Full Transcript of Genzyme’s 3Q05 Conference Call — Q&A (GENZ)

Here’s the entire text of the Q&A from Genzyme’s (ticker: GENZ) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Q&A

Operator

At this time I would like to remind everyone if would you like to ask a question please press * then 1 on your telephone keypad. Please limit your questions to one per person to allow time to address all questions. We'll pause for just one moment to compile the Q-and-A roster. Your first question comes from the line of Yaron Werber of Citigroup.

Q: Hi. Thanks for taking my question, and congrats on the nice quarter. I have a question relating to Hectorol inventory levels. It was about, what I calculate, roughly maybe kind of 11, 12, 13 million, because of inventory reduction, is that reasonable? And what would you, I know you wouldn't want to give guidance here, but, once we discount that would you expect that things would kind of reapproximate the previous trend seen in Q1? And was wondering whether you can give us what actual Q2 sales were?

A: John, can you respond to the questions?

A: Sure, Yaron. I wasn't sure of the first part. I think you were saying that inventory draw down was something like 10 or 12 million. That's high, quite high. The end user sales in the third quarter were approximately between 21 and $22 million. So that's the end user run rate. So you get a sense of the draw down from that. And our expectation is a couple of things. One, we're currently negotiating inventory management agreements similar to the ones we have with Renagel for Hectorol. At that point we'll have very, very good inventory data. Right now our inventories are based on not on 852 data but simply talking to the wholesalers. And, obviously we want to put the same kind of controls in place for Hectorol that we have for Renagel and we're in the process of doing that. And certainly then my expectation is that you'll have a much more normal revenue pattern.

Q: And John can you share with us what sales were last quarter, end user sales?

A: I can't because we didn't own the company last quarter, so I don't have that information.

A: Yes. It's the problem is that they did not report it last quarter, either. You're a little dependent on strip data in that regard.

Operator:

Your next question comes from the line of Chris Raymond of Robert Baird & Company.

Q: Another sort of focus here on Hectorol and the integration. Maybe a quantitative and a qualitative part to this question. I guess quantitatively, how many Bone Care reps are now full-time, permanent Genzyme employees? And then maybe the qualitative question is could you maybe give us some sense of how well you executed the integration of Bone Care, maybe alongside some of the other innovations you have in the past?

A: In terms of the integration, this was a very, very straightforward transaction, because this was primarily in sales force and the marketing effort with some support staff, and so that went very simply. This product was not manufactured by Bone Care, it was manufactured by manufacturers, as we have done in the past, our tendency will be to bring these product in house, but we visited the toll manufacturers feel quite gratified that they are good people and they can support the product. In terms of the number of people added, John, can you…

A: Chris, I don't have the exact number, but they had 100 people in the field, and I believe we kept approximately 60 people. Total we have 200 people in the field now, and since we had about 140 before, I would say we kept about 60.

Q: And so this inventory -- I mean, the sales sort of stepped down from the last quarter, for what one might estimate from last quarter, is due 100% to inventory adjustments?

A: Yes. The end user demand remains strong.

Q: Thank you.

Operator:

Your next question comes from the line of Mark Schoenebaum of Bear Stearns.

Q: Thanks for taking my question. Congrats on another good quarter. I was intrigued in the press release you actually said something about Renagel formula replacement looks favorable. Can you give us any details around that, any specifics? You've reviewed 200 of them, and 100 of them are favorable? Is there any kind of granularity you can provide us with regarding the part D formularies, then the corollary to that is, have these part D plans seen the D-COR data?

A: There's some granularity we can give around that. The simplest way is to look at the national plans, which cover all the different regions. And right now Renagel is on formulary at 9 of those 10 plans. Which we're incredibly pleased about, and for a couple of reasons. Those are all plans that will be able to accept dual eligibles, so the Medicaid patients who will be transferred into part D, as of January 1, so nine out of ten of those plans have Renagel on formulary so there will be no break in service for those patients' access to Renagel. And obviously, we'll help inform patients as to which plans are more favorable for patients with kidney disease, not only for Renagel but Hectorol and other products as well.

There are clearly a lot of plans that are regional based, and we've been dealing with a number of those, and I can't give you specifics on those, because we don't have it today, but I feel very, very positive about where we are from a part D formulary placement in all of the major regions, particularly if you look at the top Medicaid states, we're in a very favorable position.

Henri Termeer: Next question.

Operator:

Your next question comes from the line of Adam Walsh of Jefferies.

Q: Hey, good morning. Thanks for take my question, guys. Henri, you mentioned Campath for MS may take up to three to four years to get approval. Would you mind expanding on your assumptions embedded in that timeline in terms of what you anticipate the FDA requirements might be?

A: We obviously will have to run this phase III clinical trial, which will start first half of next year. Most MS trials run two years. We expect this to be the same here. So that is the basic assumption and the view time that follows. Dr. Rich Moscicki is here, he's head of our Regulatory Clinical Organization. Rich, any added comment to that?

