Genzyme Reports Financial Results for Fourth Quarter of 2009 and Full Year



CAMBRIDGE, Mass.--(BUSINESS WIRE)--Genzyme Corp. (NASDAQ: GENZ), a diversified, global biotechnology company, today announced fourth-quarter and full year 2009 financial results and provided 2010 guidance that reflects growth across its businesses and a focus on strengthening core areas of the company.

Fourth-quarter GAAP net income was $23.2 million, or $0.09 per diluted share, compared with $86.7 million, or $0.31 per diluted share, in the same period in 2008. Non-GAAP net income was $83.5 million, compared with $118.2 million in the fourth quarter of 2008. Non-GAAP earnings were $0.31 per diluted share, compared with $0.42 per diluted share in the prior fourth quarter. GAAP and non-GAAP figures include manufacturing write-offs and amortization, among other items. Non-GAAP net income excludes stock compensation expenses and costs associated with the acquisition of Bayer oncology products.

As previously announced, fourth-quarter revenue was $1.08 billion, compared with $1.17 billion in the same period in 2008. For the year, revenue was $4.52 billion compared with $4.61 billion in 2008. Excluding the Genetic Disease business, which was affected by the product supply interruption, fourth-quarter revenue grew 24 percent, compared with the same period in 2008, and full-year revenue grew 15 percent. This growth reflects progress across the corporation, including the successful launches of Synvisc-One® (hylan G-F 20) and Mozobil® (plerixafor injection), and the integration of the Bayer oncology products.

Individual product sales for the fourth quarter and the year were detailed in a January 12, 2010, press release coinciding with the company’s presentation at the JPMorgan Healthcare Conference.

“We are moving into a recovery period, regaining momentum and getting back to delivering sustainable growth this year,” said Henri A. Termeer, Genzyme’s chairman and chief executive officer. “As we work to smooth the resupply of Cerezyme and Fabrazyme, our diverse product portfolio is contributing meaningfully. At the same time, we are strengthening the company by making changes, bringing in new talent, and investing in existing businesses.”

2009 Results

GAAP net income in 2009 was $422.3 million, or $1.54 per diluted share, compared with $421.1 million, or $1.50 per diluted share, in 2008. Non-GAAP net income was $621.5 million, or $2.27 per diluted share, compared with $551.3 million, or $1.95 per diluted share, in 2008.

Genzyme generated approximately $1.2 billion in cash from operations in 2009, and utilized this cash to invest in its global infrastructure and repurchase shares. The company was able to continue to generate cash and maintain a solid balance sheet in 2009 despite the manufacturing challenges and resulting product supply interruption.

Genzyme recently adopted a new executive compensation program designed to better align the incentives of senior executives with shareholders’ interests. It includes cash flow return on invested capital among a set of corporate performance metrics to encourage the productive use of the cash the company is expected to generate over the coming years.

Financial Guidance for 2010

Genzyme expects that its non-GAAP earnings will accelerate as the year progresses. First-quarter earnings are expected to be flat with the fourth quarter of 2009 and fourth quarter 2010 earnings are expected to reach approximately $1.00 per diluted share.

Revenue and earnings are expected to accelerate in the second half of the year, depending on three factors: FDA approval of Lumizyme™ (alglucosidase alfa) by the June PDUFA date; the company’s ability to increase manufacturing productivity for Fabrazyme® (agalsidase beta); and its ability to maintain a substantial portion of the market for Cerezyme® (imiglucerase for injection).

In establishing its budget for 2010, Genzyme assumed a foreign exchange rate of $1.50 per Euro, the rate at the time the budget was finalized. At a theoretical rate of $1.40 per Euro, this represents an approximately $90 million risk on the revenue line, which is significantly mitigated on the profit after tax bottom line by the company’s geographic diversification. This impact, estimated at approximately $20 million, is reflected in the lower-end of the earnings guidance range.

This year Genzyme is focusing its investments in strengthening core areas and reducing risk. This includes investments to expand manufacturing capacity and create redundant capacity; improve information technology infrastructure; increase sales and marketing for key products to strengthen their market-leading positions; and advance promising, late-stage programs likely to result in the introduction of new products in the next few years.

Earnings

  • Non-GAAP earnings in 2010 are expected to increase to $2.80 – $3.20 per diluted share. GAAP earnings are expected to reach $1.90 – $2.27 per diluted share. Projected GAAP and non-GAAP earnings include approximately $320 million in amortization, up from $266 million in 2009. Nearly all of the increase reflects payments due to Bayer for Fludara® (fludarabine phosphate), Leukine® (sargramostim), and Campath® (alemtuzumab) and to Wyeth for Synvisc® (hylan G-F 20) given the projected sales of these products.

