Genzyme Reports Second-Quarter Financial Results Delivers Solid Earnings Growth Based on Strong Top-Line Performance



    CAMBRIDGE, Mass., July 12 /PRNewswire-FirstCall/ -- Genzyme Corp.
 (Nasdaq:   GENZ) today reported a 19 percent increase in second quarter
 revenue, driven by growth across all major product areas. Revenue rose to
 $793.4 million from $668.1 million in the second quarter a year ago.
     GAAP net income increased to $134.5 million, or $0.49 per diluted
 share, compared with $123.6 million, or $0.46 per diluted share, in the
 second quarter last year. GAAP net income includes a $42.0 million net gain
 in equity securities, principally reflecting the tender of Genzyme's
 investment in Cambridge Antibody Technology Group plc, which is being
 acquired by AstraZeneca plc. GAAP earnings also include stock compensation
 expenses, which amounted to $55.3 million after taxes, or $0.20 per diluted
 share, and were higher than in the first quarter because they reflect the
 impact of Genzyme's annual broad-based stock option grant in May. GAAP
 earnings for the second quarter of last year do not include stock
 compensation expenses.
     Non-GAAP net income increased 22 percent to $181.2 million, up from
 $149.0 million in the same quarter a year ago, and non-GAAP earnings
 increased 19 percent to $0.68 per diluted share from $0.57 per diluted
 share. Non-GAAP figures exclude one-time items, amortization, stock
 compensation expenses, dilution from contingent convertible debt, and the
 impact of FIN 46.
     "We had a strong quarter with excellent progress throughout the
 business, including solid results in the three product areas that were
 below expectations in the first quarter," said Henri A. Termeer, Genzyme's
 chairman and chief executive officer. "We are on track to meet our
 financial goals for the year, while also meeting our commitment to the
 future by continuing to invest in late-stage clinical trials, manufacturing
 expansion, and product launches."
     Genzyme reiterated its full-year revenue guidance of $3.1 to $3.3
 billion, its GAAP earnings guidance of $1.78-$1.88 per diluted share, and
 its non-GAAP earnings guidance of $2.65-$2.75 per diluted share.
     Product Sales
     Within the Renal division, revenue for Renagel(R) (sevelamer
 hydrochloride), a phosphate binder for patients with end-stage renal
 disease on hemodialysis, grew 26 percent to $126.6 million, up from $100.8
 million in the same period last year. Renagel's growth is being driven by
 the communication of strong clinical data, improved access to the product
 through the Medicare Part D program, development of international markets,
 and the expanded U.S. commercial organization. Genzyme looks forward to the
 publication later this year of clinical results from the DCOR study and the
 presentation of health economic data from this study at the American
 Society of Nephrology meeting in November.
     The expanded U.S. commercial organization is also helping to drive the
 growth of Hectorol(R) (doxercalciferol), which treats secondary
 hyperparathyroidism in patients on dialysis and those with earlier stages
 of chronic kidney disease. Hectorol sales in the second quarter were $22.4
 million, compared with sales of $18.9 million in the first quarter. Genzyme
 has begun to implement the global commercialization strategy for Hectorol
 it envisioned when it acquired the product last July. During the quarter,
 it submitted a marketing application for the product in Argentina, and
 filings in Mexico and Israel are expected to follow later this year. The
 company is planning clinical studies to facilitate Hectorol's registration
 in Europe and to reinforce its position in the United States.
     Within the Therapeutics area, sales of Fabrazyme(R) (agalsidase beta)
 enzyme replacement therapy for Fabry disease grew 20 percent in the second
 quarter to $89.0 million, compared with sales of $74.4 million in the same
 quarter last year. Fabrazyme's growth was driven by the number of new
 patients beginning therapy. Sales increased 11 percent from the first
 quarter.
     Sales of Cerezyme(R) (imiglucerase for injection) enzyme replacement
 therapy for Type 1 Gaucher disease were $254.0 million, 8 percent greater
 than sales of $236.0 million in the second quarter a year ago.
     Sales of Aldurazyme(R) (laronidase) enzyme replacement therapy for
 patients with MPS I were $23.5 million in the second quarter, a 23 percent
 increase from sales of $19.2 million in the same quarter last year.
 Aldurazyme is marketed through an increasingly profitable joint venture
 with BioMarin Pharmaceutical Inc.
     Sales of Myozyme(R) (alglucosidase alfa) were $6.5 million in the
 second quarter. In April, the product was approved in the United States for
 the treatment of all patients with Pompe disease. Myozyme was launched in
 the United States in mid-May, and the product is also being introduced in a
