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Microsoft word - q110earnings_pr_04_21_10.doc
For Immediate Release
Genzyme Reports Financial Results for the First Quarter of 2010
Provides Update on Product Supply and Consent Decree Terms
CAMBRIDGE, Mass. – Genzyme Corp. (NASDAQ: GENZ) today reported that first-quarter
revenue was $1.07 billion, compared with $1.15 billion in the same period last year, reflecting
limited shipments of Cerezyme® (imiglucerase for injection) and Fabrazyme® (agalsidase beta)
due to product supply constraints.
GAAP net loss was $114.9 million, or $0.43 per diluted share, compared with net income of
$195.5 million, or $0.70 per diluted share, in the first quarter of 2009. GAAP results reflect the
impact of the anticipated $175 million expense associated with the consent decree for the
company’s Allston manufacturing facility.
Non-GAAP net income was $99.3 million, or $0.37 per diluted share, compared with $227.5
million, or $0.82 per diluted share, in the same period last year. Non-GAAP net income
excludes stock compensation expenses, costs associated with the acquisition of Bayer
oncology products and the expense associated with the consent decree.
Genzyme continues to make progress in strengthening the corporation to build shareholder
value. The company recently created the position of chief operating officer to establish a
sharper focus on commercial execution and appointed Executive Vice President David Meeker
to this role; elected Ralph Whitworth, principal and co-founder of Relational Investors LLC, to
the company’s board of directors to add fresh perspective; launched a search for an additional
board member with manufacturing expertise; created new board committees on capital
allocation and risk management; advanced manufacturing capacity expansion projects; and
reported the publication and presentation of clinical trial data validating the potential of the
company’s major late-stage development programs.
“As we work to resume sustainable growth, we are focusing on transforming our manufacturing
operations, maximizing the potential of our diverse product portfolio, and advancing key pipeline
programs, while tightly managing expenses across the corporation,” said Henri A. Termeer,
Genzyme’s chairman and chief executive officer. Consent Decree
Genzyme received a draft consent decree from the FDA regarding its Allston manufacturing
plant. The draft provides for an up-front disgorgement of past profits of $175 million. Because
this is a likely outcome, Genzyme booked this expense in the first quarter. In addition, if the
Allston fill/finish facility is still operating after deadlines for domestic and exported products, the
draft provides for disgorgement of 18.5 percent of revenues from sales of products
manufactured and distributed from Allston after those deadlines. Genzyme and the FDA are
having discussions regarding appropriate deadlines for moving fill/finish operations, as well as
Genzyme Reports Financial Results for the First Quarter of 2010—page 2
the details of the disgorgement provisions. Finally, if fill/finish operations are moved from
Allston but certain remediation actions relating to overall cGMP compliance are not met by
deadlines over the coming years in a remediation plan to be approved by the FDA, the draft
provides for a payment of $15,000 per day per violation until the compliance milestones are
met. Genzyme is actively negotiating with the FDA the terms of the consent decree and
expects that the negotiations will be completed during the second quarter. After finalization of
the consent decree, Genzyme will provide an update, including revised 2010 financial guidance. Product Supply Update
Genzyme achieved its goal of building a small inventory buffer during the first quarter. The
current shipping allocation of 50 percent of demand will be extended, however, due to an
interruption in operations at the company’s Allston facility late in the quarter. The interruption
resulted from an unexpected city electrical power failure that compounded issues with the
plant’s water system, which have been corrected. The facility is fully operational.
Genzyme estimates that it will need to continue the 50 percent shipping allocation for 2-3
months. The company will provide a more precise supply update within a month, after
determining whether Cerezyme material that was unfinished when the interruption occurred can
be finished, the impact of the pending consent decree on product release timelines and a more
accurate assessment of global demand.
Genzyme has made progress in increasing the productivity of the Fabrazyme manufacturing
process. The first run of a new working cell bank (WCB) resulted in a 30 percent increase in
productivity, and a second run is underway. Genzyme’s goal is to increase productivity an
additional 30 percent.
Genzyme estimates that it will need to continue the 30 percent shipping allocation through the
third quarter. The company will provide a more precise update within a month once additional
information is available about the productivity of the new WCB, as well as the timing of
regulatory clearance of the new WCB, the impact of the pending consent decree on product
release timelines and whether Genzyme is able to finish the small amount of work-in-process
Fabrazyme material that was unfinished when the interruption occurred at the Allston plant.