Revenue

  • Revenue is expected to reach $5.23 – $5.53 billion in 2010, compared with $4.52 billion in 2009. Revenue guidance for Genzyme’s business segments and key products is provided in the guidance table attached to this press release. Revenue growth will be driven by:
    • The strong demand for Cerezyme;
    • The continued global growth of Myozyme® (alglucosidase alfa) and the anticipated U.S. launch of Lumizyme;
    • The ongoing U.S. launch of Synvisc-One, which is both gaining market share and expanding the market to include patients currently relying on traditional oral pain medications;
    • And the growth of the Hematologic Oncology business, reflecting the inclusion of Thymoglobulin® (anti-thymocyte globulin, rabbit) in this segment, the integration of the Bayer oncology products, and the successful global launch of Mozobil.
  • Fabrazyme revenue in 2010 is projected to be lower than 2009 given the low productivity of the manufacturing process since the re-start of production. Genzyme is implementing changes intended to increase productivity.

Gross Margin

  • The non-GAAP gross margin for 2010 is expected to be approximately 71 – 73 percent of revenue, compared with 71 percent in 2009 due to manufacturing write-offs. The gross margin reflects continued investments in manufacturing and a shift in product mix.

Expenses

  • Non-GAAP selling, general and administrative expenses are expected to be approximately $1.5 billion in 2010, compared with approximately $1.3 billion in 2009. SG&A spending this year includes: investments in the company’s genetic disease business intended to regain its competitive position and prepare for the U.S. introduction of Lumizyme; a broad-based marketing campaign designed to support the adoption of Synvisc-One; and the full-year expenses associated with the Bayer oncology products.
  • Non-GAAP research and development spending is expected to be $945 – $960 million in 2010 compared with $804 million in 2009. Genzyme continues to make a significant investment in its pipeline to sustain its future growth, with a focus on key late-stage programs including alemtuzumab for multiple sclerosis and eliglustat tartrate for Gaucher disease.

Tax Rate

  • Genzyme’s non-GAAP tax rate this year is expected to be 27 – 28 percent of profit before tax. The GAAP tax rate is expected to be 26 – 27 percent.

Capital Expenditures

  • Capital expenditures are expected to total approximately $600 million this year, primarily for infrastructure improvements.

    Genzyme is making a significant investment in manufacturing capacity to support the growth of existing products and prepare for the launch of products in late-stage development. These include a new facility in Framingham, Mass., for Fabrazyme and Cerezyme; the expansion of the Geel, Belgium, facility to support the growth of Myozyme and Campath; and the expansion of the Waterford, Ireland, facility’s fill-finish capabilities.

Genetic Disease Business Updates

Genzyme has made progress over the past several months toward ensuring a sustainable supply of both Cerezyme and Fabrazyme, managing the urgent need to provide treatment with the need to improve manufacturing quality systems and perform preventative maintenance and upgrades at the Allston plant.

Cerezyme manufacturing is continuing with productivity levels above historical averages. Approximately 85 percent of U.S. patients have resumed therapy, and a similar percentage is estimated worldwide.

To more consistently manage the resupply of Cerezyme to patients in approximately 100 countries and reduce the interruptions in shipping that occur in the absence of inventory, Genzyme will work to immediately build a small inventory buffer. This buffer will allow a more predictable schedule for Cerezyme delivery through the remainder of 2010 and help avoid the challenges many physicians and patients have experienced in scheduling infusions. To build this inventory buffer, the company will ship 50 percent of demand for an eight-week period beginning the week of February 22, 2010. Genzyme is working closely with physicians and patient organizations to manage this temporary initiative.

The company is working to increase the productivity of the Fabrazyme manufacturing process, which has performed at the low end of the historical range since the re-start of production. The combination of reduced productivity, the additional time needed to reestablish fill-finish operations for Fabrazyme at the Allston facility, and the need to build a small inventory buffer has led Genzyme to extend the current 30 percent supply allocation through April and May.

Genzyme has developed a new working cell bank and production is underway at the 2000-liter scale. Pending regulatory approval, output from this process is expected starting in June. If this change is successful, Genzyme anticipates that sufficient supply will become available to enable higher dosing for patients on Fabrazyme. Genzyme will provide an update on this process by its Analyst Day in May.

