Genzyme Corp. (GENZ) recently reported preliminary revenues for the fourth quarter and full year ended December 31, 2009. With the company facing manufacturing problems from mid 2009, we were not surprised to see fourth quarter revenues decline 8% to $1.08 billion. Full year revenues declined 2% to $4.5 billion.
Genzyme’s Genetic Diseases segment was the most adversely affected by the temporary shutdown of the company’s Allston Landing facility in June 2009. The production and supply of two products – Cerezyme and Fabrazyme − were mainly affected by the temporary shutdown. Revenues from the segment declined 43% to $317 million. For the full year, revenues from this segment declined 20% to $1.8 billion. Sales of the lead product Cerezyme declined 65% to $106 million in the fourth quarter. For the year, Cerezyme sales were $793 million, down 34%.
Excluding the Genetic Diseases business, fourth-quarter and full year revenues increased 24% and 15% year over year.
Fabrazyme sales declined 53% to $59 million in the fourth quarter. For the year, sales declined 12.8% to $431 million. Genzyme reported that it is currently producing Fabrazyme at a rate of 70% of demand. New product shipment commenced recently. Genzyme is working on improving productivity and expects to meet 70−100% of demand during the second quarter.
Apart from the Genetic Diseases segment, all the other segments at Genzyme reported an increase in sales. While revenues in the Cardiometabolic & Renal segment increased 7% in the quarter, Biosurgery segment revenues increased 26%. For the full year, Cardiometabolic & Renal segment revenues increased 6% with Biosurgery segment revenues increasing 14%.
The Hematologic Oncology segment recorded a 147% increase in revenues in the reported quarter. For the full year, revenues increased 114%, with Mozobil generating sales of $55 million.
Genzyme is slowly emerging from the manufacturing issues that hampered its performance in 2009. The company has recently hired a new head of quality control to oversee products made at 17 sites worldwide. Genzyme also entered into a manufacturing contract with Hospira Inc. (HSP) under which Hospira will be responsible for the filling and packaging vials of key products.
Besides this, Genzyme is working on developing products that will help drive growth beyond 2011. Some of the pipeline candidates that show promise include mipomersen for high blood cholesterol, alemtuzumab for multiple sclerosis and GENZ-112638 for Gaucher’s disease. Genzyme is also is boosting its sales force and adding manufacturing capacity.
Genzyme will be presenting full results for 2009 on February 17, 2010. We currently have a Neutral recommendation on the stock.
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