Here is the quarterly report for GENZL
Wednesday July 22, 4:01 pm Eastern Time
Company Press Release
SOURCE: Genzyme Tissue Repair
Genzyme Tissue Repair Reports Second Quarter Revenues
Increase 64%
CAMBRIDGE, Mass., July 22 /PRNewswire/ -- Genzyme Tissue Repair (Nasdaq: GENZL -
news) announced today that total revenues for the second quarter of 1998 were $4.35 million, up
64 percent from $2.65 million for the same period in 1997.
Sales of Epicel(TM)skin grafts, a skin replacement product for severe burns, were $1.8 million, up
from $1.1 million a year ago. The increase resulted from recent improvements in marketing and
reimbursement efforts and confirms the continued, life-saving importance of Epicel in the treatment of
patients with severe burns.
Sales of Carticel(TM) autologous cultured chondrocytes, for the treatment of knee cartilage damage,
were $2.5 million in the second quarter of 1998, compared to $1.6 million in the second quarter of
1997.
''During the quarter, we made significant progress in selecting and training our distributor sales force
and developing programs to increase patient awareness of Carticel, two of the key elements of our
strategy to build the Carticel business,'' said Tim Surgenor, president of Genzyme Tissue Repair.
''We are also pleased with the substantial reduction in our net loss, which is a result of our initial
actions to streamline operations.''
Net loss for the second quarter of 1998 decreased by nearly $1 million to $10.5 million, or $0.52
per share, compared to a net loss of $11.4 million, or $0.86 per share, in the second quarter of
1997. The decrease in net loss is attributed to higher revenues and lower operating expenses.
Genzyme Tissue Repair's funding of the NeuroCell development program under the joint venture
agreement between Genzyme Tissue Repair and Diacrin Inc. (Nasdaq: DCRN - news) dropped
from 100 percent to 75 percent of expenses, further reducing the net loss.
Carticel Performance Indicators
The number of U.S. patients approved for the Carticel procedure by insurance companies during the
second quarter was 259, a 14-percent increase over the 227 patients approved during the prior
quarter. However, the number of patients with insurance company approvals for implantation who
had not yet scheduled their surgeries rose 48 percent from 73 at the end of the first quarter to 108 at
the end of the second quarter. In the past, over 90 percent of patients approved by insurance
companies have been treated with Carticel.
As Carticel usage has expanded in general orthopedic practice and reimbursement approvals have
become easier to obtain, individual patient preferences and time constraints have become a larger
factor in the scheduling of surgery dates. The company believes that these delays in patients'
scheduling their implant procedures were the primary cause of the decrease in the number of patients
treated in the United States from 202 in the first quarter to 189 in the second quarter.
During the second quarter, there was growth in activities which may lead to treatments in future
quarters. U.S. surgeons identified 610 patients for potential Carticel treatment, an 18-percent
increase over the 517 cases identified in the first quarter. There was a corresponding increase in the
number of cases submitted to insurance companies for approval.
U.S. surgeon interest in Carticel continued to strengthen, largely due to information on positive
long-term outcomes data provided at the March meeting of the American Academy of Orthopedic
Surgeons. This enthusiasm by the orthopedic community is evidenced by the increase in the number
of surgeons trained, up 26 percent to 283 from 224 in the prior quarter. In the first half of 1998,
Genzyme Tissue Repair trained almost twice as many U.S. surgeons as it did in all of 1997.
In Europe, 68 patients were treated during the second quarter, up from 46 in the previous quarter.
The increase was primarily due to renewed availability of hospital budgets for the treatment of
patients with cartilage defects. The number of surgeons trained in Europe increased from 26 in the
first quarter to 83 in the second quarter. Carticel Marketing Strategy
Genzyme Tissue Repair continues to move forward with its aggressive sales and marketing strategy
to develop high-volume usage of Carticel by surgeons in regions where reimbursement for Carticel is
easiest to obtain. During the second quarter, Genzyme Tissue Repair continued to select and train
distributor representatives in several major metropolitan markets to augment the company's direct
sales force. These distributors mainly focus on sports medicine products and are highly
recommended by their orthopedic surgeon customers. At the end of the second quarter, the number
of distributors in place had doubled from the first quarter to 55 distributors.
In these high focus markets, Genzyme Tissue Repair has recently begun a marketing program to
increase patient flow to key surgeons. This program includes public education activities with
hospitals, publicity campaigns in major cities, and regional advertising. Instrumentation Program
Since approval of Carticel by the U.S. Food and Drug Administration last summer, Genzyme Tissue
Repair began to develop surgical instrumentation to improve the Carticel procedure. The company
has designed instrumentation intended to significantly shorten the time it takes to attach the periosteal
patch, which is the most difficult part of the procedure. The company plans to file for marketing
approval with the FDA and plans to launch the instrumentation in mid-1999. The ultimate goal of this
program is to allow surgeons to perform the Carticel procedure arthroscopically. NeuroCell Update
To date, investigators have enrolled seven patients in a pivotal phase II/III clinical trial of
NeuroCell(TM)-PD, a porcine neural cell product for the treatment of Parkinson's disease. The trial
is a 36-patient, 18-month, blinded, randomized, placebo-controlled study designed to show safety
and efficacy. Two additional NeuroCell-PD clinical trial protocols are currently being reviewed by
the FDA and are on schedule to begin by the end of this year. These three trials are expected to
form the basis for seeking marketing approval of NeuroCell-PD from the FDA.