A June 17 FDA PDUFA date has been confirmed for the marketing application for Lumizyme produced at the 4000 L scale. Genzyme in December reopened enrollment in the Alglucosidase Alfa Temporary Access Program (ATAP), a program which provides access to treatment for severely affected adults with Pompe disease prior to commercial approval of Lumizyme. The company is currently providing therapy free of charge to approximately 180 patients. The ATAP program will remain active until commercial approval of Lumizyme.

Making Changes to Support Growth

Genzyme continues to implement measures intended to fundamentally strengthen the company and support current and future growth:

  • The company has hired two new senior leaders for its global product manufacturing and quality operations. Scott Canute, the former manufacturing head at Eli Lilly & Company and a respected leader in the field with more than 25 years of experience, will join Genzyme March 1 as President of Global Manufacturing and Corporate Operations. Ron Branning, who has more than 30 years of experience in biopharmaceutical manufacturing quality and regulatory compliance, including with Gilead and Genentech, recently joined as Senior Vice President of Global Product Quality.
  • Genzyme last month adopted new long-term and short-term incentive compensation plans for senior executives intended to encourage decisions that will drive growth and shareholder value. The plans, which are effective beginning this year, include a broader set of corporate financial performance metrics that will be used to determine cash and equity bonus awards.
  • The company also recently implemented changes at the board level to improve corporate governance, including strengthening the role of its lead independent director, Robert Carpenter, appointing new board member Robert Bertolini as Audit Committee Chair, and requiring that at least two-thirds of the board consist of independent members. Currently eight members of the nine-member board are independent.

Development Programs On-Track

Genzyme’s R&D pipeline includes several major late-stage programs:

  • Genzyme last week announced two-year follow-up data from the phase 2 study of its investigational oral therapy for patients with Gaucher disease type 1, eliglustat tartrate (formerly Genz-112638). This therapy has the potential to transform the treatment experience for Gaucher patients by providing a daily oral capsule option instead of bi-weekly infusions lasting several hours or more. At the two-year timepoint, continued improvements were observed across all endpoints, including bone disease, compared with baseline. Genzyme has begun enrollment in two global, multi-center, phase 3 trials of eliglustat tartrate.
  • Genzyme and Isis Pharmaceuticals Inc. last week reported positive results from the second phase 3 study of mipomersen, in heterozygous familial hypercholesterolemia (FH). The study met its primary endpoint with a 28 percent reduction in LDL-cholesterol. Strong phase 3 results in homozygous FH were presented at the American Heart Association meeting in November. The companies expect data from two additional phase 3 studies in mid-2010; one involves patients with severe hypercholesterolemia and the other includes hypercholesterolemic patients at high risk for coronary heart disease.
  • Enrollment was completed ahead of schedule in 2009 in the two phase 3 studies of alemtuzumab in multiple sclerosis, which holds the potential to fundamentally change the standard-of-care for this disease, based on four-year data from the phase 2 study. This program is Genzyme’s largest development effort. Phase 3 results are expected next year.
  • Genzyme is collaborating with PTC Therapeutics Inc. on ataluren, a novel oral therapy for the treatment of genetic disorders due to nonsense mutations. Results of a pivotal phase 2b trial of ataluren in Duchenne muscular dystrophy are anticipated during the first half of this year, a phase 3 trial in cystic fibrosis began enrolling patients last fall, and a phase 1 trial in hemophilia is underway.

About Genzyme

One of the world's leading biotechnology companies, Genzyme is dedicated to making a major positive impact on the lives of people with serious diseases. Since 1981, the company has grown from a small start-up to a diversified enterprise with more than 12,000 employees in locations spanning the globe and 2009 revenues of $4.5 billion.

With many established products and services helping patients in approximately 100 countries, Genzyme is a leader in the effort to develop and apply the most advanced technologies in the life sciences. The company's products and services are focused on rare inherited disorders, kidney disease, orthopaedics, cancer, transplant and immune disease, and diagnostic testing. Genzyme's commitment to innovation continues today with a substantial development program focused on these fields, as well as cardiovascular disease, neurodegenerative diseases, and other areas of unmet medical need.

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 1-678-999-4572 outside the United States.

