 per diluted share, for the company's 2008 equity investment in Isis Pharmaceuticals, reflecting the extent to which the share price paid exceeds the current market value. Non-GAAP net income excludes stock compensation expenses and costs associated with the acquisition of oncology products from Bayer.
“This was a difficult quarter as reflected in our financial results, but based on the progress we've made with our recovery efforts, the outlook for the second half of 2010 is promising,” said Henri A. Termeer, Genzyme's chairman and chief executive officer. “We are encouraged by the improvements in Cerezyme and Fabrazyme manufacturing. We expect that increasing sales of these products combined with reductions in our operating costs will produce an increase in earnings during the second half of the year.”
During the second quarter, Genzyme continued to make progress in transforming its manufacturing operations, maximizing the potential of its product portfolio, and advancing key pipeline programs to ensure sustainable long-term growth. Major operational milestones included FDA approval of Lumizyme™ (alglucosidase alfa) for late-onset Pompe disease patients in the United States; progress in moving fill/finish operations out of the Allston manufacturing facility; and the strongest quarter to date in the ongoing U.S. launch of Synvisc-One.
The company also continues to make progress in executing its plan for shareholder value creation announced in May. The plan builds on the series of operational and organizational changes the company has made over the past year.
In the area of corporate governance, Genzyme settled its proxy contest and shareholders re-elected all of the company's directors. In addition, Genzyme's board appointed Steven Burakoff, M.D., Eric Ende, M.D., and Dennis Fenton, Ph.D., as directors.
Product Supply Update
Production of Cerezyme is now in-line with historical averages and the Allston facility remains fully operational. With production proceeding successfully, Genzyme will begin increasing shipments in August. The company expects that patients will be able to begin increasing their doses in September and return to normal dosing in the fourth quarter. Genzyme will increasingly look to make therapy available to new patients in need during the fourth quarter as supply becomes available.
Genzyme continues its efforts to improve the productivity of the Fabrazyme manufacturing process, and has received both FDA and EMA approval to use the new working cell bank. As previously communicated, the current shipping allocations will remain in place for the third quarter. Shipments of Fabrazyme are expected to increase in the fourth quarter.
Since levels of demand, ordering patterns and dose regimens vary by region, Genzyme staff in countries around the world will provide patients and physicians with more information on the local impact of this guidance for each product. Because inventories remain limited, any manufacturing disruptions or delays in shipping can impact availability of Cerezyme and Fabrazyme.
At the company's new Framingham manufacturing facility, two bioreactors are currently operational and Fabrazyme engineering runs are planned for September. The facility is on-track for approval, anticipated in late 2011.
During the second quarter, Genzyme began implementing changes to address requirements of the FDA consent decree, including transitioning fill/finish operations out of its Allston facility. The company signed a new agreement with Hospira Worldwide Inc., which will provide fill/finish manufacturing services for some of the company's products. Genzyme has transitioned fill/finish for Cerezyme and Myozyme to its Waterford, Ireland facility, and is in the process of transferring Thyrogen® (thyrotropin alfa for injection) and Fabrazyme fill/finish to Hospira. Process validation runs for Thyrogen and Fabrazyme are underway at Hospira, and the company is on-track to meet its late November 2010 deadlines to complete this transition for all Thyrogen and Fabrazyme that is sold in the United States.
2010 Financial Guidance
Genzyme is providing new 2010 financial guidance based on several factors, including: updated information regarding Cerezyme and Fabrazyme supply; the consent decree; and the estimated impact of foreign exchange, health care reform in the United States, and new product pricing being implemented in the European Union. Please see the attached guidance sheet for additional detail and a reconciliation to the company's previous guidance.
Cerezyme revenue is expected to be $725 million - $775 million and Fabrazyme revenue is expected to be $200 million - $220 million. Total 2010 revenue is expected to be $4.4 billion - $4.5 billion. Non-GAAP EPS is expected to be $0.40 - $0.50 per diluted share in the third quarter, $0.90 - $1.00 per diluted share in the fourth quarter, and $1.90 - $2.00 per diluted share for the full year. This new guidance excludes revenue and expenses in the second half of the year for the three businesses that are expected to be divested.
Second Quarter Results and Business Updates
Within the Personalized Genetic Health segment, second-quarter sales of Myozyme® (alglucosidase alfa) increased 16 percent to $92.1 million from $79.3 million in the same period in 2009. Second-quarter revenue reflects a negative $3.7 million impact of foreign exchange. Genzyme on May 24 received FDA approval for Lumizyme, and has implemented a Risk Evaluation and Mitigation Strategy (called the Lumizyme ACE Program) to ensure that the appropriate patients receive Lumizyme commercially.