In April, Genzyme Tissue Repair announced that NeuroCell-PD and NeuroCell(TM)-HD, for the
treatment of Huntington's disease, were well- tolerated in patients treated with the products in phase
I clinical trials. The patients in these trials will be followed and reported on regularly over a period of
three years. In addition to tolerating the treatment well, the group of Parkinson's patients showed
statistically significant clinical improvement 12 months following surgery, compared to an evaluation
that was taken prior to surgery (p=0.01). Long-term Financing
During the quarter, Genzyme Corporation established a long-term financing plan to provide an
additional $53 million for the continuing development of Genzyme Tissue Repair's product portfolio
and research and development programs.
Genzyme Tissue Repair's equity line of credit available from Genzyme General (Nasdaq: GENZ -
news) was increased from $13 million to $50 million. Under the terms of the equity line, Genzyme
Tissue Repair may draw down funds as needed on a quarterly basis in exchange for designated
shares of its common stock. Genzyme Tissue Repair also sold its Framingham manufacturing facility
to Genzyme General for approximately $16 million in cash in June.
With its current cash resources and a continued focus on reducing operating expenses, Genzyme
Tissue Repair does not anticipate drawing down funds from the equity line until 1999.
Genzyme Tissue Repair is a leading developer of cell therapies and biological products for the
treatment of cartilage damage, severe burns, chronic skin ulcers, and neurodegenerative diseases. A
division of the biotechnology company Genzyme Corp., Genzyme Tissue Repair has its own
common stock intended to reflect its value and track its economic performance.
This press release contains forward-looking statements about expected Carticel treatment levels, the
design, approval, and market introduction of arthroscopic instrumentation for use in connection with
the Carticel procedure, the timing of additional NeuroCell-PD trials and the use of the results to seek
FDA approval, and Genzyme Tissue Repair's cash requirements. Actual results may differ materially
from these statements depending on the number of patients who actually receive Carticel treatments,
the ability of Genzyme Tissue Repair to continue to show positive long-term data and clinical
effectiveness of the Carticel product, the successful implementation of Genzyme Tissue Repair's
marketing strategy using distributors, the results of Genzyme Tissue Repair's efforts to develop
arthroscopic instrumentation for Carticel, the actual timing and results of clinical trials of
NeuroCell-PD, the timing and content of decisions made by the FDA regarding NeuroCell-PD and
regarding arthroscopic instrumentation for Carticel, and reimbursement rates for products and
services, revenue fluctuations, results of development and partnering efforts, and the cost and timing
of clinical trials.
Genzyme Tissue Repair's releases are on the World Wide Web at genzyme.com. They
are also available from Genzyme's fax-on-demand service at 1-800-436-1443 within the U.S. or
1-201-521-1080 outside the U.S.
Genzyme Tissue Repair will host a conference call today to discuss earnings at 5:00 p.m. ET. A
replay of the conference call will be available from 7:00 p.m. today through midnight on July 29. To
hear the replay please call 1-800-633-8284 in the United States or 303-248-1201 outside the
United States. Callers should refer to reservation number 4418900.
GENZYME TISSUE REPAIR
Combined Statements of Operations
(Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Net service sales $4,345 $2,654 $7,956 $4,641
Operating costs
and expenses:
Cost of
services sold 3,776 3,135 7,010 5,991
Selling,
general and
administrative 6,007 6,204 12,320 12,658
Research and
development 2,832 2,228 5,918 4,996
Total operating
costs and
expenses 12,615 11,567 25,248 23,645
Operating loss (8,270) (8,913) (17,292) (19,004)
Other income (expenses):
Equity in
net loss of
joint venture (1,697) (1,827) (3,628) (3,416)
Interest income 227 212 674 398
Interest expense (715) (861) (1,529) (1,238)
Other income
(expenses) (2,185) (2,476) (4,483) (4,256)
Net loss $(10,455) $(11,389) $(21,775) $(23,260)
Net loss per Genzyme Tissue
Repair Common Share
(Basic and diluted):
Net loss $(0.52) $(0.86) $(1.08) $(1.76)
Weighted average
shares outstanding 20,159 13,238 20,080 13,208
Condensed Combined Balance Sheets
(In thousands)
June 30, December 31,
1998 1997
Cash and all
marketable securities $28,531 $31,915
Other current assets 6,413 4,926
Property, plant and
equipment (net) 2,754 19,524
Other assets 230 453
Total assets $37,928 $56,818
Current liabilities $5,355 $5,407
Noncurrent liabilities 32,087 31,208
Division equity 486 20,203
Total liabilities and
division equity $37,928 $56,818
Genzyme Tissue Repair
Carticel Performance Indicators
1995 1996 1997 1997 1997 1997 1997 1998 1998 Since
Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Inception
Clinical activity:
Total Patients
Treated 60 303 112 156 172 220 660 248 257 1,528
US 60 251 76 115 132 153 476 202 189 1,178
Europe 0 52 36 41 40 67 184 46 68 350
US Reimbursement Activity
Third-party
Coverage
(millions of
lives): 15 53 101 101 123 130 130
Cum. # Payers
with Policy
Protocol 33 54 67 67 73 80 80
Patient
Approvals 72 391 113 171 190 224 698 273 327 1,761
Surgeon Training:
US 206 749 41 90 75 122 328 224 283 1,790
Europe 47 461 56 58 26 57 197 26 83 814
Total
Surgeons
Trained 253 1,210 97 148 101 179 525 250 366 2,604
SOURCE: Genzyme Tissue Repair |