This press release contains forwarding-looking statements regarding Genzyme’s financial outlook and business plans including, without limitation: its financial guidance for 2010; its expectation that revenue and earnings will accelerate in the second half of 2010; its anticipated drivers of 2010 revenue growth; its expectation that it will be successful in creating a Cerezyme inventory buffer and that the buffer will allow for more predictable supply of product; its expectations regarding Fabrazyme supply and the new working cell bank; its expectation that eliglustat tartrate and alemtuzumab-MS have the potential to be transformative treatments; its plans to file for US and EU approval of mipomersen in the first half of 2011 and the possible scope of the indication sought; its expectation that phase 3 results for alemtuzumab in MS will be available in 2011 and will form the basis of a US marketing approval filing in 2012; and its expectation that results from a phase 2b study of ataluren in nm DMD will be available in the first half of 2010 and that the 2b trial will be pivotal. These statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among others: that Genzyme is unable to meet its 2010 financial guidance for any reason, including that the FDA does not approve Lumizyme on the expected timeframe or at all, that manufacturing productivity of Fabrazyme does not increase as anticipated, that the reliability of Cerezyme supply cannot be established as anticipated, that Fabrazyme and Cerezyme patients choose alternative treatments at a rate greater than expected, and that the costs to mitigate manufacturing issues are higher than forecasted; that production of Fabrazyme and Cerezyme does not continue as planned due to any reason, including bacterial or viral contamination, mechanical failures, cell growth at lower than expected levels, fill-finish inefficiencies, or regulatory issues; that Genzyme cannot obtain and maintain regulatory approvals for its products and manufacturing facilities, including its Allston manufacturing facility; that Genzyme is not able to successfully complete clinical development and obtain regulatory approvals of its product candidates within anticipated timeframes and for anticipated indications, including aliglustat tartrate, alemtuzumab-MS, mipomersen, and ataluren for any reason, including lower than anticipated trial enrollment rates, unfavorable trial results and safety profiles that reduce the potential target population; that Genzyme cannot effectively compete against alternative treatments and maintain or grow market share for its products; that the estimates of the size and characteristics of the markets to be addressed by Genzyme’s product candidates are not accurate; that reimbursement for products is unavailable or is available at lower levels than anticipated; and the risks and uncertainties described in Genzyme's SEC reports filed under the Securities Exchange Act of 1934, including the factors discussed under the caption "Risk Factors" in Genzyme's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. Genzyme cautions investors not to place substantial reliance on the forward-looking statements contained in this press release. These statements speak only as of February 16, 2010 and Genzyme undertakes no obligation to update or revise them.

Genzyme®, Cerezyme®, Fabrazyme®, Myozyme®, Synvisc®, Synvisc-One®, Renvela®, Renagel®, Mozobil® and Thymoglobulin® are registered trademarks and Lumizyme™ is a trademark of Genzyme Corporation or its subsidiaries. Fludara® and Leukine® are registered trademarks licensed to Genzyme Corporation.

Conference Call Information

Genzyme will host a conference call today at 11 a.m. Eastern. To participate in the call, please dial 773-799-3828 and refer to pass code “Genzyme.” A replay of this call will be available by dialing 203-369-0261. This call will also be Webcast live on the investor events section of www.genzyme.com. Replays of the call and the Webcast will be available until midnight on February 24, 2010.

Upcoming Events

On April 21, 2010, Genzyme will report its financial results for the first quarter of 2010. There will be a conference call at 11:00 a.m. Eastern. To participate in the call, please dial 773-799-3828 and refer to pass code “Genzyme.” A replay of this call will be available by dialing 203-369-0536. This call will also be Webcast live on the investor events section of www.genzyme.com. Replays of the call and the Webcast will be available until midnight on April 28, 2010.

 

GENZYME CORPORATION (GENZ)

Consolidated Statements of Operations   Three Months Ended   Year Ended
(Unaudited, amounts in thousands, except per share amounts)   December 31,   December 31,
      2009       2008       2009       2008  
   
Total revenues $ 1,080,630   $ 1,173,560   $ 4,515,525   $ 4,605,039  
   
Operating costs and expenses:
Cost of products and services sold 380,334 290,711 1,386,076 1,148,562
Selling, general and administrative 389,160 341,329 1,428,596 1,338,190
Research and development 228,535 358,430 865,257 1,308,330
Amortization of intangibles 73,482 59,884 266,305 226,442
Charge for impaired assets

 

-

2,036

 

-

2,036
Contingent consideration expense   28,297     -     65,584     -  

 

Total operating costs and expenses

  1,099,808     1,052,390     4,011,818     4,023,560  
Operating income (loss)   (19,178 )   121,170     503,707     581,479  
 
Other income (expenses):
Gain (loss) on investments in equity securities, net 1,276 861 (56 ) (3,340 )
Gain on acquisition of business - - 24,159 -
Other 700 (383 ) (1,719 ) 557
Investment income 3,604 11,245 17,642 51,260
Interest expense   -     (822 )   -     (4,418 )

 

Total other income (expenses)