Genzyme has initiated this program with the health care professionals involved in the Alglucosidase Alfa Temporary Access Program (ATAP), the program created in 2007 through which Genzyme has provided therapy free of charge to nearly 200 patients prior to commercial approval of Lumizyme. Genzyme will keep ATAP open until August 20, 2010 to ensure that patients have uninterrupted therapy while working to enroll participants in the Lumizyme ACE Program. Genzyme has also begun working with U.S. health care professionals to enable those adult patients who have been waiting to access treatment to begin Lumizyme therapy.
Second-quarter sales of Cerezyme were $138.7 million compared with $298.1 million in the second quarter of last year and sales of Fabrazyme were $39.5 million, compared with $134.3 million in the same period last year. Due to supply constraints, Cerezyme was shipped at 50 percent of demand and Fabrazyme was shipped at 30 percent of demand for the entire second quarter.
Within the Biosurgery segment, sales of Synvisc® (hylan G-F 20) increased 31 percent to $107.7 million from $82.4 million in last year's second quarter, driven by Synvisc-One, which was launched in the United States in March 2009. Growth is resulting both from gains in market share and from overall expansion of the U.S. viscosupplement market, which grew approximately 14 percent in the first half of 2010 compared with the same period last year. Synivsc-One now represents two-thirds of all U.S. Synvisc revenue.
Within the Renal and Endocrinology segment, sales of Genzyme's sevelamer therapies, Renvela® (sevelamer carbonate) and Renagel® (sevelamer hydrochloride), were $170.1 million, compared with $175.4 million during the second quarter of 2009, reflecting increased U.S. sales volume offset by price decreases being implemented by some E.U. countries. The ongoing launch of Renvela in Europe continues to progress well, with launches in the key markets of France, Spain, Italy and the U.K. expected to take place during the second half of 2010.
Sales of Thyrogen increased 8 percent to $46.3 million from $42.9 million in the second quarter of 2009. In accordance with terms of the consent decree, a Dear Healthcare Provider letter describing the patients for whom FDA considers Thyrogen to be medically necessary is currently being included in all U.S. shipments of Thyrogen. Genzyme has limited its promotional activities in the United States to be consistent with the requirements of the consent decree. Once fill/finish operations are transferred to Hospira, the criteria will no longer be in effect and Genzyme will resume normal U.S. promotional work.
Total revenue for the Hematology and Oncology segment, including the oncology products acquired from Bayer in May 2009, increased 58 percent to $176.5 million from $112.0 million in last year's second quarter.
Within this segment, sales of Mozobil® (plerixafor injection) nearly doubled to $22.1 million from $11.7 million in the second quarter last year, reflecting a 23 percent increase in U.S. sales and the robust launch in Europe. Sales of Thymoglobulin® (anti-thymocyte globulin, rabbit) increased 9 percent to $58.2 million compared with $53.6 million in the second quarter of 2009, with significant growth coming from the Asia-Pacific region.
Second-quarter growth in this segment was also driven by sales of Clolar® (clofarabine injection), which increased 29 percent to $25.5 million from $19.7 million in the same period a year ago, with volume growth occurring in all major markets. Data from the phase 3 trial of Clolar in combination with an approved therapy in second-line adult acute myeloid leukemia are expected in the fourth quarter, and positive findings would support regulatory filings for a label expansion in this indication.
Other revenue – which includes the company's Genetics, Diagnostics, and Pharmaceuticals businesses – was $130.0 million in the second quarter of 2010 compared with $143.1 million in the same period last year.
Genzyme's GAAP SG&A was $402.5 million, compared with $354.1 million in the second quarter of 2009. Non-GAAP SG&A was $375.9 million compared with $316.3 million in the same period last year. SG&A reflects expenses associated with the acquisition of the Bayer oncology products, the proxy contest, and consent decree legal fees.
The company's GAAP R&D was $225.6 million compared with $210.5 million in last year's second quarter; non-GAAP R&D was $211.5 million compared with $190.7 million in the second quarter of 2009.
Late-Stage R&D Programs
Genzyme has a strong late-stage pipeline that is expected to help drive long-term growth:
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 12,000 employees in locations spanning the globe and 2009 revenues of $4.5 billion. In 2010, Genzyme was named to the Fortune 500.
With many established products and services helping patients in 100 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 immune disease. Genzyme's commitment to innovation continues today with a substantial development program focused on these fields, as well as cardiovascular disease, neurodegenerative diseases, and other areas of unmet medical need.
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.
