Genzyme Tissue Repair Reports 42 Percent Increase in U.S. Carticel Sales

Jul 19, 2000, 01:00 ET from Genzyme Tissue Repair

    CAMBRIDGE, Mass., July 19 /PRNewswire/ -- Genzyme Tissue Repair
 (Nasdaq:   GZTR) today reported revenues of $6.3 million for the second quarter
 of 2000, a 35 percent increase from $4.7 million in revenues reported in the
 second quarter of 1999.
     Increases in revenue were led by a 42 percent growth in U.S. sales of
 Carticel(R) (autologous cultured chondrocytes).  U.S. sales of Carticel
 increased to $4.0 million for the second quarter of 2000, compared to $2.8
 million in the second quarter of 1999.
     Net loss for the second quarter of 2000 decreased 52 percent to $4.0
 million, as compared to $8.4 million in the second quarter of 1999.  The loss
 per share for the second quarter of 2000 decreased to a loss of $0.14 per
 share, as compared to a loss of $0.37 per share in the second quarter of 1999.
 This improvement is due to increased revenue and gross margin improvement, as
 well as the transfer of the NeuroCell program-a joint venture between Genzyme
 and Diacrin, Inc.-to Genzyme General (Nasdaq:   GENZ) in May 1999.
     Gross profit more than doubled for the second time this year, increasing
 126 percent in the second quarter of 2000 to $3.3 million compared to $1.4
 million in the second quarter of 1999.  Gross margin as a percent of total
 revenue was a record 52 percent for the quarter, up from 31 percent for the
 same quarter last year.  The increase in gross profit is due mainly to an
 increase in sales volume and leveraging of production production costs.
 Operating losses for the second quarter of 2000 were $3.8 million, a decrease
 of 41 percent from $6.7 million in the second quarter of 1999.
     "Genzyme Tissue Repair continues to drive Carticel revenues with
 consistent average yearly growth of 40 percent in U.S. sales," said Russell
 Herndon, president, Genzyme Tissue Repair.  "Additionally, our consistent
 improvements in gross margin to record levels continue to be a major
 contributor to our success in decreasing our loss each quarter."
     Worldwide sales of Carticel increased 21 percent to $4.6 million for the
 second quarter of 2000, up from $3.8 million in the second quarter of 1999.
 European Carticel sales were $0.6 million in the second quarter of 2000, down
 42 percent from $1.0 million in the second quarter of 1999, which was an
 atypical and record quarter for Carticel in Europe.
     Revenue from Epicel(TM) (cultured epidermal autografts) increased a record
 97 percent to $1.7 million in the second quarter of 2000, compared to $0.9
 million for the second quarter of 1999.  Epicel revenues fluctuate from
 quarter to quarter depending on the need for severe burn care.
     Genzyme Tissue Repair ended the quarter with $4.4 million in cash.
 Genzyme Tissue Repair has access to $15.0 million under an interdivisional
 financing arrangement from Genzyme General, as well as access to additional
 funding from Genzyme's revolving credit facility.
     Orthopedic Product Development Update
     In the second quarter of 2000, Genzyme Tissue Repair submitted a 510(k)
 filing on schedule to the U.S. Food and Drug Administration (FDA) for
 clearance to market its Quick Tack(TM) periosteal fixation system.  Quick Tack
 is a small device designed to replace the use of sutures during the Carticel
 implantation.  It is expected to simplify the procedure and decrease the time
 needed for the surgery.  In addition, Quick Tack is the first step from the
 current open-knee procedure toward an arthroscopic (closed knee) Carticel
     Carticel Phase 4 Study Update
     Genzyme Tissue Repair has made significant progress in all of its three
 Carticel post-marketing studies, including the completion of one study.  The
 studies are required by the U.S. Food and Drug Administration as part of
 Carticel's accelerated marketing approval.
     During the quarter, the first of these three studies, the Registry Based
 Study, was completed ahead of schedule and has been sent to the FDA for
 review. The study met its primary and secondary endpoints related to efficacy.
 The second post-approval study, called STAR (Study of the Treatment of
 Articular Repair), is ahead of schedule in site initiation and patient
 enrollment. Genzyme Tissue Repair received protocol approval for STAR in the
 first quarter of 2000 and to date, 17 sites have been initiated and 7 patients
 have received Carticel implantation.  Investigators will evaluate
 approximately 100 patients in this study and will follow these patients for
 four years.
