FRAMINGHAM, Mass., Oct. 16 /PRNewswire-FirstCall/ -- Genzyme Corp. today reported third quarter financial results for its Genzyme Molecular Oncology division (Nasdaq: GZMO - News), and revised its financial guidance to reduce its overall loss for the year while reaffirm its expectations for total revenue in 2002.
Revenues for the third quarter were $2.3 million, up from $1.2 million in the third quarter of 2001. The increase in revenue is primarily due to the division's antiangiogenesis collaboration with the pharmaceutical division of Kirin Brewery of Japan, and an increase in funding associated with its antigen discovery collaboration with Purdue Pharma L.P.
Total research and development, including collaborator-funded expenses, were $7.0 million ($5.9 million in research and development and $1.1 million in collaborator funded research) in the third quarter of 2002, consistent with $7.0 million ($6.4 million in research and development and $0.6 million in collaborator funded research) in the third quarter of 2001.
Net loss allocated to Genzyme Molecular Oncology stock for the third quarter of 2002 was $6.3 million, or $0.37 per share, compared to a net loss of $7.5 million, or $0.45 per share for the third quarter of 2001.
"We are managing our finances in a very prudent manner," stated Gail Maderis, president, Genzyme Molecular Oncology. "We are carefully decreasing expenses, while continuing to advance our clinical programs and engage in active product and technology partnering discussions with interested biotechnology and pharmaceutical companies. While these have been challenging months for the industry, we are maintaining strong momentum and look forward to achieving major milestones during the first half of next year."
Genzyme Molecular Oncology ended the quarter with $18.0 million in cash and marketable securities -- enough to fund its operations into 2003. It also has access to $11 million through its financing arrangement with Genzyme General and additional credit through Genzyme Corporation's revolving credit facility.
Financial Guidance
Genzyme Molecular Oncology is closely managing its cash resources by decreasing its research and development expense. Much of this decrease will be obtained by delaying the start of one of its two planned trials that use a novel, electrofusion approach in producing a vaccine. As a result, the division expects to reduce its operating loss for 2002 and end the year with more than $10 million in available cash.
Genzyme Molecular Oncology expects a total loss of approximately $24 to $26 million for 2002, compared with earlier guidance of $30 million. The reduction in net loss is primarily attributable to savings of $4 to $5 million in research and development expense.
Progress in the Clinic
Genzyme Molecular Oncology expects to report on safety and efficacy data from three patient-specific vaccine trials in breast, melanoma and kidney cancer by the end of the year. The vaccines tested in these Phase I/II trials were made using a chemical fusion approach. Data from these trials, together with data from an upcoming fusion trial in metastatic kidney cancer, will help guide further clinical development of this program.
Genzyme Molecular Oncology also expects to have an update from its ex vivo antigen specific melanoma trial by the end of the year. This will include clinical immunologic data, along with a clinical status on the patients treated in the trial. Frank G. Haluska, M.D., Ph.D., of the Massachusetts General Hospital Cancer Center, is the lead investigator of the trial.
Thirty-eight patients are expected to complete their therapy and study visits in Genzyme Molecular Oncology's in vivo antigen specific cancer vaccine trial in melanoma. The protocol for this multi-center trial expanded last spring to accommodate interest from investigators and eligible patients. Genzyme Molecular Oncology expects to complete patient treatment in this trial by the end of the year. Dr. Haluska is leading this trial as well.
Lastly, Genzyme Molecular Oncology expects patient enrollment to begin within the month for its newest cancer vaccine trial in kidney cancer. The trial uses an innovative vaccine made from the electrofusion of the patient's own tumor cells with powerful, immune stimulating cells to fight the deadly disease. Genzyme Molecular Oncology is the first commercial entity in the United States to pursue development of patient-specific, cancer vaccines produced using this unique electrical fusion approach. The trial will assess the vaccine's safety, and seek to measure any clinical and immunologic responses in the patients.
Program Updates
Genzyme Molecular Oncology is using its world-class antigen discovery program to identify both cellular and antibody targets. A number of cancer antigens have recently been presented for consideration to Purdue Pharma L.P., with whom it has a discovery and licensing agreement for tumor antigen discovery.