A: No, I think that's a reasonable and conservative estimate. We do know that FDA is looking for two-year data. We will have two-year data from the Phase II trial. I cannot say that given the dramatic efficacy that we've been seeing that it might not be possible for us to move forward with one-year data on the Phase III and supplement it with two-year data from the Phase II. But I think that until those final discussions take place, this would be a conservative way to view that time.

Q: Great. So there was nothing in that three to four year time line that would suggest there'd be onerous requirements by the FDA placed upon Campath above and beyond the different Phases upon other MS trials?

A: No, there was not.

Operator:

Your next question comes from the line of Jennifer Chao of Deutsche Bank.

Q: Thanks for taking the call. Congrats on a nice quarter. Just some questions with respect to the oral Cerezyme. I think first, if you could just talk maybe about developmental time lines? Secondly, any proof of concept that's been generated to date. Third, what's the extent of the data that we should expect to see presented at ASHG? Then, of course, this all goes to the point of any other offensive strategies, vis-a-vis shire GHECB that you could talk about? Thanks.

A: Those are lots of questions, and I've, Dr. David Meeker here the President of the division. David, can you make some comments on this one?

A: Sure. I'm not sure I got quite all the questions but we'll work through them. So with regard to the developmental time line, let me back up for a moment. You called it Cerezyme in a pill, so this is not Cerezyme in a pill, this is a molecule working through substrate inhibition. It's similar to a currently commercially available product called Zavesca but it's in a different class. The reason we're moving forward with this molecule is that we do have data in vitro and in animal models, which would suggest that the molecule that we have, which gets to the substrate inhibitions through a slightly different mechanism is much more potent than the commercially available product that's out there today.

As we go forward, the hurdle we will impose upon ourselves, in addition to the regulatory hurdles to bring this forward will be we will only bring it forward to the extent that it address a true unmet medical need, meaning that it has to do something better than the existing enzyme replacement therapy can do today. So oral is a huge convenience advantage, but it needs to be very effective and extremely safe, and I think the safety component is the part that we'll be very focused on in deciding whether we would continue to move this through development.

So, with that said we're optimistic that it could meet that profile. We will start phase 2 trials the beginning of Q1 next year or in Q1 by 2006, and that will be an open label trial and we will follow those patients out for a period of 12 months. The developmental time line beyond that is unclear. To a certain extent it will depend very much on the data that we get back from the patients studied in that first trial. We would anticipate at this point doing a Phase III trial and we're prepared to do that, and at this point we'd get into that trial at some point in 2007 with regulatory filings thereafter. Did I hit all the questions you asked?

Q: Sorry, just the extent of the data at ASHG and any thoughts just vis-a-vis Shire's GHECB?

A: The only date that that's been generated so far internally is related to the Phase I trial. We've done three specific Phase I trials in normal volunteers looking at the usual safety factors. I'm going to have Rich Moscicki make one comment in just a minute here to amplify on that, but we've completed three trials there and they are all reassuring in allowing us to go forward into our Phase II. Rich can comment. With regard to the TKT opportunity, they're developing an enzyme replacement therapy. This is a product which -- depending again on the data, will be used probably not in conjunction with an ERT. We would expect it to be a stand-alone. So whether it's RERT or some other ERT coming into this phase, this would be a product that could be used, for example, in a maintenance population whose default might be one profile for the product. Rich?

A: I was only going to add that our Phase I program has already studied over 150 individuals. It's a pretty strong safety package that has been put together for this product already, as we move it into Phase II. So, I think we have pretty clear picture of what to look for and we're quite confident in our ability to do that.

Q: One final question, Rich, for you on that. Is the Phase II a dose ranging or do we believe we've nailed down the dose?

A: No, there will be dose ranging.

Q: Okay. Thank you.

Operator:

Your next question comes from the line of Meg Malloy of Goldman Sachs.

Q: Thanks very much. Just a quick question. Could you break out US versus international Renagel sales, please?

A: Yes. US was 56% of sales.

Q: Can I have a follow-up?

A: Yes.

Q: Unrelated. Could you talk about what drove the diagnostic sales during the quarter? They were a little bit higher than what might have been expected.

A: Generally good performance of both divisions, the Diagnostic Products Division did well and the Genetics Division did well, too. So there's no specific product that drove this. Overall pretty good performance of these businesses.

Q: It's a little early to see the impact of some of the newer cancer target?

A: Oh, yes, way early, Meg, yes.

Q: Thank you.

Operator

Your next question comes from the line of Phil Nadeau of SG Cowen.

Q: Good morning. Congratulations again on another good quarter. My question is actually on Myozyme. You mentioned in the press release that you expect regulatory action in the next few months. I guess the first question is what gives you confidence that there's going to be action in the next few months? Second question, could you update us on your commercialization strategy for Myozyme, which patients are you targeting, and any idea of price and dosing? Thanks.

A: Okay. Let me ask Rich Moscicki to make a comment on the action question, and Dr. David Meeker give a comment on the marketing question.

