Adam Feuerstein

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Genzyme Posts Lower Profits, Says Renagel Worries Nearly Over

Adam Feuerstein

Genzyme (GENZ Quote - Cramer on GENZ - Stock Picks) posted lower third-quarter profits Wednesday, hurt as expected by slumping sales of its drug Renagel.

Genzyme was expected to post poor results based on a hefty sales and profit warning issued last month. In fact, the Cambridge, Mass.-based firm has lowered guidance three times this year.

But Genzyme insists that its Renagel troubles -- too much of the drug sitting on warehouse shelves -- are nearing an end. And the company is feeling a bit more confident about approval of its experimental Fabry disease drug, Fabrazyme, now that a rival drug from Transkaryotic Therapies (TKTX Quote - Cramer on TKTX - Stock Picks) has run into a regulatory roadblock.

On a reported basis, Genzyme earned $53.4 million, or 25 cents per share, in the third quarter.

Pro forma income in the quarter totaled $57.9 million, or 27 cents per diluted share, before certain charges and special items. This compares to pro forma net income of $64.1 million, or 30 cents per share, in the third quarter last year. Analysts were expecting pro forma third-quarter earnings of 28 cents per share, down from expectations of 33 cents per share last month, according to Thomson Financial/First Call.

Revenue in the quarter rose 7% to $272.8 million, compared to $255.1 million in the third quarter last year. Sales of Renagel, a drug used by patients undergoing kidney dialysis, totaled $37 million, well off sales from the year-ago quarter but within reduced guidance of $36 million to $40 million.

Cerezyme, a treatment for Gaucher disease, racked up third-quarter sales of $157.5 million, an increase of 10% over the comparable year-ago period.

Genzyme reaffirmed the reduced guidance given on Sept. 16: Fourth-quarter earnings of 35 cents to 37 cents per share and 2002 earnings in the range of $1.08 to $1.11 per share. The problem: Lower-than-expected sales of Renagel due to excessive wholesale inventory levels. The forecast for 2002 Renagel sales was cut to a range of $155 million to $165 million.

Wednesday, Genzyme said Renagel inventory levels were currently at 5 weeks to 6 weeks, down from bloated 12 weeks of inventory at the beginning of the year. The company's goal is to reduce Renagel inventory levels further to 4 to 6 weeks by the end of the year.

Sales of Fabrazyme in Europe, where it was approved last year, totaled $7.2 million, a sequential quarterly increase of 21%. By comparison, Transkaryotic Therapies warned earlier this month that sales of its Fabry disease drug, Replagal, would be lower than second-quarter sales of $8.8 million due to falling seasonal demand.

Genzyme says it is urging the Food and Drug Administration to reschedule an advisory panel meeting for Fabrazyme as soon as possible. The company is hopeful that the regulatory setback for Transkaryotic's Replagal gives Fabrazyme the edge.

Shares of Genzyme were up 96 cents, or 3.9%, to $25.72 in recent trading.