  5,580     10,901     40,026     44,059  
Income (loss) before income taxes (13,598 ) 132,071 543,733 625,538
(Provision for) benefit from income taxes   36,843     (45,421 )   (121,433 )   (204,457 )
Net income $ 23,245   $ 86,650   $ 422,300   $ 421,081  
 
Net income per share:
Basic $ 0.09   $ 0.32   $ 1.57   $ 1.57  
 
Diluted (1) $ 0.09   $ 0.31   $ 1.54   $ 1.50  
 
Weighted average shares outstanding:
Basic   265,596     270,658     268,841     268,490  
 
Diluted (1)   270,241     284,338     274,071     285,595  
 
     
 
All amounts herein are presented in accordance with GAAP and are provided for quantitative analysis only and should be read in conjunction with the text of the Earnings Release. Please refer to our Form 10-Q's and Form 10-K's for an in-depth discussion and analysis of our results of operations and financial position and for detailed information regarding specific material transactions in a particular period.
 
 
 

In addition, we believe that certain Non-GAAP financial measures, when considered together with the GAAP figures, can enhance the overall understanding of the company's past financial performance and its prospects for the future. Please refer to our GAAP to Non-GAAP Reconciliations attached to the Earnings Releases for the above respective periods, which are filed as 8-K's with the Securities and Exchange Commission at www.sec.gov. The Non-GAAP financial measures are provided with the intent of providing investors with a more complete understanding of the trends underlying our operating results and financial position and are among the primary indicators management uses for planning and forecasting purposes and measuring the company's performance.

 
 
 

(1)

 

Prior to January 1, 2009, in accordance with EITF 04-8, the shares issuable upon conversion of our $690.0 million in principal of 1.25% convertible senior notes were included in diluted weighted average shares outstanding for purposes of computing diluted earnings per share, unless the effect was anti-dilutive. Accordingly, interest and debt fees related to these notes of $1.3 million and $6.9 million, net of tax, for the three months ended and the year ended December 31, 2008, respectively, have been added back to net income. Approximately 6.4 million shares and 8.9 million shares issuable upon conversion of these notes prior to redemption have been included in diluted weighted average shares outstanding for the three months ended and the year ended December 31, 2008, respectively. There are no similar adjustments to the computation of diluted earnings per share for the three months ended and year ended December 31, 2009, because the notes were redeemed, primarily for cash, on December 1, 2008.
 
 
 
 
 
 
 
 
GENZYME CORPORATION (GENZ)        
Condensed Consolidated Balance Sheets December 31, December 31,
(Unaudited, amounts in thousands)                 2009       2008  
 
Cash and all marketable securities $ 1,049,700 $ 973,691
Other current assets 1,934,223 1,886,522
Property, plant and equipment, net 2,809,349 2,306,567
Intangibles, net 3,716,625 3,055,772
Other noncurrent assets   550,827     448,724  
Total assets $ 10,060,724   $ 8,671,276  
 
Current liabilities $ 1,080,130 $ 914,283
Noncurrent liabilities 1,296,942 451,000
Stockholders' equity   7,683,652     7,305,993  
Total liabilities and stockholders' equity $ 10,060,724   $ 8,671,276  
 

                   
Genzyme Corporation (GENZ)
Analyst Schedule
(Unaudited, amounts in thousands, except percentage amounts)  
      Q4-09
vs.
            Q4-08      
Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09

% B/(W)

FY 2007 FY 2008

YTD 12/31/09

Total revenues:
Genetic Diseases
Cerezyme $ 309,280 $ 306,034 $ 295,970 $ 298,087 $ 93,599 $ 105,368 (66%) $ 1,133,153 $ 1,238,977 $ 793,024
Fabrazyme 125,619 125,558 122,201 134,302 115,161 58,026 (54%) 424,284 494,260

 

429,690
Myozyme 76,663 74,967 67,392 79,273 85,980 91,900 23% 200,728 296,176 324,545
Aldurazyme 38,236 37,579 36,837 39,190 40,331 38,707 3% - 151,664 155,065
Other Genetic Diseases   11,367   14,039   14,650   17,301   19,217   21,052 50%   8,314   45,615   72,220
Total Genetic Diseases product and service revenue 561,165 558,177 537,050 568,153 354,288 315,053 (44%) 1,766,479 2,226,692 1,774,544
R&D Revenue   -   -   -   -   -   -   1,059   -   -
Total Genetic Diseases   561,165   558,177   537,050   568,153   354,288   315,053 (44%)   1,767,538   2,226,692   1,774,544
 