 growing number of European Union countries following European Commission
 approval at the end of the first quarter. Genzyme is making excellent
 progress in securing reimbursement approvals both for patients with the
 infantile and the late-onset forms of Pompe disease. Myozyme sales are
 expected to increase throughout this year as patients transition from
 clinical trials or expanded access programs and as new patients are
 identified. Genzyme anticipates that sales will begin to have a material
 impact on the company next year. Marketing applications for Myozyme have
 been submitted in Japan and Canada, and Genzyme expects to file for
 approval in several additional countries in the coming months.
     Sales of Thyrogen(R) (thyrotropin alfa for injection) rose to $23.7
 million in the second quarter, a 15 percent increase from sales of $20.7
 million during the same period a year earlier.
     Within the Biosurgery area, sales of Synvisc(R) (hylan G-F 20)
 increased 8 percent compared with the second quarter of last year, rising
 to $63.6 million from $58.8 million, driven by the expanding market for
 viscosupplementation products. Product sales increased 19 percent from the
 first quarter of this year, reflecting seasonal trends and the impact of an
 expanded sales and marketing investment. Synvisc is indicated for the
 treatment of knee pain caused by osteoarthritis. Data from an independent
 study were presented last month at the annual congress of the European
 League Against Rheumatism that provide further evidence to differentiate
 Synvisc clinically from competing products. The study results showed that
 patients receiving Synvisc experienced a greater magnitude and duration of
 pain relief than those receiving Hyalgan(R) (sodium hyaluronate).
 Similarly, Synvisc patients experienced significantly better functional
 outcomes and higher levels of satisfaction than those receiving Hyalgan.
     Sales of Sepra(TM) products grew 28 percent to $22.0 million, up from
 $17.1 million in the second quarter a year ago. This growth was driven
 partially by the increasing use of Seprafilm(R) adhesion barrier in major
 gynecologic procedures, including oncologic surgery and Cesarean sections.
     Within the Transplant area, combined sales of Thymoglobulin(R) (anti-
 thymocyte globulin, rabbit) and Lymphoglobuline(TM) (anti-thymocyte
 globulin, equine) were $39.8 million, up 19 percent compared with $33.6
 million in the second quarter last year. These products are used in
 conjunction with immunosuppressant drugs to treat acute rejection in renal
 transplant procedures.
     Total revenue for the Diagnostics/Genetics business increased to $87.3
 million in the second quarter, 14 percent greater than revenue of $76.5
 million in the same period last year. During the quarter, Genzyme Genetics
 introduced two new molecular tests that may enable physicians to better
 manage patients with acute myelogenous leukemia.
     Other revenue -- including oncology revenue, sales of pharmaceutical
 intermediates, and royalties from sales of WelChol(R) (colesevelam
 hydrochloride) -- increased 30 percent to $40.1 million from $30.9 million
 in the second quarter last year.
     Oncology revenue was $13.7 million, an increase of 41 percent compared
 with $9.7 million in the same quarter last year. Oncology revenue includes
 profits and royalties from Campath(R) (alemtuzumab), which is marketed by
 Schering AG and its U.S. affiliate Berlex; sales of Clolar(R) (clofarabine
 for intravenous infusion); and R&D revenue.
     Expenses
     Selling, general and administrative expenses were $220.4 million,
 excluding the impact of stock compensation expenses and FIN 46. Non-GAAP
 SG&A spending was approximately 28 percent of revenue, down from 29 percent
 in the same period a year ago.
     Non-GAAP research and development spending in the second quarter was
 $138.6 million, or 17 percent of revenue, excluding the impact of stock
 compensation expenses and FIN 46. Non-GAAP R&D spending in the same quarter
 last year was $115.3 million, or 17 percent of revenue. The reconciliation
 from GAAP to non-GAAP R&D and SG&A expenses is included on the accompanying
 chart.
     Genzyme is conducting more late-stage trials now than at any point in
 its history. New products and new product indications are expected to
 expand and further diversify the company's portfolio and contribute to its
 long-term growth. Clinical development program highlights for the second
 quarter include the following:
     * Enrollment is more than two-thirds complete in the phase 3 trial of
       tolevamer, a novel non-absorbed polymer therapy that could be the first
       non-antibiotic treatment for Clostridium difficile-associated diarrhea,
       a widespread and growing global problem affecting patients in hospitals
       and nursing homes.  The trial is scheduled for completion next year.
       Regulatory submissions are scheduled to begin late next year, and the
