Only one analyst is listed as following GCOR, but he apparently did not model for the end of the amortized research payments, and was expecting six cents. GCOR has delivered only two, without changing guidance. Having hit a 52-week high today, I'd say it's going to backpedal some starting tomorrow (or perhaps after hours).
>>PALO ALTO, Calif., Oct. 28 /PRNewswire-FirstCall/ -- Genencor International, Inc. (Nasdaq: GCOR - News) today reported that for the quarter ended September 30, 2004, product revenues increased by 11% to $99.5 million, compared to $89.8 million in the third quarter of 2003. Total revenues in the third quarter were $101.9 million, compared to $94.1 million for the same period in 2003. Net income available to common stockholders was $1.2 million, or $0.02 per diluted share, compared to $2.3 million or $0.04 per diluted share during the same period in 2003. Fees and royalty revenues were $2.4 million in the third quarter of 2004 as compared to $4.3 million in the prior year, primarily due to the end of the amortizable period for an upfront research payment from Dow Corning in the 2003 period. Lower net income available to stockholders was due in part to increased general and administrative expenses and third party consulting fees. For the third quarter of 2004, Genencor generated $4.0 million in operating income and $16.7 million in cash flow from operations.
For the nine months ended September 30, 2004, total revenues were $306.1 million, compared to $286.2 million for the same period in 2003. Net income available to common stockholders was $24.4 million, or $0.40 per diluted share for the nine months ended September 30, 2004, compared to $12.8 million or $0.21 per diluted share for that same period in 2003.
"Although this quarter's earnings were reduced by higher expenses, our record product revenues reflect the strength of our core enzyme business," said Ray Land, senior vice president and chief financial officer. "Our cash balance grew by $12.6 million to $167.7 million during the quarter providing us with additional flexibility in executing our financial and operating strategy."
Financial Results by Segment
The Bioproducts segment develops and delivers products and services for the industrial, consumer and agri-processing markets to a global customer base. All of the company's current product revenues are derived from this segment. For the third quarter of 2004, the Bioproducts segment increased our gross profit by 9% to $41.1 million, compared to $37.7 million in third quarter of 2003. For the third quarter of 2004, the Bioproducts segment achieved operating income of $11.6 million as compared to operating income of $15.4 million for the third quarter of 2003. The lower operating income was due to higher operating expenses and lower fees and royalty revenues, as discussed above. For the nine months ended September 30, 2004, the Bioproducts segment achieved operating income of $49.7 million as compared to operating income of $52.2 million for the same period in 2003.
The Health Care segment is primarily engaged in the performance of research and development, securing intellectual property and the establishment of strategic investments and collaborations in support of our product objectives in the health care market. For the third quarter of 2004, the Health Care segment reported an operating loss of $7.8 million as compared to an operating loss of $9.2 million for the same period in 2003. For the nine months ended September 30, 2004, the Health Care segment experienced an operating loss of $11.3 million as compared to an operating loss of $24.6 million for the same period in 2003.
Business Update
"We are delighted with the excellent growth in product revenues during the third quarter, which established a new quarterly record for the company," said Jean-Jacques Bienaime, chairman, chief executive officer and president of Genencor. "Market acceptance of new products, expansion of our core enzyme business and favorable currency have produced strong product revenue growth throughout the year. In addition to solid expansion in its core markets, Genencor has exciting growth opportunities in safety and protection, biomass conversion, personal care, the Silicon Biotechnology(TM) platform and health care, providing us with confidence in the future growth of our company. Although we continue to look into selective partnering opportunities as the financial strength of the company grows, we are reducing our dependence on third party research funding so as to retain more of the value created by our technology. This should help reduce future total revenues variability," said Bienaime.
Bioproducts
During the third quarter of 2004, Genencor's Bioproducts segment set a quarterly product revenue record with gains noted in all regions. Assisted by the market's acceptance of new products, particular strength was seen in the fermentation alcohol, carbohydrate processing (formerly referred to as sweeteners) and the food, feed and specialty categories, with double-digit growth in the Asia Pacific, European, and Latin American regions.