Genzyme Molecular Oncology remains very active in publishing its recent findings and discoveries. The Journal of Immunology published an article authored by Charles A. Nicolette, Ph.D., and a group of his colleagues at Genzyme Molecular Oncology, regarding the SPHERE(TM) (Solid PHase Epitope REcovery) method. The article describes SPHERE and details its unique ability to identify proteins associated with cancer tumors that could be used in vaccines to overcome the body's self-tolerance to certain cancers. SPHERE is a key component of Genzyme Molecular Oncology's discovery platform, which also includes the SAGE(TM) (Serial Analysis of Gene Expression), LongSAGE(TM), SCAN(TM), AbSCAN(TM), and SELEC-T(TM) technologies.
Genzyme Molecular Oncology continues to strengthen its intellectual property portfolio. A new patent covering SAGE issued in Japan earlier this month and another is currently pending in Europe.
Progress in Antiangiogenesis
Genzyme Molecular Oncology's highly regarded research program in antiangiogenesis is making good progress. Further validation work continues around a focused set of proprietary tumor endothelial markers (TEMs) involved in the antibody collaboration with the pharmaceutical division of Kirin Brewery of Japan. Genzyme Molecular Oncology researchers have confirmed that some of these TEMs are biologically active in in vitro assays of angiogenesis.
The collaboration that Genzyme Molecular Oncology formed with Kirin in late 2001 is focused on the development and commercialization of fully human antibodies for use as therapeutic agents in antiangiogenesis and vascular targeted cancer drug delivery. The goals of the initial two-year research program, funded by Kirin, are to validate a subset of the TEMs, generate human antibodies to those TEMs using Kirin's KM Mouse(TM) technology, and select one or more antibodies as clinical candidates.
In addition to the work on the TEMs specific to the Kirin collaboration, researchers at Genzyme Molecular Oncology have performed additional SAGE analysis on tumor endothelial cells derived from other tumor types, and have now extended the TEMs portfolio to approximately 400 markers. A number of these have been shown to play an active role in angiogenesis and belong to specific classes of molecules that are believed to be good targets for small molecule therapies.
Genzyme Molecular Oncology also is currently in active partnering discussions with several biotech and pharmaceutical companies around small molecule approaches to a broader set of the TEMs. Despite this strong interest, current trends in the pharmaceutical industry are lengthening the timeline for deal execution. While Genzyme Molecular Oncology remains very optimistic about the potential for a significant small molecule TEMs collaboration, it is moving its timeframe for completion of such a transaction to the first half of 2003.
About Genzyme Molecular Oncology
Genzyme Molecular Oncology is developing a new generation of cancer products focusing on cancer vaccines and angiogenesis inhibitors. It is shaping these new therapies through the integration of its genomics, gene and cell therapy, small-molecule drug discovery, and protein therapeutic capabilities. Genzyme Molecular Oncology is a division of Genzyme Corporation. For more information on Genzyme Molecular Oncology, please visit its website at www.genzymemolecularoncology.com
This press release contains forward-looking statements, including the statements regarding Genzyme Molecular Oncology's future cash needs, its projected 2002 operating loss and cash position at the end of this calendar year, its ability to enter into a collaboration around the TEMs and the timing of such collaboration, the time at which enrollment will begin in its patient- specific cancer vaccine trial in kidney cancer, the time at which safety and efficacy data from the four other cancer vaccine trials will be reported, the time at which patient treatment in the in vivo antigen-specific cancer vaccine trial will be completed, and the issuance of the SAGE(TM) patent in Europe. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward- looking statements. These risks and uncertainties include, among others, Genzyme Molecular Oncology's ability to reduce research and development and other expenses in the fourth quarter of 2002, the continued funding of its collaborations, actual financial results for the upcoming quarters, including without limitation revenues, operating expenses, interest income and the availability of additional funding, the ability to identify a suitable collaborator and negotiate a mutually acceptable collaboration agreement around the TEMs, the content and timing of decisions made by the FDA and institutional review boards regarding clinical development of the patient- specific vaccine for kidney cancer, the actual timing for data analysis and presentation for the four other clinical studies, the ability to attract, enroll and successfully treat patients in the in vivo antigen-specific vaccine trial, the ability to manufacture sufficient supply of product to perform clinical studies, the content and timing of decisions by the European Patent Office on the SAGE(TM) patent, and the factors contained under the caption "Factors Affecting Future Operating Results" in Exhibit 99.2 to Genzyme Corporation's 2001 Annual Report on Form 10-K. Genzyme Molecular Oncology Division common stock is a series of common stock of Genzyme Corporation. Therefore, holders of Genzyme Molecular Oncology Division common stock are subject to all of the risks and uncertainties described in those reports. We caution investors not to place undue reliance on the forward-looking statements contained in this press release. These statements speak only as of the date of this press release and we undertake no obligation to update or revise the statements.