This press release contains forwarding-looking statements regarding Genzyme's financial outlook and business plans including, without limitation: its 2010 financial guidance; its expectations regarding shipments of Cerezyme and Fabrazyme and patient dosing of Cerezyme; its expectation that its new Framingham manufacturing facility will be approved in late 2011; its expectation of when results from its two phase 3 studies of alemtuzumab in MS patients will be available and its regulatory filing plans and timetables for the product; its assessment that the company is on track to meet its deadlines to transition all Thyrogen and Fabrazyme fill/finish operations for product sold in the U.S. to Hospira; its assessment that the planned divestitures of three of its business units are on-track for completion by year end; its expectations regarding mipomersen, including the timing of data availability from two phase 3 studies and the anticipated regulatory filing strategy and timing; its expectation that Renvela will be launched in key European markets during the second half of 2010; and its expectations for Clolar, including that data from the phase 3 trial of Clolar in combination in second-line adult AML will be available in the fourth quarter and that such data will support a label expansion; its plans to begin implementation of a multi-year action plan to improve operating margins in the fall; and its assessment that eliglustat tartrate has the potential to transform the treatment experience for Gaucher patients. These statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among others: that production and shipment of Fabrazyme and Cerezyme does not continue as planned due to any reason, including contamination, equipment malfunctions, cell growth at lower than expected levels, fill-finish inefficiencies, power outages, human error or regulatory issues; that Genzyme is unable to meet its 2010 financial guidance for any reason, including due to lower than expected revenues attributable to further manufacturing issues or an inability to transition Lumizyme patients to commercial product as quickly as anticipated, or higher than expected operating expenses; that Genzyme cannot obtain on expected timetables or maintain regulatory approvals for its products and manufacturing facilities, including its Allston manufacturing facility, its new Framingham facility, and a third Myozyme bioreactor in its Geel facility; that Genzyme is unable to successfully transition its fill/finish operations out of its Allston facility to its Waterford, Ireland plant and to Hospira on planned timelines; that Genzyme is not able to successfully complete clinical development and obtain regulatory approvals of its product candidates within anticipated timeframes and for anticipated indications, including alemtuzumab-MS, mipomersen and eliglustat tartrate for any reason, including trial results that are not as favorable as expected and safety profiles that reduce the potential target population; that Genzyme is unable to complete any or all of its planned business divestitures by the end of the year; 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 Management's Discussion and Analysis of Financial Condition and Results of Operations in Genzyme's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. Genzyme cautions investors not to place substantial reliance on the forward-looking statements contained in this press release. These statements speak only as of July 21, 2010 and Genzyme undertakes no obligation to update or revise them.
Genzyme®, Cerezyme®, Fabrazyme®, Myozyme®, Synvisc®, Synvisc-One®, Renvela®, Renagel®, Thyrogen®, Mozobil®, Clolar®, and Thymoglobulin® are registered trademarks and Lumizyme™ is a trademark of Genzyme Corporation or its subsidiaries. All rights reserved.
Conference Call Information
Genzyme will host a conference call today at 11 a.m. Eastern. 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 402-998-1512. 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 July 28, 2010.
On October 20, 2010, Genzyme will report its financial results for the third quarter of 2010. There will be a conference call at 11 a.m. Eastern. 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 203-369-3645. 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 27, 2010.
|GENZYME CORPORATION (GENZ)|
|Consolidated Statements of Operations||Three Months Ended||Six Months Ended|
|(Unaudited, amounts in thousands, except per share amounts)||June 30,||June 30,|
|Operating costs and expenses:|
|Cost of products and services sold||361,671||350,523||707,282||646,335|
|Selling, general and administrative||402,535||354,128||955,845||672,089|
|Research and development||225,558||210,522||446,488||417,447|
|Amortization of intangibles||67,891||63,945||138,875||121,543|
|Contingent consideration expense||10,021||9,090||72,570||9,090|
|Total operating costs and expenses||1,067,676||988,208||2,321,060||1,866,504|
|Operating income (loss)||11,763||240,302||(167,148||)||510,877|
|Other income (expenses):|
|Gain (loss) on investments in equity securities, net||(870||)||(105||)||(1,567||)||(681||)|
|Gain on acquisition of business||-||24,159||-||24,159|
|Total other income (expenses)||(28,992||)||26,142||(26,828||)||29,937|
|Income (loss) before income taxes||(17,229||)||266,444||(193,976||)||540,814|
|(Provision for) benefit from income taxes||17,252||(78,870||)||79,051||(157,754||)|
|Net income (loss)||$||23||$||187,574||$||(114,925||)||$||383,060|
|Net income (loss) per share:|
|Weighted average shares outstanding:|
Posted: July 2010