Genzyme's Results Give Shares a Jolt - TheStreet

Shares of

Genzyme

(GENZ)

jumped 4.6% Wednesday, spurred by a 26% gain in second-quarter revenue.

The Cambridge, Mass.-based biotechnology company's stock closed up $2.08 at $47.54, after Genzyme posted second-quarter revenue of $418.9 million, up from $332.2 million for the same period last year.

However, Genzyme posted a net loss of $74.5 million for the three months ended June 30, compared with a profit of $28.3 million for the year-ago quarter. The company noted that if amortization and special items are excluded from the calculations, Genzyme's pretax profit was $98.1 million for the second quarter, up from a pretax profit of $54.7 million for the same period last year.

"This was a very, very strong quarter for us," said Henri A. Termeer, the company's chairman, chief executive and president, in a conference call with analysts. The results prompted a slight adjustment in Genzyme's earnings-per-share guidance to a range of $1.30 to $1.35 from a range of $1.25 to $1.35. These predictions exclude special items and amortization.

"I had a better feeling about Genzyme after the conference call," said Christopher Raymond, who follows the company for Robert W. Baird & Co. "There were no 'yeah, buts.'" Raymond has a neutral rating on the stock. He doesn't own shares; his firm doesn't have an investment banking relationship with Genzyme, but it is a market maker in Genzyme's stock.

Wednesday's results reflect a consolidation of the company's former three tracking-stock divisions -- a structure that the company discontinued on July 1. Wednesday's report includes the results of the three divisions plus the corporation. Starting in the next quarter, the company will report only one set of financial results reflecting the entire corporation.

"I'm glad they stopped doing the tracking stocks," Raymond said. "The income statement was way more confusing than it had to be."

The Genzyme General division reported a 30% gain in revenue to $347.7 million from $267.2 million. Net income allocated to Genzyme General stock rose 43% to $70.8 million, or 32 cents a share, from $49.6 million, or 23 cents a share.

Sales of Renagel, a drug for patients with end-stage kidney disease on hemodialysis, jumped 67% to $66 million from the $39.5 million in sales for the same period last year.

Raymond said Renagel's sales had been disappointing in the past, but he added that "going forward, I have a much better feeling that the company can grow demand

for the drug reasonably."

Another drug with a strong showing was Cerezyme, an enzyme replacement therapy for patients with a form of Gaucher's Disease. Sales rose 19% in the second quarter to $184.7 million from $154.7 million for the same period last year. This disease, a metabolic disorder that causes a fatty substance to accumulate in multiple organs, can increase a person's risk of anemia, lung and kidney impairments and a weakened skeletal system.

"Cerezyme was better than expected," said William Tanner, who follows the company for Leerink Swann & Co., a health care investment banking firm in Boston. Tanner rates the stock as a market performer; he doesn't own shares and his firm doesn't have an investment banking relationship with Genzyme.

Sales of Fabrazyme, an enzyme replacement therapy for Fabry Disease, jumped 157% in the second quarter to $15.4 million from $6 million for the same period a year ago. Sales were aided by the U.S. Food and Drug Administration's approval of the drug for U.S. marketing on April 24. Fabry Disease, caused by an enzyme deficiency, can increase a person's risk of heart attack, stroke and kidney ailments.

Revenue for the Genzyme Biosurgery division gained 9% to $68.8 million from $62.9 million. The net loss allocated to this division was $141 million for the second quarter, compared with a net loss of $15.1 million for the same period last year.

The net loss includes a charge of $102.8 million, reflecting an estimated impairment of goodwill from a prior acquisition. The division's performance also reflects a loss on the sale of the company's cardiothoracic devices business and other related charges totaling $38.8 million.

Revenue for the Molecular Oncology division gained 9% to $2.5 million from $2.3 million. The net loss allocated to the Molecular Oncology stock was $4.4 million, compared with a net loss of $6.2 million for the same quarter last year.

The company also announced several management additions, the most significant being the hiring of Georges Gemayel, 43, as executive vice president of Genzyme's two largest business units -- therapeutics and renal care. Gemayel spent 16 years at Hoffman-LaRoche.