SAGE(TM), LongSAGE(TM), SCAN(TM), AbSCAN(TM), SPHERE(TM) and SELEC-T(TM) are trademarks of Genzyme Corporation. KM Mouse(TM) is a trademark of Kirin Brewery Company, Ltd. All rights reserved.
Conference Call Information
There will be a conference call today at 1:00 p.m. EST to discuss Genzyme Molecular Oncology's third quarter financial results. If you would like to participate in the call, please dial 913-981-5517. A replay of this call will be available from 4:00 p.m. EST through midnight on October 23 by dialing 719-457-0820. Please reference reservation number 505201. This call will also be webcast live over the Internet at genzyme.com
Upcoming Events
Genzyme Corporation will report fourth quarter 2002 financial results on March 5, 2003. If you would like to participate in any of these calls, please dial 913-981-5517 at 11:00 a.m. for Genzyme General, at 1:00 p.m. for Genzyme Molecular Oncology, and 3:00 p.m. for Genzyme Biosurgery. There is no passcode necessary. Please refer to www.genzyme.com one week prior to the financial reporting date for any updates to this information. This call will also be webcast live over the internet at genzyme.com
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 1-703-797-1866 outside the United States.
Media Contact: Maria Foley, +1-617-591-5690, or Investor Contact: Carol Miceli, +1-617-761-8935, both of Genzyme
GENZYME MOLECULAR ONCOLOGY (A Division of Genzyme Corporation)
Combined Statements of Operations
(Unaudited, amounts in thousands,
except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Total revenues $2,282 $1,224 $7,050 $3,915
Operating costs and expenses:
Cost of revenues 1,151 668 3,740 1,697
Selling, general and administrative 1,746 1,817 5,939 5,519
Research and development 5,876 6,381 16,497 19,610
Total operating costs and expenses 8,773 8,866 26,176 26,826
Operating loss (6,491) (7,642) (19,126) (22,911)
Other income (expenses):
Interest income 206 162 613 853
Interest expense (20) (14) (60) (41)
Total other income (expenses) 186 148 553 812
Division net loss $(6,305) $(7,494) $(18,573) $(22,099)
Net loss per share of Molecular
Oncology Stock -
basic and diluted $(0.37) $(0.45) $(1.11) $(1.36)
Weighted average shares outstanding 16,847 16,679 16,804 16,225
Condensed Combined Balance Sheets September December
30, 31,
(Amounts in thousands) 2002 2001
(Unaudited)
Cash and all marketable securities $18,021 $41,135
Other current assets 401 1,165
Equipment, net 38 119
Total assets $18,460 $42,419
Current liabilities $9,576 $13,493
Noncurrent liabilities 191 2,113
Division equity 8,693 26,813
Total liabilities and division equity $18,460 $42,419
GENZYME CORPORATION
Consolidated Statements of Operations
(Unaudited, amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Total revenues $340,166 $319,495 $970,298 $898,397
Operating costs and expenses:
Cost of products
and services sold 93,641 89,503 273,774 272,484
Selling, general
and administrative 115,514 122,030 329,354 316,810
Research and
development 74,698 69,127 232,773 188,651
Amortization of
intangibles (1) 17,583 30,950 52,766 90,115
Purchase of in-process
research and
development (2) 1,879 86,800 1,879 95,568
Charge for impaired
assets (3) 8,958 - 8,958 -
Total operating costs
and expenses 312,273 398,410 899,504 963,628
Operating income (loss) 27,893 (78,915) 70,794 (65,231)
Other income (expenses):
Equity in net loss
of unconsolidated
affiliates (2,387) (8,110) (10,429) (28,921)