Genzyme will continue to work with minimal levels of inventory for Cerezyme and Fabrazyme
until the company’s new Framingham manufacturing facility is approved, which is anticipated to
take place in late 2011, and any additional manufacturing delays will likely impact supply of
Across the company’s manufacturing operations, programs to expand capacity are on-track.
The new Framingham plant is mechanically complete. Pre-operational activities, including cell
culture, media preparation, bioreactor validation and staff training, are currently taking
place. Engineering and process validation runs are planned for this year. At its Geel, Belgium
facility, Genzyme is adding a third bioreactor for the production of Myozyme, and approval is
anticipated in mid-2011. The company is also working to transition fill/finish operations out of its
Allston facility to its Waterford, Ireland plant and to a contract manufacturer.
Genzyme Reports Financial Results for the First Quarter of 2010—page 3
First Quarter Results and Business Updates
Personalized Genetic Health
Within the Personalized Genetic Health segment (previously called Genetic Diseases) first-
quarter sales of Myozyme® (alglucosidase alfa) increased 28 percent to $86.1 million from $67.4
million in the same period in 2009. First-quarter revenue was down from fourth-quarter 2009
sales, reflecting an $8 million shipment that was delayed for a release hold at the end of the first
quarter. It was subsequently shipped early in the second quarter.
New patients continued to begin treatment with Myozyme during the first quarter. Expansion is
ongoing worldwide, and Genzyme plans new regulatory filings in more than 15 countries during
2010. Positive results from the Late-Onset Treatment Study of Myozyme were published last
week in the New England Journal of Medicine.
The trial was conducted to evaluate the safety
and efficacy of the treatment in older children and adults with Pompe disease.
A June 17 PDUFA date has been set by the FDA for the marketing application of Lumizyme™
(alglucosidase alfa) produced at the 4000L scale. Genzyme in December reopened enrollment
in the Alglucosidase Alfa Temporary Access Program (ATAP), a U.S. program which provides
access to treatment for severely affected adults with Pompe disease prior to commercial
approval of Lumizyme. The ATAP program will remain active until commercial approval of
Lumizyme. Genzyme is currently providing therapy free of charge to more than 200 patients in
the United States.
First-quarter sales of Cerezyme were $179.1 million compared with $296.0 million in the first
quarter of last year. Cerezyme revenue increased 70 percent from $105.4 million in the fourth
quarter of 2009, reflecting the resumption of product shipments to patients in approximately 100
countries. Sales of Fabrazyme in the first quarter were $53.2 million, compared with $122.2
million in the same period last year.
Genzyme’s Personalized Genetic Health segment now includes the company’s cardiovascular
business, enabling this business to build upon its expertise in registry development,
reimbursement and patient advocacy. The cardiovascular business includes the mipomersen
development program, Cholestagel®
(colesevelam hydrochloride), and product sales and
royalties from Welchol®
(colesevelam hydrochloride). Genzyme markets Cholestagel in Europe
for the treatment of patients with the genetic disease familial hypercholesterolemia (FH), and for
statin-intolerant patients. Mipomersen is being developed initially for FH patients with severe
Within the Biosurgery segment, sales of Synvisc® (hylan G-F 20) increased 26 percent to $79.5
million from $63.2 million in the first quarter of 2009. This growth was driven by Synvisc-One®
(hylan G-F 20), which was launched in the United States in March 2009 and is the only single-
injection viscosupplement approved for the treatment of osteoarthritis knee pain. First-quarter
2010 sales were down from $95.4 million in the fourth quarter of 2009, reflecting the annual
seasonality trend in the viscosupplement market, in which sales typically decline in the first
quarter, and peak during the second quarter.
Genzyme Reports Financial Results for the First Quarter of 2010—page 4
Sales of Sepra® products grew 8 percent to $37.2 million, from $34.3 million in the same period
last year, with growth driven by increasing use of the Seprafilm® adhesion barrier in C-section
and other gynecologic procedures.