As announced during the quarter, scientists from Genencor and Stanford Linear Accelerator Center announced an important breakthrough in the ability to compute, in record time, all possible metabolic behaviors open to a microorganism. This development is expected to facilitate engineering of a microorganism to assist in the creation of an array of desired products. A significant decrease in the time to compute the reaction spectrum paves the way for new applications in metabolic engineering. Moving from a small target molecule back to the pathway and then back to the gene, industrializes the process of developing co-products in, for example, a biorefinery.
Genencor's progress in developing low cost enzymes for cellulosic biomass conversion to ethanol has exceeded the contractual goals and expectations of the National Renewable Energy Laboratory (NREL) and the Department of Energy. Based upon NREL's model, Genencor scientists have achieved an estimated enzyme cost in the range of $0.10 to $0.20 per gallon of bioethanol, which represents an approximate 30-fold improvement in enzyme cost for the process. NREL is expected to validate these results at pilot scale within the next quarter. While other technology challenges continue to be addressed, Genencor believes that the enzymatic conversion of cellulose into fermentable sugars is no longer the major technical hurdle. As biorefineries come on line, Genencor expects to be ready with technology that is instrumental in the production of bioethanol.
During the quarter Genencor continued its progress in commercializing new products for the safety and protection opportunities within its specialty business category. Biodefense enzymes for the neutralization of organophosphate nerve agents, like sarin, are expected to generate initial revenue in the near term. It is expected that the military and civilian first responders such as fire and police departments plus hazardous materials teams will be the first targeted customer base for this product. Genencor's proprietary enzyme system for the elimination of prion infectivity also continues to advance through development and is currently under regulatory review. Once approved, the company expects to commercialize the product in 2005 for use in hospitals and other medical settings, along with future possible uses in the meat packing and processing industries.
Within the Bioproducts segment, progress continues with several growth opportunities, including personal care and the Silicon Biotechnology(TM) platform. Focusing on oral, hair and skin care applications, leading consumer products companies are evaluating Genencor's performance ingredients. Biosensors for the home medical market is one of the early targets of the technology and business efforts being employed in the Silicon Biotechnology(TM) collaboration with Dow Corning.
As announced earlier this month, Genencor was included in Forbes Magazine list of the "200 Best Small Companies." To qualify, companies with sales between $5 million and $750 million must have demonstrated a consistent pattern of positive growth during a five-year period as well as over the last 12 months. This is Genencor's first appearance on Forbes' elite list.
Health Care
During the third quarter of 2004, Genencor's Health Care segment continued to make progress in advancing its first product candidate for treating cancer through development toward filing an investigational new drug application (IND) in late 2005. This product candidate, GCR-8886/2141, is intended to target significant unmet medical needs in colorectal and pancreatic carcinoma. In support of the IND-enabling program, key steps are underway at Genencor's newly opened cGMP facility in Rochester, New York toward preparing protein drug supply for toxicology studies, and preparation of prodrug supply by selected cGMP vendors is also underway.
With a focus on targeted cancer biotherapeutics, Genencor's Health Care research team continues building and qualifying additional follow-on leads, expanding the range of cancer targets served by its product development pipeline. As part of this research effort, Genencor has established a collaboration with Ablynx, a biotechnology company whose proprietary Nanobody technology platform could be helpful in discovering new targeting sequences against specific tumor targets that may be incorporated by Genencor into its cancer drug candidates.
As previously announced, the strategy of Genencor's Health Care segment is to create a biotherapeutics product pipeline which is focused entirely on the oncology market. To support this strategy, the company continues to investigate new in-licensing opportunities in oncology.
2004 Guidance
Annual guidance remains unchanged from last quarter. Total revenues for 2004 are estimated to be in the range of $400 million to $406 million. Genencor anticipates research and development expenses for the full year 2004 to fall in the range of $73 million to $74 million. Operating income is expected to be in the $41 million to $42 million range. Genencor estimates net income available to common stockholders of between $24 million and $25 million, or between $0.38 and $0.40 earnings per diluted share, in 2004. Genencor does not provide quarterly guidance.<<
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Cheers, Tuck |