       first commercial approval is anticipated in 2008.
     * Preparations are underway for the initiation of a phase 3 study of
       alemtuzumab (Campath) for the treatment of relapsing/remitting multiple
       sclerosis, which is expected during the second half of this year.   In
       addition, nearly all participating patients have now completed at least
       24 months in the ongoing Phase 2 clinical trial comparing alemtuzumab
       with Rebif(R) (interferon beta-1a) for the treatment of multiple
       sclerosis.  Genzyme expects to release data in the second half of this
       year from a two-year interim analysis of this three-year study.
     * Progress continues to be made within the sevelamer carbonate development
       program.  A study evaluating the product's equivalence to Renagel has
       been completed and results are being analyzed.  Genzyme has also begun a
       study evaluating the potential of sevelamer carbonate to benefit
       patients with chronic kidney disease who are not on dialysis, and a
       study comparing a powder form of sevelamer carbonate dosed once a day to
       Renagel tablets dosed three times a day.  Such a formulation could
       provide an additional option to increase patient compliance.
     * The clinical study of Myozyme involving patients with late-onset Pompe
       disease is fully enrolled and will continue throughout this year.  The
       90-patient trial is intended to provide further support for Myozyme's
       use.  Results will be available early next year and will be submitted to
       regulatory authorities.
     * Advances continue within the clinical program designed to extend the use
       of Synvisc to the hip, shoulder and ankle, and to introduce new
       formulations of the product.  Genzyme expects to launch Synvisc for use
       in the hip in the United States during the first half of 2007.  The
       company is also conducting pivotal trials of Synvisc 2 and hylastan,
       potential next-generation viscosupplementation products that are
       designed to increase patient convenience by reducing the number of
       injections required for treatment.  Enrollment has been completed in the
       trial of Synvisc 2, and Genzyme is planning for product launch next year
       in Europe and the United States, depending on the outcome of the trial.
     * Genzyme is working to broaden the indications for its oncology products,
       Campath and Clolar, to benefit larger patient populations.  A phase 3
       trial comparing Campath with chlorambucil in previously untreated
       patients with progressive B-cell chronic lymphocytic leukemia (B-CLL)
       may demonstrate the product's efficacy as a first-line agent.
       Encouraging interim results from this study, focusing on the study's
       secondary endpoint, were presented at the Annual Meeting of the American
       Society of Clinical Oncology in June.  They showed that patients who
       received Campath exhibited significantly higher overall and complete
       response rates, with a manageable safety profile, compared with
       chlorambucil patients.  The interim results also showed statistically
       significant higher response rates to Campath in patients with certain
       cytogenic abnormalites that are typically associated with poor
       prognosis.  Data from the study's primary endpoint of progression-free
       survival are expected by the end of the year, when Genzyme and
       development partner Schering AG expect to submit U.S. and European
       applications to expand the product's current label to include first-line
       treatment of B-CLL patients.
     * Genzyme is seeking to expand Clolar's indication to include adult
       patients.  Enrollment is expected to begin shortly in a phase 3 study
       evaluating Clolar's use in combination with existing therapies for adult
       patients with acute myelogenous leukemia.  Additional late-stage studies
       are also planned to support Clolar's use in older patients.  The product
       is currently indicated for the treatment of pediatric patients with
       relapsed or refractory acute lymphoblastic leukemia after at least two
       prior regimens.
     * In the lysosomal storage disease area, enrollment is expected to begin
       in the coming weeks in an international, multi-center phase 2 clinical
       trial evaluating the safety and efficacy of the small molecule GENZ-
       112638 for the treatment of Gaucher disease.  The trial will help
       determine the potential of this compound as an alternative or adjunct to
       enzyme replacement therapy.  GENZ-112638 also may be applicable to
       several other lysosomal storage disorders in addition to Gaucher
       disease. Initiation of the phase 2 program follows completion of an
       extensive pre-clinical research effort and a phase 1 program that
       involved more than 120 subjects in three separate studies.
 