Cardiometabolic and Renal
Renagel and Renvela (including Sevelamer) 170,992 169,476 170,599 175,398 181,702 178,890 6% 602,670 677,729 706,589
Hectorol   33,825   34,400   33,030   28,981   36,869   31,877 (7%)   115,708   128,153   130,757
Subtotal   204,817   203,876   203,629   204,379   218,571   210,767 3%   718,378   805,882   837,346
Thyrogen 38,153 37,062 38,826 42,860 41,691 47,267 28% 113,587 148,448 170,644
Other Cardiometabolic and Renal   573   496   494   753   742   1,027 107%   103   1,653   3,016
Total Cardiometabolic and Renal product and service revenue 243,543 241,434 242,949 247,992 261,004 259,061 7% 832,068 955,983 1,011,006
R&D revenue   56   27   13   8   156   155 474%   1,200   200   332
Total Cardiometabolic and Renal   243,599   241,461   242,962   248,000   261,160   259,216 7%   833,268   956,183   1,011,338
 
Biosurgery
Synvisc 67,513 68,512 63,171 82,417 87,526 95,419 39% 242,319 263,094 328,533
Sepra products 33,001 35,278 34,304 36,038 37,831 40,365 14% 104,318 133,663 148,538
Other Biosurgery   21,787   20,908   21,485   20,002   19,643   21,121 1%   74,673   91,698   82,251
Total Biosurgery product and service revenue 122,301 124,698 118,960 138,457 145,000 156,905 26% 421,310 488,455 559,322
R&D revenue   661   563   562   870   647   414 (26%)   5,337   2,645   2,493
Total Biosurgery   122,962   125,261   119,522   139,327   145,647   157,319 26%   426,647   491,100   561,815
 
Hematologic Oncology
Total Hematologic Oncology product and service revenue 26,328 27,437 34,423 55,078 87,982 108,117 294% 69,927 102,899 285,600
R&D revenue   7,726   15,104   8,775   5,918   7   134 (99%)   18,601   36,148   14,834
Total Hematologic Oncology   34,054   42,541   43,198   60,996   87,989   108,251 154%   88,528   139,047   300,434
 
Other
Genetic/Diagnostics product and service revenue 121,163 124,840 129,194 132,955 133,748 142,340 14% 410,917 477,614 538,237
Transplant product and service revenue 47,784 50,723 52,666 56,060 55,604 60,623 20% 174,826 192,200 224,953
Other product and service revenue   28,598   30,252   23,501   22,423   18,496   37,101 23%   108,577   119,155   101,521
Total Other product and service revenue 197,545 205,815 205,361 211,438 207,848 240,064 17% 694,320 788,969 864,711
R&D revenue   959   305   778   596   582   727 138%   3,218   3,048   2,683
Total Other   198,504   206,120   206,139   212,034   208,430   240,791 17%   697,538   792,017   867,394
                 
Total revenues $ 1,160,284 $ 1,173,560 $ 1,148,871 $ 1,228,510 $ 1,057,514 $ 1,080,630 (8%) $ 3,813,519 $ 4,605,039 $ 4,515,525
 
All amounts herein are presented in accordance with GAAP and are provided for quantitative analysis only and should be read in conjunction with the text of the Earnings Release and our audited financial statements filed with the Securities and Exchange Commission. Please refer to our Form 10-Q's and Form 10-K's for an in-depth discussion and analysis of our results of operations and financial position and for detailed information regarding specific material transactions in a particular period.
 

                                     
GENZYME CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
For the Year Ended December 31, 2009
(Amounts in thousands, except percentage and per share data)
                         
       
 
 

 

OTHER DISCRETE ITEMS

 

(included in GAAP and Non-GAAP results)

 

 

   

 

 

GAAP

As Reported

 

Bayer

Acquisition

Related (2)

 

FAS 123R

Expense

 

 

 

NON-GAAP (1)

Manufacturing

Related

 

Technology

Purchase

 

Q2 Inventory

Fair Value Step-up (2)

Income Statement Classification:
 
Total revenues $ 4,515,525 $ 4,515,525
 
Cost of products and services sold $ (1,386,076 ) $ 36,822   $ 32,314   $ (1,316,940 ) $ 76,398   $ 6,639  
Gross margin 69% $ 3,129,449 $ 36,822 $ 32,314 71% $ 3,198,585 $ 76,398 $ 6,639
 
Selling, general and administrative $ (1,428,596 ) $ 110,410 $ (1,318,186 )
 
Research and development $ (865,257 ) $ 61,391 $ (803,866 ) $ 25,180
 
Amortization of intangibles $ (266,305 ) $ (266,305 )
 