Renal and Endocrinology
Within this segment, sales of Genzyme’s sevelamer therapies, Renvela® (sevelamer carbonate)
and Renagel® (sevelamer hydrochloride), were $164.6 million, compared with $170.6 million
during the first quarter of 2009. While sevelamer volume grew by 4 percent year over year,
Renagel pricing in Brazil and conversion to Renvela in the United States resulted in a decrease
in revenue. Genzyme last year lowered the price of Renagel in Brazil to compete with generics
marketed in that country. Genzyme had raised the price of Renagel in the United States last
year to encourage conversion to Renvela, and revenue reflects the increasing percentage of
Renvela sales within total U.S. sevelamer revenue. The U.S. market share for sevelamer grew
during the first quarter and is currently 51 percent.
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. planned in the coming months. The U.S. launch of
the powder formulation of Renvela is also exceeding expectations.
Sales of Thyrogen® (thyrotropin alfa for injection) increased 18 percent to $45.6 million from
$38.8 million in the first quarter of 2009, driven by increased utilization of the treatment in
thyroid remnant ablation procedures.
Hematology and Oncology
Within this segment, revenue from Mozobil® (plerixafor injection) grew 75 percent to $18.9
million from $10.8 million in the first quarter last year. Mozobil was launched in the United States
in January 2009 and in Europe in August 2009, and additional worldwide launches are ongoing.
First-quarter growth in this segment was also driven by sales of Clolar®
which increased 36 percent to $24.7 million from $18.2 million in the same period a year ago,
with significant volume growth seen in all major markets.
Sales of Thymoglobulin® (anti-thymocyte globulin, rabbit), which is now being included in this
segment, were $52.9 million, compared with $50.7 million in the first quarter of 2009, due
primarily to increased sales in Asia.
Results from several clinical trials have been submitted for presentation at the June American
Society of Clinical Oncology meeting, including results of a phase 3 trial of Leukine®
(sargramostim) in melanoma, Leukine data in prostate cancer, and Clolar data in
myelodysplastic syndromes, non-Hodgkins lymphoma, and acute myeloid leukemia.
Other revenue – which now includes the company’s Genetics, Diagnostics, and
Pharmaceuticals businesses – was $135.9 million in the first quarter of 2010. Operating Expenses
Genzyme’s GAAP SG&A was $553.3 million, including the $175 million consent decree
expense, compared with $317.9 million in the first quarter of 2009. Non-GAAP SG&A was
Genzyme Reports Financial Results for the First Quarter of 2010—page 5
$352.8 million compared with $294.1 million in the same period last year. The increase was
lower than anticipated, reflecting strong expense controls across the company. The company’s
GAAP R&D was $220.9 million compared with $206.9 million in last year’s first quarter; non-
GAAP R&D was $206.5 million compared with $193.4 million in the first quarter of 2009. Last
year’s R&D included $18 million of expense associated with the Exact Sciences transaction.
Amortization expense was $71 million compared with $57.6 million in the same period last year,
due primarily to the Bayer transaction. Late-Stage R&D Programs
Genzyme made excellent progress during the first quarter across its late-stage pipeline:
• Four-year follow-up data from Genzyme’s completed phase 2 trial of alemtuzumab in
multiple sclerosis patients were presented at last week’s American Academy of Neurology meeting. Results of the four-year review found that an estimated 71 percent of alemtuzumab-treated patients remain free of clinically active disease as much as three years after most patients received their last course of the investigational therapy. Two phase 3 studies are ongoing, and results are expected next year.
• Enrollment is underway in two global, multi-center, phase 3 trials of eliglustat tartrate,
Genzyme’s investigational oral therapy for patients with Gaucher disease type 1. There are currently a total of 30 active sites for these trials, with additional sites preparing to begin enrollment. Results of the phase 2 trial of eliglustat tartrate are expected to be published in the journal Blood
next month. This therapy has the potential to transform the treatment experience for patients by providing a daily oral capsule option instead of bi-weekly infusions lasting several hours or more.
• Genzyme and Isis Pharmaceuticals Inc. in February reported positive results from the
second phase 3 study of mipomersen, in patients with heterozygous familial hypercholesterolemia (FH). Phase 3 data in patients with homozygous FH were published last month in The Lancet
. The companies expect data from two additional phase 3 studies in mid-2010; one involves patients with severe hypercholesterolemia and the other includes hypercholesterolemic patients at high risk for coronary heart disease.
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.
With many established products and services helping patients in approximately 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, and diagnostic testing.
