Genzyme Tissue Repair Reports 42 Percent Increase in U.S. Carticel Sales
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 procedure. 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: http://www.genzyme.com/ir/events.htm. 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 http://www.genzyme.com. 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 GENZYME TISSUE REPAIR 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 expenses: 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 Inception Patients Treated US 252 339 308 325 3351 Europe/ROW 70 93 88 74 1000 Total Treated 322 432 396 399 4351 US Reimbursement Activity Third Party Coverage (est millions of lives) 164 169 179 179 Cumulative # of Payors with protocol to routinely pay for Carticel 99 101 103 103 US Patient Approvals 324 377 396 402
SOURCE Genzyme Tissue Repair
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