     Genzyme Tissue Repair has also made significant progress in its third
 post-approval commitment-a preclinical study assessing the contribution of the
 cells to the cartilage repair.  The study is designed to compare the results
 from the Carticel procedure (cultured cartilage cells implanted in the defect
 are covered with a patch of periosteum to hold them in place) versus placing
 periosteum over the defect without Carticel.  The periosteum is a membrane
 covering the shin bone.  Data collection for this study is expected to be
 complete by the end of 2000.
     NeuroCell Update
     In the second quarter of 2000, the Genzyme Corporation Board of Directors
 extended the first milestone date for the NeuroCell program.  The milestone
 date to initiate a phase 3 clinical trial of NeuroCell-PD to treat Parkinson's
 disease was extended to December 31, 2000, from June 30, 2000.
     The milestone date and related financial obligation to Genzyme General
 were extended to allow time to complete and review the current blinded phase 2
 clinical trial.  In the meantime, preparations for the phase 3 clinical trial
 are moving forward.  The FDA has reviewed the phase 3 trial protocol and trial
 sites and investigators have been selected.  The first Institutional Review
 Board (IRB) approval for the protocol was obtained in May 2000.
     Genzyme transferred its interest in the NeuroCell joint venture from
 Genzyme Tissue Repair to Genzyme General in May 1999.   The milestone, based
 on the initiation of a phase 3 clinical trial, is part of the terms of the
 transfer agreement.
     Formation of Genzyme Biosurgery
     Progress continues toward the proposed merger which would combine Genzyme
 Tissue Repair with Genzyme Surgical Products (Nasdaq:   GZSP), and acquire
 Biomatrix Inc. (NYSE:   BXM) to form a new publicly-traded division of Genzyme
 Corporation called Genzyme Biosurgery.
     The merger has received clearance from the Federal Trade Commission under
 the Hart-Scott-Rodino Antitrust Improvements Act and is being reviewed by the
 Securities and Exchange Commission.  Once effective, a joint proxy
 statement/prospectus will be mailed to shareholders of each company.  A
 special shareholder meeting will be held to vote on the proposed merger plan.
 The meeting is expected to occur in the third quarter.
     The formation of Genzyme Biosurgery will create critical mass in the area
 of bio-orthopedics and establish the business as a leader in this field with
 two marketed break-through bio-orthopedic products: Biomatrix' Synvisc for
 osteoarthritis and Carticel.  The financial and technical strength of the new
 business will also allow Genzyme Tissue Repair to accelerate development of
 its pipeline products including Carticel II, intended to allow implantation
 arthroscopically, and its small molecule therapy under development for the
 treatment of osteoarthritis.
     Upon formation, Genzyme Biosurgery will have approximately 1,300
 employees; six dedicated manufacturing facilities; global clinical and
 regulatory capabilities; cutting-edge scientific and technological expertise;
 an extensive intellectual property portfolio; several established sales
 organizations in focused surgical markets in both the United States and
 Europe; and marketing and distribution agreements with a number of large,
 multinational health care companies.
     Genzyme Tissue Repair is a leading developer of biological products for
 the treatment of orthopedic injuries such as cartilage damage, and severe
 burns.  It is a division of Genzyme Corp. and has its own common stock
 intended to reflect its value and track its performance.
     This press release contains forward-looking statements, including
 statements about Genzyme Tissue Repair's expected benefits of Quick Tack, the
 anticipated timing of regulatory submissions and the completion of clinical
 studies, the planned acquisition of Biomatrix, the anticipated creation of
 Genzyme Biosurgery, the timing for the creation of Genzyme Biosurgery, the
 expected growth and success of Genzyme Biosurgery, Genzyme Biosurgery's
 anticipated impact on Genzyme Corp.'s involvement in the biosurgery and bio-
 orthopedic markets and the expected effects of the creation of Genzyme
 Biosurgery on Genzyme Tissue Repair's development of products.  Actual results
 may differ materially due to many factors, including the results of
 operations, the actual benefits of Quick Tack, enrollment rates for trials,
 the actual safety and efficacy of products, the time involved in compiling and
 analyzing clinical trial data, the timing and content of submissions to and
 decisions by the FDA and other regulatory authorities, the likelihood of
 regulatory and other approvals of the planned acquisition of Biomatrix and the
 creation of Genzyme Biosurgery and related matters, the operational
 integration associated with the anticipated transactions and other risks
 generally associated with such transactions, the accuracy of information about
 the biosurgery and bio-orthopedic markets, the competitive environment for the
 biosurgery and bio-orthopedic markets, and the ability to successfully
 complete preclinical and clinical development of products.  GZTR stock is a
 class of common stock of Genzyme Corporation, therefore GZTR shareholders are
 subject to the risks and uncertainties described in Genzyme's filings with the
 Securities and Exchange Commission under the Exchange Act of 1934, as amended,
 including Exhibit 99.2 to Genzyme's Annual Report on Form 10-K for the year
 ended December 31, 1999.