     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. This year marks the 25th anniversary of Genzyme's
 founding. Since 1981, the company has grown from a small start-up to a
 diversified enterprise with more than 8,000 employees in locations spanning
 the globe and 2005 revenues of $2.7 billion. Genzyme has been selected by
 FORTUNE as one of the "100 Best Companies to Work for" in the United
 States.
     With many established products and services helping patients in more
 than 80 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 diseases, and diagnostic
 testing. Genzyme's commitment to innovation continues today with a
 substantial development program focused on these fields, as well as heart
 disease and other areas of unmet medical need.
     This press release contains forward-looking statements, including
 statements regarding 2006 earnings, revenues, EPS, and product sales
 estimates; expected drivers of Genzyme's future growth, as well as the
 growth drivers for certain products, including Renagel, Hectorol, and
 Myozyme; the ability of our molecular tests to help physicians better
 manage treatment for patients with AML; the development of new markets and
 seeking additional approved indications and uses for Genzyme's products,
 including Hectorol, Myozyme, Synvisc, Campath and Clolar; anticipated
 progress of clinical trials, including those for tolevamer, alemtuzumab MS,
 sevelamer carbonate, Myozyme, hylastan, Synvisc 2, Clolar and GENZ-112638;
 publication of results from the DCOR trial; the anticipating timing of
 Synvisc 2 launch; and other statements regarding Genzyme's future
 performance and strategy. These statements are subject to risks and
 uncertainties that could cause actual results to differ materially from
 those forecast in these forward-looking statements. These risks and
 uncertainties include, among others, Genzyme's ability to successfully
 complete preclinical and clinical development of its products and services;
 Genzyme's ability to expand the use of current products in existing and new
 indications; Genzyme's ability to maintain and obtain regulatory approvals
 for products and services, and the timing of receipt of such approvals;
 Genzyme's ability to successfully identify and market to new patients; the
 scope of third-party reimbursement coverage for Genzyme's products and
 services; Genzyme's ability to successfully expand its sales and marketing
 teams in existing and new markets; Genzyme's ability to manufacture
 products and product candidates in a timely and cost effective manner; the
 ability to manage patient safety and the continued administration of
 alemtuzumab to MS patients following clinical hold release; Genzyme's
 ability to develop and obtain approval of a patient safety plan for
 alemtuzumab MS; failure of Genzyme's molecular tests to produce diagnostic
 results as 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 "Factors Affecting Future
 Operating Results" in Genzyme's Quarterly Report on Form 10-Q for the
 quarter ended March 31, 2006. Genzyme cautions investors not to place
 substantial reliance on the forward- looking statements contained in this
 press release. These statements speak only as of July 12, 2006 and Genzyme
 undertakes no obligation to update or revise the statements.
     This press release includes certain non-GAAP financial measures that
 involve adjustments to GAAP figures. Genzyme believes that these non-GAAP
 financial measures, when considered together with the GAAP figures, can
 enhance an overall understanding of Genzyme's past financial performance
 and its prospects for the future. The non-GAAP financial measures are
 included with the intent of providing both management and investors with a
 more complete understanding of underlying operational results and trends.
 In addition, these non-GAAP financial measures are among the primary
 indicators Genzyme management uses for planning and forecasting purposes.
 These non-GAAP financial measures are not intended to be considered in
 isolation or as a substitute for GAAP figures. In addition, gross margin
 figures exclude amortization of product-related intangible assets.
     Genzyme(R), Renagel(R), Hectorol(R), Fabrazyme(R), Cerezyme(R),
 Thyrogen(R), Synvisc(R), Myozyme(R), Thymoglobulin(R), Clolar(R) and
 Campath(R) are registered trademarks and Sepra(TM) and Lymphoglobuline(TM)
 are trademarks of Genzyme Corporation or its subsidiaries. WelChol(R) is a
 registered trademark of Sankyo Pharma Inc. Aldurazyme(R) is a registered
 trademark of BioMarin/Genzyme LLC. Hyalgan(R) is a registered trademark of
 Sanofi Aventis. Rebif(R) is a registered trademark of Serono, Inc.
     Conference Call Information
     There will be a conference call today at 11:00 a.m. Eastern to discuss
 Genzyme Corporation's financial results for the second quarter of 2006. If
 you would like to participate in the call, please dial (706) 679-8722. This
 call will also be Webcast on the investor events section of
 http://www.genzyme.com. A replay of the Webcast call will be available from
 2:15 p.m. Eastern today through midnight on July 19. For the call, please
 dial (706) 645-9291 and refer to reservation number 7981370.
     Upcoming Events
     Genzyme will announce its financial results for the third quarter of
 2006 on October 12, 2006. There will be a conference call to discuss these
 results at 11:00 a.m. Eastern. If you would like to participate in the
 call, please dial (706) 679-8722. The call will also be Webcast live on the
 investor events section of http://www.genzyme.com. A replay of the Webcast
 call will be available from 2:15 p.m. Eastern through midnight on October
 19, 2006. For the call replay, please dial (706) 645-9291 and refer to
 reservation number 1650276.
     Genzyme's press releases and other company information are available at
 http://www.genzyme.com and by calling Genzyme's investor information line
 at 1-800-905-4369 within the United States or 1-703-797-1866 outside the
 United States.
     Media Contact:       Investor Contact:
     Bo Piela             Sally Curley
     617-768-6579         617-768-6140
 