Contingent consideration expense $ (65,584 ) $ 65,584 $ -
 
Gains (losses) on investments in equity securities $ (56 ) $ (56 )
 
Gain on acquisition of business $ 24,159 $ (24,159 ) $ -
 
Other $ (1,719 ) $ (1,719 ) $ 1,484
 
Investment income $ 17,642 $ 17,642
 
Interest expense $ - $ -
                               
 
 
Summary:
 
Income (loss) before income taxes $ 543,733 $ 78,247 $ 204,115 $ 826,095 $ 77,882 $ 25,180 $ 6,639
 
(Provision for) benefit from income taxes 22% $ (121,433 ) $ (29,739 ) $ (53,434 ) 25% $ (204,606 ) $ (17,956 ) $ (8,118 ) $ (1,302 )
 
Net income (loss) $ 422,300   $ 48,508   $ 150,681   $ 621,489   $ 59,926   $ 17,062   $ 5,337  
 
 
Net income (loss) per share:

Basic

$ 1.57 $ 0.18 $ 0.56 $ 2.31 $ 0.22 $ 0.06 $ 0.02
 
Diluted $ 1.54 $ 0.18 $ 0.55 $ 2.27 $ 0.22 $ 0.06 $ 0.02
 
Weighted average shares outstanding:
Basic 268,841 268,841 268,841 268,841
 
Diluted         274,071       274,071       274,071           274,071  
 
 

Notes:

 

(1) Represents the Non-GAAP results of operations for Genzyme Corporation for the year ended December 31, 2009. We believe that certain Non-GAAP financial measures, when considered together with the GAAP figures, can enhance the overall understanding of the company's past financial performance and its prospects for the future. The Non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of the trends underlying our operating results and financial position and are among the primary indicators management uses for planning and forecasting purposes and measuring the company's performance. Such Non-GAAP financial measures should not be considered in isolation or used as a substitute for GAAP. Earnings per share are calculated as net income (loss) divided by weighted average shares outstanding. Therefore, earnings per share may not add across due to rounding.

 

(2) "Bayer Acquisition Related" includes the gain on acquisition, contingent consideration expense and, beginning with Q3 2009, the inventory fair value step-up associated with our acquisition from Bayer. The initial inventory fair value step-up in Q2 for the Bayer transaction was presented as "Other Discrete Items".

 

                             
GENZYME CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
For the Three Months Ended December 31, 2009
(Amounts in thousands, except percentage and per share data)
                         
           
 
 
OTHER DISCRETE ITEMS
  (included in GAAP and Non-GAAP results)  
Bayer

 

GAAP

Acquisition FAS 123R Manufacturing
   

 

 

As Reported

 

Related (2)

  Expense  

 

 

NON-GAAP (1)

Related
Income Statement Classification:
 
Total revenues $ 1,080,630 $ 1,080,630
 
Cost of products and services sold $ (380,334 ) $ 19,082   $ 9,935   $ (351,317 ) $ 20,937  
Gross margin 65 % $ 700,296 $ 19,082 $ 9,935 67 % $ 729,313 $ 20,937
 
Selling, general and administrative $ (389,160 ) $ 24,109 $ (365,051 )
 
Research and development $ (228,535 ) $ 14,017 $ (214,518 )
 
Amortization of intangibles $ (73,482 ) $ (73,482 )
 
Contingent consideration expense $ (28,297 ) $ 28,297 $ -
 
Gains (losses) on investments in equity securities $ 1,276 $ 1,276
 
Other $ 700 $ 700
 
Investment income $ 3,604 $ 3,604
 
Interest expense $ - $ -
                           
 
 
Summary:
 
Income (loss) before income taxes $ (13,598 ) $ 47,379 $ 48,061 $ 81,842 $ 20,937
 
(Provision for) benefit from income taxes $ 36,843   $ (22,189 ) $ (13,002 ) $ 1,652   $ (5,694 )
 
Net income (loss) $ 23,245   $ 25,190   $ 35,059   $ 83,494   $ 15,243  
 
 
Net income (loss) per share:
Basic $ 0.09 $ 0.09 $ 0.13 $ 0.31 $ 0.06
 
Diluted $ 0.09 $ 0.09 $ 0.13 $ 0.31 $ 0.06
 
Weighted average shares outstanding:
Basic 265,596 265,596 265,596 265,596 265,596
 
Diluted         270,241       270,241       270,241           270,241   270,241
 

Notes:

 

(1) Represents the Non-GAAP results of operations for Genzyme Corporation for the three months ended December 31, 2009. We believe that certain Non-GAAP financial measures, when considered together with the GAAP figures, can enhance the overall understanding of the company's past financial performance and its prospects for the future. The Non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of the trends underlying our operating results and financial position and are among the primary indicators management uses for planning and forecasting purposes and measuring the company's performance. Such Non-GAAP financial measures should not be considered in isolation or used as a substitute for GAAP. Earnings per share are calculated as net income (loss) divided by weighted average shares outstanding. Therefore, earnings per share may not add across due to rounding.