     Genzyme Tissue Repair's second quarter earnings conference call will be
 broadcast live over the Internet at 11:00 a.m. EDT today on Genzyme's website:  The conference call will be available
 through midnight EDT July 27.
     Investors can also listen to a playback of a conference call discussing
 the second quarter financial results by phone by dialing 1-800-633-8284 in the
 United States or 1-858-812-6440 elsewhere from 1pm EDT today through 12
 midnight EDT July 27.  Refer to reservation number 15487322.
     Genzyme's releases are on the World Wide Web at
 They are also available from Genzyme's fax-on-demand service at 1-800-436-1443
 within the United States and 1-201-521-1080 outside the United States.
      Media Contact:           Investor Contact:
      Elizabeth Heller         Kristen Nally
      617-761-8419             617-252-7815
     Combined Statements of Operations
     (Amounts in thousands, except per share amounts)
                              Three Months Ended          Six Months Ended
                                   June 30,                   June 30,
                              2000          1999          2000         1999
     Total revenues          $6,287        $4,665      $12,154        $8,688
     Operating costs and
      Cost of services sold   3,023         3,221        6,046         6,219
      Selling, general and
       administrative         5,626         6,115       11,365        12,429
      Research and
       development            1,452         2,003        3,323         3,971
       Total operating costs
        and expenses         10,101        11,339       20,734        22,619
     Operating loss         (3,814)       (6,674)      (8,580)      (13,931)
     Other income (expenses):
      Equity in net loss of
       joint venture              -       (1,361)            -       (3,368)
      Other                       -             -          (5)             -
      Interest income           106            72          208           165
      Interest expense        (323)         (419)        (625)         (864)
       Total other income
       (expenses)             (217)       (1,708)        (422)       (4,067)
     Net loss              $(4,031)      $(8,382)     $(9,002)    $ (17,998)
     Net loss per GZTR
      basic and diluted
      common share          $(0.14)      $ (0.37)      $(0.31)       $(0.81)
     Weighted average
      shares outstanding     28,666        22,764       28,598        22,355
     Condensed Combined Balance Sheets                June 30,    December 31,
     (In thousands)                                     2000          1999
     Cash and all marketable securities                $4,382         $9,373
     Other current assets                               8,519          7,615
     Property, plant and equipment, net                 2,099          2,545
     Other assets                                         101            115
      Total assets                                    $15,101        $19,648
     Current liabilities                               $3,536         $4,876
     Noncurrent liabilities                            18,152         18,227
     Division equity                                  (6,587)        (3,455)
      Total liabilities and division equity           $15,101        $19,648
                          Carticel Performance Indicators
                         1995       1996    1997     1998      1Q99     2Q99
     Patients Treated
     US                    60        251     476      855       227      258
     Europe/ROW             0         52     184      239        79      121
     Total Treated         60        303     660     1094       306      379
     US Reimbursement Activity
     Third Party Coverage
      (est millions of lives)                101      525      141       142
     Cumulative # of Payors
      with protocol to
      routinely pay for
      Carticel                                67      325        89       92
     US Patient Approvals  72        301     543     1078       278      335
                      3Q99         4Q99         1Q00         2Q00       Since
     Patients Treated
     US                252          339          308          325        3351
     Europe/ROW         70           93           88           74        1000
     Total Treated     322          432          396          399        4351
     US Reimbursement
     Third Party
      Coverage (est
      of lives)        164          169          179          179
     Cumulative #
      of Payors
      with protocol
      to routinely pay
      for Carticel      99          101          103          103
     US Patient
                       324          377          396          402

SOURCE Genzyme Tissue Repair