 
 
     GENZYME CORPORATION (GENZ)
     Consolidated Statements of Operations
     (Unaudited, amounts in thousands, except per share amounts)
 
                                   Three Months Ended       Six Months Ended
                                         June 30,                June 30,
                                     2006        2005        2006        2005
 
     Total revenues               $793,356    $668,139  $1,524,198  $1,298,088
 
     Operating costs and
      expenses:
      Cost of products and
       services sold (1)           185,333     145,250     352,283     291,343
      Selling, general and
       administrative (1)          273,480     196,385     504,149     378,224
      Research and development (1) 168,941     121,726     321,264     236,471
      Amortization of
       intangibles                  52,883      40,105     105,575      81,291
      Purchase of in-process
       research and development (2)    -           -           -         9,500
      Total operating costs and
       expenses                    680,637     503,466   1,283,271     996,829
     Operating income              112,719     164,673     240,927     301,259
 
     Other income (expenses):
      Equity in income (loss)
       of equity method
       investments                   3,854        (417)      6,100      (2,135)
      Minority interest              2,750       3,357       5,196       5,551
      Gain on investments in
       equity securities (3)        66,967       4,817      74,909       4,958
      Other                           (319)        253        (458)        193
      Investment income             12,563       7,544      22,641      14,162
      Interest expense              (4,035)     (4,466)     (8,473)     (8,274)
      Total other income
       (expenses)                   81,780      11,088      99,915      14,455
     Income before income taxes(1) 194,499     175,761     340,842     315,714
     Provision for income taxes(1) (60,002)    (52,130)   (105,371)    (96,525)
     Net income (1)               $134,497    $123,631    $235,471    $219,189
 
     Net income per share of
      Genzyme Stock:
       Basic                         $0.52       $0.49       $0.91       $0.87
 
       Diluted (1,4)                 $0.49       $0.46       $0.86       $0.83
 
     Weighted average shares
      outstanding:
       Basic                       260,444     253,086     260,076     252,003
 
