BOSTON (Reuters) - Genzyme Corp GENZ.O, which is fending off a hostile bid from French drugmaker Sanofi-Aventis SA (SASY.PA), said third-quarter earnings quadrupled as it increased shipments of its biggest-selling drug.
Profit fell short of Wall Street expectations, but investors were heartened by the company’s fourth-quarter outlook and its progress in resolving key manufacturing issues. Its shares rose 0.6 percent to $72.33 in afternoon trading.
Last year Genzyme was forced to temporarily close its manufacturing plant in Boston due to a viral contamination. The interruption lead to shortages of two key drugs: Cerezyme for Gaucher disease and Fabrazyme for Fabry disease.
That crisis sent the company’s stock price plummeting from nearly $84 in 2008 to a low earlier this year of $45.39. Sanofi’s offer to acquire the company for $18.5 billion, or $69 a share — along with a 14 percent rise in the NYSE Arca Biotech Index since late July — have helped the shares rebound.
But Genzyme is now on a mission to prove to shareholders that it is worth more than Sanofi is offering, and executives told investors on a conference call that the third quarter marks the beginning of its financial turnaround.
Third-quarter sales of Cerezyme, the company’s top drug, rose to $179.8 million from $93.6 million a year earlier, beating analysts’ average forecast of $175 million.
“In the third quarter we saw our financial recovery start to take effect, and we expect that this will accelerate during the fourth quarter as Cerezyme patients are able to return to normal dosing levels and we begin to increase shipments of Fabrazyme,” Genzyme CEO Henri Termeer said in a statement.
The Cambridge, Massachusetts-based biotech company said net profit rose to $69 million, or 26 cents a share, from $16 million, or 6 cents a share, a year earlier. Revenue excluding divested businesses rose 8 percent to $1 billion.
Earnings excluding one-time items were 42 cents a share. Analysts on average expected 50 cents, according to Thomson Reuters I/B/E/S.
Sales of Fabrazyme fell to $33.9 million from $115.2 million, reflecting continued supply constraints. Analysts had expected $43 million. The company said it expects to restore full supplies of Fabrazyme in the first half of 2011.
Inventory of both Cerezyme and Fabrazyme will remain tight until the company can get its new manufacturing plant, in Framingham, Massachusetts, up and running. But Genzyme said the facility is operational and Fabrazyme engineering runs are under way. The company expects the plant to receive regulatory approval in late 2011.
Geoffrey Porges, an analyst at Sanford Bernstein, said that although third-quarter results came in below expectations, they will likely be “received favorably by investors.” He cited the fact that Genzyme remains on track to resolve supply constraints for Fabrazyme, and its “encouraging” fourth-quarter earnings forecast.
Genzyme said it expects Cerezyme revenue in the fourth quarter of $235-$245 million and Fabrazyme revenue of $70-$75 million, based on currently anticipated product release dates.
It said it expects fourth-quarter earnings of 90 cents to 95 cents a share, compared with a previous range of 90 cents to $1.00. It plans to give a forecast for 2011 at a meeting with investors in New York on Friday.
Sales of the company’s Pompe disease drugs Myozyme and Lumizyme were $106 million in the third quarter, below the average analyst forecast of $111 million.
Genzyme said it is on track to meet November deadlines for moving certain finishing processes out of the Boston plant. The deadlines were imposed by regulatory authorities under a consent decree that placed the plant under third-party supervision.
Separately, the company said results from a late-stage clinical trial of its drug Clolar, which is used to treat leukemia in children, failed to improve overall survival in adults.
Mark Schoenebaum, an analyst at ISI Group, said in a note to clients that the trial results will have “minimal impact” on Sanofi’s bid since expected sales of Clolar in adult acute myeloid leukemia cases represent just 1 percent of Genzyme’s “outer year” revenue.
Still, Genzyme said the drug, in combination with a chemotherapy agent, improved results in all of the study’s secondary goals, including complete remission rate and event-free survival. It said it intends to continue developing the drug.
Reporting by Toni Clarke; editing by Gerald E. McCormick and John Wallace