23 September 2002 00:00 [Source: ICB Americas]Genzyme General, a division of Genzyme Corp., lowered third quarter and full year guidance for 2002 based on a reduced outlook for Renagel (sevelamer) and inflated wholesaler inventories. Analysts lowered earnings per share (EPS) estimates in 2002 and beyond. A growing base of data is expected to shore up Renagel, catalyzing long-term growth of the stock, which rose $1.55 to $19.95 on a third and apparently final earnings warning for the year last Mon-day. The stock has fallen over 60 percent since January.
Genzyme lowered guidance to $1.05 billion to $1.10 billion for 2002, versus a previous range of $1.10 billion to $1.15 billion. Underlying EPS of $1.08 to $1.11 for 2002 fell from previous guidance of $1.18 to $1.23. Third quarter EPS is expected to be 26 to 28 cents, versus a former 31 to 33 cents. Renagel sales for 2002 are expected at $155 million to $165 million, down from $177 million in 2001.
Genzyme expects US wholesaler inventories to decline from July levels of about 8.5 weeks to four to five weeks at the end of the fourth quarter, with estimated 2002 revenues reflecting an inventory reduction of around $30 million.
Analysts expect the continued lack of visibility on Renagel sales trends and management credibility issues to hamper multiple expansion near-term.
RBC Capital Markets analyst Jennifer Chao lowered her third quarter and fourth quarter 2002 EPS estimates by 9 cents to 25 cents and 5 cents to 32 cents, respectively, on a 15-cent drop in full-year EPS to $1.04. Out-year estimates fell 12 cents to $1.52, 10 cents to $1.68, and 16 cents to $1.88, in 2003, 2004 and 2005, respectively. Renagel estimates for the third and fourth quarters fell by $38 million to $28 million and $20 million to $48 million, respectively, on full-year estimates down $58 million to $145 million. Out-year Renagel projections fell $85 million to $235 million, $95 million to $310 million, and $145 million to $360 million, in 2003, 2004, and 2005, respectively.
Morgan Stanley analyst Caroline Copithorne lowered third quarter and fourth quarter estimates by 2 cents to 28 cents, and 2 cents to 33 cents, respectively. Full-year EPS estimates fell by 5 cents to $1.06, 4 cents to $1.42, 7 cents to $1.67, 23 cents to $2.05, and 38 cents to $2.32 in 2002, 2003, 2004, 2005 and 2006 respectively, on a growth rate down 5 percent to 18 percent from 2003 to 2006. Her Renagel estimate for 2002 fell by $18 million to $155 million.
"Key drivers for the Renagel business are still in place, or are forthcoming, such as the expanded sales force, Brazilian launch, publication of Treat to Goal data and the National Kidney Foundation's Kidney Dialysis Outcomes Quality Initiative (KDOQ1) guidelines," says Ms. Copithorne. Also forthcoming are results from the ongoing head-to-head Renagel versus calcium studies (D-COR and RIND).
"Management's previous forecast of a dramatic inflection point from the less than 6 percent sequential quarterly US end-user growth of the first and second quarters to over 20 percent each in third and fourth quarters has been consistently recognized as too aggressive," adds Ms. Copithorne.
Analysts anticipate US approval in the second half of 2003 of Shire Pharmaceu-ticals Group PLC's phosphate binder Fosrenol, and modest sales for Fosrenol, given physician caution on metal-based products. Shire expects a European approval in the first quarter of 2003.
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.