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 Reports Financial Results for the First Quarter of 2010—page 6
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. Important Information
Genzyme, its directors, and the other individuals identified in its preliminary proxy statement
filed with the SEC on April 16, 2010, may be deemed to be participants in the solicitation of
proxies from Genzyme's shareholders in connection with the company's 2010 annual meeting of
shareholders. Information about the directors and other individuals and their interests can be
found in the preliminary proxy statement, a copy of which is available at the SEC's web site at
Genzyme shareholders are advised to read carefully the company's definitive proxy statement
relating to the company's 2010 annual meeting of shareholders and any other relevant
documents filed by the company with the SEC, when they become available, before making any
voting or investment decision, because they will contain important information. The definitive
proxy statement and other reports, when available, can be obtained free of charge at the SEC's
web site at www.sec.gov or from Genzyme at www.genzyme.com. A copy of the company's
definitive proxy statement will also be available for free by writing to Genzyme Corporation, 500
Kendall Street, Cambridge, MA 02142. In addition, copies of the proxy materials may be
requested from our proxy solicitor, Innisfree M&A Incorporated, 501 Madison Avenue, 20th
Floor, New York, NY 10022, (212) 750-5833.
This press release contains forwarding-looking statements regarding Genzyme’s financial
outlook and business plans including, without limitation: its expectations regarding the terms of
the consent decree being negotiated with the FDA and when those negotiations are expected to
be completed; its expectations regarding the duration and amount of the continuing allocations
of Cerezyme and Fabrazyme; its assessment of the factors that will influence those allocations;
its expectation of receipt of regulatory approvals of the new Fabrazyme working cell bank and
the timing thereof; its expectation that its new Framingham manufacturing facility will be
approved in late 2011; its expectation that a third Myozyme bioreactor in its Geel facility will be
approved in mid-2011; its expectation that results from its two phase 3 studies of alemtuzumab
in MS patients will be available next year; its assessment that eliglustat tartrate has the potential
to transform the treatment for patients; its expectation that data from two phase 3 studies of
mipomersen will be available in mid-2010; and its expectation that Renvela will be launched in
key European markets in the coming months. These statements are subject to risks and
uncertainties that may cause actual results to differ materially. These risks and uncertainties
include, among others: that the final terms of the consent decree differ from the terms described
in this release or that the negotiations with the FDA around the consent decree take longer than
that the allocations of Fabrazyme and Cerezyme need to last longer than expected
or need to be more severe than expected for any reason, including that Genzyme is unable to
finish work-in-process material that was in production when operations at Allston were
interrupted, that third party oversight under a consent decree results in delays in product
releases, that Genzyme’s demand forecasts and estimates are inaccurate, or that productivity of
the new Fabrazyme working cell bank does not increase as anticipated or that regulatory
approval does not proceed as anticipated; that production of Fabrazyme and Cerezyme does
not continue as planned due to any reason, including bacterial or viral contamination, equipment
failures, cell growth at lower than expected levels, fill-finish inefficiencies, power outages,
human error or regulatory issues; 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
Genzyme Reports Financial Results for the First Quarter of 2010—page 7
facility; that Genzyme is unable to successfully transition its fill/finish operations out of its Allston
facility to its Waterford, Ireland plant and to a contract manufacturer 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 eliglustat tartrate, alemtuzumab-MS and mipomersen for any reason, including trial
results that are not as favorable as expected and safety profiles that reduce the potential target
population; 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 Part II, Item 7 of Genzyme's Annual Report on Form 10-K for the year ended
December 31, 2009. Genzyme cautions investors not to place substantial reliance on the
forward-looking statements contained in this press release. These statements speak only as of
April 21, 2010 and Genzyme undertakes no obligation to update or revise them.
Genzyme®, Cerezyme®, Fabrazyme®, Myozyme®, Cholestagel®
, Synvisc®, Synvisc-One®,
Sepra®, Seprafilm®, Renvela®, Renagel®, Thyrogen®, Mozobil® and Thymoglobulin® are
registered trademarks and Lumizyme™ is a trademark of Genzyme Corporation or its
subsidiaries. Leukine® is a registered trademark licensed to Genzyme Corporation. Welchol®
a registered trademark of Daiichi Sankyo, Inc. 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 203-369-0536. 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
April 28, 2010.
On May 6, 2010, Genzyme will hold its annual Analyst and Investor Day starting at 1 p.m.
Eastern, which will be webcast live on the investor events section of www.genzyme.com
On July 21, 2010, Genzyme will report its financial results for the second 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 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
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