Gain (loss) on
investments in
equity securities 29 (24,464) 538 (25,996)
Minority interest
in net loss of
subsidiaries 14 260 14 2,259
Other (248) (980) 715 (4,823)
Investment income 12,956 13,718 39,017 36,359
Interest expense (6,602) (8,739) (20,467) (30,875)
Total other income
(expenses) 3,762 (28,315) 9,388 (51,997)
Income (loss)
before income taxes 31,655 (107,230) 80,182 (117,228)
(Provision for)
benefit from
income taxes (6,600) 4,554 (20,031) 7,288
Net income (loss)
before cumulative
effect of change in
accounting for
goodwill and
derivative financial
instruments (1,4) 25,055 (102,676) 60,151 (109,940)
Cumulative effect of
change in accounting
for goodwill (1) - - (98,270) -
Cumulative effect of
change in accounting
for derivative financial
instruments,
net of tax (4) - - - 4,167
Net income
(loss) (1) $25,055 $(102,676) $(38,119) $(105,773)
Net income (loss) per share:
Allocated to Genzyme General Stock:
Net income (loss)
before cumulative
effect of change
in accounting
for derivative
financial
instruments $44,518 $(81,706) $113,238 $(34,843)
Cumulative effect
of change in
accounting for
derivative financial
instruments,
net of tax (4) - - - 4,167
Genzyme General
division net
income (loss) 44,518 (81,706) 113,238 (30,676)
Tax benefit
allocated from
Genzyme Biosurgery 6,325 2,918 13,618 20,661
Tax benefit allocated
from Genzyme
Molecular Oncology 2,573 2,687 6,938 9,367
Net income (loss)
allocated to Genzyme
General Stock (1) $53,416 $(76,101) $133,794 $(648)
Net income (loss)
per share of Genzyme
General Stock:
Basic:
Net income
(loss) per
share before
cumulative
effect of change
in accounting
for derivative
financial instruments $0.25 $(0.37) $0.63 $(0.02)
Per share cumulative
effect of change
in accounting for
derivative financial
instruments,
net of tax (4) - - - 0.02
Net income (loss)
per share of Genzyme
General Stock (1) $0.25 $(0.37) $0.63 $0.00
Diluted (5):
Net income (loss)
per share before
cumulative effect
of change in
accounting for
derivative financial
instruments $0.25 $(0.37) $0.61 $(0.02)
Per share cumulative
effect of change
in accounting for
derivative
financial instruments,
net of tax (4) - - - 0.02
Net income (loss)
per share of
Genzyme General Stock $0.25 $(0.37) $0.61 $0.00
Weighted average shares outstanding:
Basic 214,303 208,350 213,851 198,841
Diluted (5) 217,541 208,350 219,413 198,841
Net income (loss) per share (continued):
Allocated to Biosurgery Stock:
Division net loss
before cumulative
effect of change
in accounting
for goodwill $(24,464) $(21,525) $(62,368) $(94,460)
Cumulative effect
of change in
accounting for
goodwill (1) - - (98,270) -
Genzyme Biosurgery
division net loss (24,464) (21,525) (160,638) (94,460)
Allocated tax benefit 2,408 2,444 7,298 11,434
Net loss allocated
to Biosurgery
Stock $(22,056) $(19,081) $(153,340) $(83,026)
Net loss per share of Biosurgery Stock - basic and diluted:
Net loss per share
before cumulative
effect of change
in accounting
for goodwill $(0.55) $(0.48) $(1.38) $(2.22)
Per share cumulative
effect of change
in accounting
for goodwill - - (2.47) -
Net loss per share
of Biosurgery
Stock - basic
and diluted $(0.55) $(0.48) $(3.85) $(2.22)
Weighted average
shares outstanding 40,179 39,376 39,793 37,479
Allocated to Molecular Oncology Stock:
Net loss $(6,305) $(7,494) $(18,573) $(22,099)
Net loss per
share of Molecular
Oncology Stock-basic
and diluted $(0.37) $(0.45) $(1.11) $(1.36)
Weighted average
shares outstanding 16,847 16,679 16,804 16,225