 

(2) "Bayer Acquisition Related" includes contingent consideration expense and, beginning with Q3 2009, the inventory fair value step-up associated with our acquisition from Bayer.

 

 
Genzyme 2010 Guidance
($ in millions, except percentages and per share amounts)
   
2010 Guidance Ranges

2009 Act

Low End

High end

Revenue:
Cerezyme $793 $980 - $1,037
Fabrazyme $430 $360 - $380
Myozyme $325 $470 - $500
Total Genetic Disease $1,775 $2,080 - $2,185
 
Synvisc/Synvisc One $329 $430 - $450
Total Biosurgery $562 $690 - $710
 
Renagel/Renvela $707 $740 - $770
Total Cardiometabolic and Renal $1,011 $1,095 - $1,135
 
Total Hematologic Oncology (Incl. Thymo) $525 $775 - $810
 
Genetics $371 $405 - $415
Total Other $642 $680 - $690
 
FX Impact $0 ($90 )
             
 
TOTAL REVENUE $4,515 $5,230 - $5,530
             
 
GROSS MARGIN (1)(2) 71 % 71 % - 73 %
 
SG&A (1)(2) $1,318 $1,510 - $1,540
R&D (1)(2) $804 $945 - $960
Amortization $266 $320 - $320
Synvisc Amortization $53 $78 - $78
Bayer Transaction Amortization $35 $60 - $60
 
Tax Rate (1)(2) 25 % 27 % 28 %
             
 
GENZ NON-GAAP EPS (1)(2) $2.27 $2.80 - $3.20
             
 
WTD Average Diluted Shares O/S 274 272 - 274
 
Capital Expenditures $600
 

Diluted EPS Impact of Acquisition and Stock-Based Compensation Expenses

$0.90 - $0.93
 
This financial guidance, which is provided as part of a press release dated February 17, 2010, is subject to all of the qualifications and limitations described therein. Actual results may differ from these forward-looking statements due to the numerous factors described in the press release.
 
(1)2009 and 2010 Non-GAAP figures exclude the impact of acquisition related expenses and FAS123R, stock compensation expense.
 

(2)2009 Non-GAAP figures are reconciled on the 2009 "Genzyme Corporation Reconciliation of GAAP to Non-GAAP Earnings" schedule found on the guidance and reconciliation page within the investors section at www.genzyme.com

 

 

Genzyme 2010 Guidance

GAAP to Non-GAAP Reconciliations
($ in millions, except percentages and per share amounts)
 
 
 
 
 
Projected product gross margin GAAP to non-GAAP

2/17/2010

reconciliation:
GAAP projected product gross margin 70% - 72%
Bayer acquisition related - Inventory step up 1% - 1%
Non-GAAP projected product gross margin** 71% - 73%
 
Projected selling, general and administrative expenses GAAP to non-
GAAP reconciliation:
GAAP projected selling, general and administrative expenses $1,610 - $1,650
Stock-based compensation expenses $100 - $110
Non-GAAP projected selling, general and administrative expenses $1,510 - $1,540
 
Projected research and development expenses GAAP to non-GAAP
reconciliation:
GAAP projected research and development expenses $995 - $1,015
Stock-based compensation expenses $50 - $55
Non-GAAP projected research and development expenses $945 - $960
 
Projected diluted EPS impact of acquisition and stock-
based compensation expenses:
Bayer acquisition related - Inventory step up $0.11 - $0.11
Bayer acquisition-related contingent consideration expense $0.29 - $0.29
Stock-based compensation expenses $0.50 - $0.53
Projected diluted EPS impact of acquisition and stock-based compensation expenses $0.90 - $0.93
 
** Stock-based compensation expenses have a less than one percent impact on non-GAAP product gross margin.
 
 
 
This financial guidance, which is provided as part of a press release dated February 17, 2010, is subject to all of the qualifications and limitations described therein. Actual results may differ from these forward-looking statements due to the numerous factors described in the press release.

Genzyme Corp.
Media Contact:
Erin Emlock, 617-768-6923
or
Investor Contact:
Patrick Flanigan, 617-768-6563