       Diluted (1,4)               276,312     270,084     276,560     268,988
 
 
     (1) Reflects the adoption of Financial Accounting Standards Board, or
        FASB, Statement of Financial Accounting Standards No., or FAS, 123R,
        "Share Based Payment, an amendment of FASB Statement Nos. 123 and 95,"
        using the modified prospective basis effective January 1, 2006.  For
        the three months ended June 30, 2006, in accordance with the
        provisions of FAS 123R, we recorded pre-tax charges for stock
        compensation expense totaling $(82,888)K, of which $(4,927)K were
        charged to cost of products and services sold, $(52,692)K were charged
        to selling, general and administrative expense and $(25,269)K were
        charged to research and development expense.  In addition, we recorded
        $27,577K of related tax benefits.  For the six months ended June 30,
        2006, in accordance with the provisions of FAS 123R, we recorded
        pre-tax charges for stock compensation expense totaling $(115,495)K,
        of which $(7,230)K were charged to cost of products and services sold,
        $(72,139)K were charged to selling, general and administrative expense
        and $(36,126)K were charged to research and development expense.  In
        addition, we recorded $37,925K of related tax benefits.  Diluted
        earnings per share and diluted weighted average shares outstanding for
        the three and six months ended June 30, 2006 were computed in
        accordance with the provisions of FAS 123R.
 
     (2) Includes charges for the purchase of in-process research and
        development of $(9,500)K related to our acquisition of Verigen AG in
        February 2005.
 
     (3) Includes pre-tax gains of $69,359K related to the liquidation of our
         investment in the common stock of Cambridge Antibody Technology Group
         plc during May and June 2006.
 
     (4) Reflects the adoption of Emerging Issues Task Force Issue No. 04-8,
         "The Effect of Contingently Convertible Debt on Diluted Earnings Per
         Share," or EITF 04-8.  As a result of the adoption of EITF 04-8, the
         9,686K shares issuable upon conversion of our $690.0 million in
         principal of 1.25% convertible senior notes, which were issued in
         December 2003, are now included in diluted weighted average shares
         for purposes of computing diluted earnings per share, unless the
         effect would be anti-dilutive.  In accordance with EITF 04-8,
         interest and debt fees related to the notes of $1.9 million, net of
         tax, for the three months ended June 30, 2006 and 2005 and $3.7
         million, net of tax, for the six months ended June 30, 2006 and 2005
         have been added back to net income and approximately 9.7 million
         shares have been added to diluted weighted average shares outstanding
         for each of those periods for purposes of computing diluted earnings
         per share.
 
 
 
     GENZYME CORPORATION (GENZ)
     Condensed Consolidated Balance Sheets
     (Unaudited, amounts in thousands)
 
                                 June 30,     December 31,
                                   2006           2005
 
     Cash and all marketable
      securities                $1,358,240     $1,089,102
     Other current assets (1)    1,392,290      1,179,093
     Property, plant and
      equipment, net             1,458,222      1,320,813
     Intangibles, net            3,028,777      3,078,461
     Other assets                  135,342        211,396
      Total assets              $7,372,871     $6,878,865
 
     Current liabilities          $616,632       $550,023
     Noncurrent liabilities      1,111,591      1,178,975
     Stockholders' equity        5,644,648      5,149,867
      Total liabilities and
       stockholders' equity     $7,372,871     $6,878,865
 
 
     (1) As of June 30, 2006, includes net proceeds receivable of $99.0 million
         related to the portion of our investment in the common stock of
         Cambridge Antibody Technology Group plc that was liquidated in June
         2006.
 
 
 
                              GENZYME CORPORATION
                    RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
                            Quarter Ended June 30, 2006
                   (Amounts in thousands, except per share data)
 
 
                                                 NON-GAAP            Dilution
                                                  Before              Due to
                                             FIN 46, FAS 123R,     Contingently
                                             Amortization, Net     Convertible
                                              Gain on Equity           Debt
                                          Securities & EITF 04-8    (EITF 04-8)
     Income Statement Classification:
 
     Total revenues                               $793,356
 
     Cost of products and services sold          $(180,406)
 
     Selling, general and administrative         $(220,395)
 
     Research and development                    $(138,565)
 
     Amortization of intangibles                        $-
 
     Equity in income (loss) of equity
      method investments                            $1,105
 