(1) SFAS No. 142, "Goodwill and Other Intangible Assets," which we
adopted effective 1/1/02, requires that ratable amortization of
goodwill and certain intangible assets be replaced with periodic
tests of the goodwill's impairment and that other intangible assets
be amortized over their useful lives unless these useful lives are
determined to be indefinite. Accordingly, we ceased amortizing
goodwill effective 1/1/02. In accordance with the transitional
provisions of SFAS No. 142, we tested the impairment of the goodwill
for Genzyme Biosurgery's cardiothoracic reporting unit and recorded
an impairment charge of $98.3 million in the three months ended
March 31, 2002, which we reported as the cumulative effect of a
change in accounting for goodwill and allocated to Genzyme
Biosurgery. Had SFAS No. 142 been in effect on 1/1/01, our results
of operations for the three and nine months ended September 30, 2001
would have been as follows:
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
Goodwill Goodwill
As Amortization As As Amortization As
Reported Adjust- Adjusted Reported Adjust- Adjusted
ment ment
Amortization
of intangibles $30,950 $(13,351) $17,599 $90,115 $(39,219) $50,896
Net income
(loss) (102,676) 13,351 (89,325)(105,773) 39,219 (66,554)
Net income
(loss)
allocated
to Genzyme
General Stock (76,101) 9,503 (66,598) (648) 27,515 26,867
Net income
(loss) per
share of
Genzyme General
Stock:
Basic (0.37) 0.05 (0.32) 0.00 0.13 0.13
Diluted (0.37) 0.05 (0.32) 0.00 0.13 0.13
Net income
(loss)
allocated to
Biosurgery
Stock (19,081) 3,848(15,233) (83,026) 11,704 (71,322)
Net income
(loss) per
share of
Biosurgery
Stock-
basic and
diluted (0.48) 0.09 (0.39) (2.22) 0.32 (1.90)
(2) Represents a charge for in-process technology related to the
acquisition of Wyntek in June 2001.
(3) Represents an impairment charge to write down a bulk HA manufacturing
facility in the United Kingdom.
(4) Represents a transition adjustment for the 1/1/01 required adoption of
SFAS No. 133 to record the fair value of certain derivative assets
held on 1/1/01.
(5) Net income per share allocated to Genzyme General Stock on a diluted
basis and weighted average shares-diluted for the three and nine
months ended September 30, 2002 includes the dilutive effect of
options, stock purchase rights, and warrants, but excludes the effect
of the convertible subordinated notes and debentures allocated to
Genzyme General as the effect would be anti-dilutive in each period.
Net loss per share allocated to Genzyme General Stock on a diluted
basis and weighted average shares-diluted for the three and nine
months ended September 30, 2001 excludes the dilutive effect of
options, stock purchase rights, warrants and the effect of the
convertible subordinated notes and debentures allocated to Genzyme
General as the effect would be anti-dilutive in each period.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
September 30, December 31,
2002 2001
(Unaudited)
Cash and all marketable securities $1,163,022 $1,121,258
Other current assets 588,982 536,296
Property, plant and equipment, net 757,375 635,314
Intangibles, net 1,357,106 1,506,646
Other assets 87,853 136,231
Total assets $3,954,338 $3,935,745
Current liabilities $323,162 $282,990
Noncurrent liabilities 1,011,821 1,043,566
Stockholders' equity 2,619,355 2,609,189
Total liabilities and stockholders' equity $3,954,338 $3,935,745
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