Genzyme General

(GENZ)

reported lower second-quarter profits Wednesday, hurt by slumping sales of its drug Renagel.

The biotech firm's poor results were expected since it

slashed current-year sales and earnings forecasts last month.

Net income in the quarter totaled $54.1 million, or 25 cents per diluted share, before amortization and an after-tax gain of $1.7 million, or a penny per share, from the recovery of a previously written-off receivable note. This compares to net income of $62.1 million, or 30 cents per share, in the second quarter last year.

Analysts were expecting second-quarter earnings of 25 cents per share, down from expectations of 33 cents per share last month, according to Thomson Financial/First Call.

On a reported basis, Genzyme earned $49.6 million, or 23 cents per share, an increase over earnings of $35.2 million, or 18 cents per share, in the year-ago quarter. But these improved GAAP earnings were derived primarily from lower amortization costs and higher nonoperating income.

Revenue in the quarter rose 12% to $267.2 million, compared to $239 million in the second quarter last year. Sales of Renagel, a drug used by patients undergoing kidney dialysis, totaled $39.5 million, lower than sales from the year-ago quarter and just shy of reduced guidance of $40 million.

Cerezyme, a treatment for Gaucher disease, racked up second-quarter sales of $154.7 million, an increase of 9% over the comparable year-ago period.

On June 19, Genzyme cut its second-quarter profit forecast from 33 cents per share to a range of 25 cents to 26 cents per share, and its 2002 earnings guidance to a range of $1.18-$1.23 per share, from $1.36 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 $200 million to $210 million, from $260 million to $280 million.

Wednesday, Genzyme said Renagel inventory levels were currently at 8.5 weeks, down from bloated 12 weeks of inventory at the beginning of the year. But the company's goal is to reduce Renagel inventory levels further to 4 to 6 weeks by the end of the year.

Genzyme had said it expects Renagel sales to accelerate during the second half of the year, bolstered by new medical guidelines and clinical studies that promote the clinical benefits of the drug. One study was published late last month, but Wednesday, the company said new medical guidelines for the treatment of dialysis patients won't be released until September, instead of this month.

Shares of Genzyme were up $1.99, or 10%, to $20.65 in early trading.