     Minority interest                                  $-
 
     Gain on investments in equity
      securities                                      $501
 
     Other                                           $(319)
 
     Investment income                             $12,562
 
     Interest expense                              $(4,035)
 
 
     Summary:
 
     Income (loss) before income taxes            $263,804               $-
 
     (Provision for) benefit from income
      taxes                                        (82,581)               -
 
     Net income (loss)                            $181,223               $-
 
 
     Net income (loss) per share of
      Genzyme Stock:
       Basic                                         $0.70               $-
 
       Diluted (1)                                   $0.68          $(0.017)
 
     Weighted average shares outstanding:
       Basic                                       260,444
 
       Diluted (1)                                 266,626
 
 
 
                              GENZYME CORPORATION
                    RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
                            Quarter Ended June 30, 2006
                   (Amounts in thousands, except per share data)
 
 
                                   Gain/(Loss) on
                                     Investments
                                      in Equity                    FAS 123R
                                     Securities    Amortization     Expense
     Income Statement
      Classification:
 
     Total revenues
 
     Cost of products and services
      sold                                                         $(4,927)
 
     Selling, general and
      administrative                                              $(52,692)
 
     Research and development                                     $(25,269)
 
     Amortization of intangibles                     $(52,883)
 
     Equity in income (loss) of
      equity method investments
 
     Minority interest
 
     Gain on investments in equity
      securities                       $66,466
 
     Other
 
     Investment income
 
     Interest expense
 
 
     Summary:
 
     Income (loss) before income
      taxes                            $66,466       $(52,883)    $(82,888)
 
     (Provision for) benefit from
      income taxes                     (24,459)        19,461       27,577
 
     Net income (loss)                 $42,007       $(33,422)    $(55,311)
 
 
     Net income (loss) per share of
      Genzyme Stock:
       Basic                            $0.161        $(0.128)     $(0.212)
 
       Diluted (1)                      $0.152        $(0.121)     $(0.200)
 
     Weighted average shares
      outstanding:
       Basic
 
       Diluted (1)
 
 
 
                                GENZYME CORPORATION
                    RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
                            Quarter Ended June 30, 2006
                   (Amounts in thousands, except per share data)
 
 
                                            NON-GAAP
                                         Before Effect   Effect of      GAAP
                                           of FIN 46      FIN 46    As Reported
     Income Statement Classification:
 
     Total revenues                        $793,356                   $793,356
 
     Cost of products and services sold   $(185,333)                 $(185,333)
 
     Selling, general and administrative  $(273,087)       $(393)    $(273,480)
 
     Research and development             $(163,834)     $(5,107)    $(168,941)
 
     Amortization of intangibles           $(52,883)                  $(52,883)
 
     Equity in income (loss) of equity
      method investments                     $1,105       $2,749        $3,854
 
     Minority interest                           $-       $2,750        $2,750
 
     Gain on investments in equity
      securities                            $66,967                    $66,967
 
     Other                                    $(319)                     $(319)
 
     Investment income                      $12,562           $1       $12,563
 
     Interest expense                       $(4,035)                   $(4,035)
 
 
     Summary:
 
     Income (loss) before income taxes     $194,499          $(0)     $194,499
 
     (Provision for) benefit from income
      taxes                                 (60,002)           -       (60,002)
 
     Net income (loss)                     $134,497          $(0)     $134,497
 
 
     Net income (loss) per share of
      Genzyme Stock:
       Basic                                  $0.52           $-         $0.52
 
       Diluted (1)                            $0.49           $-         $0.49
 
     Weighted average shares outstanding:
       Basic                                260,444            -       260,444
 
       Diluted (1)                          276,312            -       276,312
 
     (1) GAAP As-Reported diluted earnings per share and diluted weighted
        average shares outstanding reflect the adoption of EITF 04-8. In
        accordance with the provisions of EITF 04-8, interest and debt fees
        related to our 1.25% convertible senior notes of $1.9 million, net of
        tax, have been added back to net income and approximately 9.7 million
        shares have been added to diluted weighted average shares for purposes
        of computing GAAP As-Reported diluted earnings per share.
 
 

SOURCE Genzyme Corporation

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