A: Well, in the US we're closing in our PDUFA date. That's a mandated date for action. We've had already communication with FDA leading up to this and so I think we're getting quite prepared. And similarly, there are expected time lines in Europe and we've been in close communication with European authorities up to this time that would also indicate that we should be hearing soon in regards to their opinions as well.

A: With regard to where we are in the commercial development of this product, a big part of the rare disease population is the early experience with the drug, and Pompe is a disease where we have been able to make the drug available to an expanded access program to a number of different centers in countries throughout the world. So taking Europe, for example, just that number, we're in excess of 100 patients who have been treated through an expanded access program to date. In Europe, a several of the markets have pre approval sales. To date, France is a classic example of that that traditionally is able to make the product available through an ATU mechanism.

Where we are focused in terms of specific market segments we've done our trials in the infantile population, and obviously that's an area where we are paying attention and beginning to develop an awareness at the neonatal center level. I think the way we would think about that is that those patients are so severely affected that they are likely to come to attention rapidly, and the need to create a significant amount of awareness in that population is less than it is to create increased awareness in the late onset population, and at this point again we're very focused on that aspect. So approaching neuromuscular centers, working closely with the Muscular Dystrophy Association. And that's a network who treats a population of patients to present very similarly to patients with Pompe disease, in fact, there may be a number of Pompe disease patients who are sitting in that pool of patients misdiagnosed or just not recognized as having Pompe disease.

The last piece I'll comment on is that, as we work with these new centers who have not treated a lysosomal storage disease previously, we're working to get the registry set up, we do have the registry available pre approval which is a luxury we have not had with some of our other products, and that's a wonderful tool both in terms of educating both the physician and the patient as to what tests need to be done and preparing them for the possibility of a product being developed.

Q: Do those 100patients that you mentioned on expanded access, are all 100 eligible to be transferred to commercial paying patients upon approval, or is it just some subset of it?

A: Well, I mean, they're all eligible. Like every product we've launched, the rapidity with which patients transfer from the existing pre approval state to a reimbursed state depends very much on the country and the mechanism in place. There will be a portion of that who will switch immediately. There will be others that it takes several months, and there will be some patients who are in an area where, today I couldn't predict when those patients might get reimbursed. So, I feel good about where we are in terms of the patients who are accessing therapy today and where we are in terms of working with countries and getting them prepared to reimburse.

Q: On pricing, given that the dosing here is much higher than any other enzyme replacement therapy, would it be safe to assume that this is going to be priced higher than previous enzyme replacement therapies, including things like Naglazyme by BioMarin?

A: On pricing we generally don't comment until we have a label and we have an approval. You can assume the following things safely. A, we will be able to provide sufficient product to treat this patient population, so the manufacturing preparations are all done on the basis of the kind of dose that we expect to need. And B, that we have a lot of experience in terms of pricing of these products, and it's very important that we provide it in a fashion that access is pretty much guaranteed in terms of the experiences.

The healthcare systems around the world have experiences in treating these very rare diseases and we want to stay within the criteria that they have now accepted as being the right criteria for the treatment of these kinds of diseases. Those were the two things we kept in mind as we developed our production economics and as we looked at this as a business moving forward. So precise pricing discretion is probably best to wait until we have a label and we have approval for the product.

Q: Thank you.

Operator

Your next question comes from the line of Geraldine O'Keefe of Fortis Bank.

Q: Good morning. One question and one clarification. The question relates to Synvisc. Wonder if you can tell what the end user sales were? I think the sales as represented including some payments of the acquisition cost. And the clarification I was looking for was just, you mentioned earlier on Renagel getting on the formulary. It's on nine of ten plans. What were those plans? Were they the main plans? Were they national plans? Wonder if you would just clarify that.

A: On the last question let me clarify. These are national plans, not regional plans. National plans. And we are a little confused about your first question on Synvisc in terms of the costs associated with it. Ann, the President of our surgical biz maybe you can answer that question.

A: I'm confused as well. I think you asked first about end user revenue, and certainly there's a lag in time from the end of the financial quarter for us to be able to access all the data to estimate end user for that quarter, so I am only estimating third quarter end user at this point and don't want to share that. Our estimated end user revenue at the time we put guidance out for the product earlier this year was around 235 million globally and we are on track. Everything I see says we're on track to be close to that number. And the acquisition cost question, could you repeat that?

Q: Yes, I think I probably was -- maybe I misread your statement but I just felt maybe they were negatively impacted by the acquisition costs, but I guess ….

A: No, not at all.

Q: Okay. Thank you very much.

Operator:

Your next question comes from the line of Ron Renaud of J.P. Morgan.

Q: Quick question for John. You may have mentioned it but I missed it, but, the REACH Program, is there an update on the number of patients that are actually on that program to date? And then, just anything qualitative that you can tell us about the differences in compliance for patients in the REACH Program versus patients that are on just regular commercial Renagel? Thanks.

A: Yes, Ron. We actually haven't talked about the numbers of patients on REACH. The program is ongoing. At this point we're really preparing for part D pretty aggressively. Since we don't see patient data we couldn't tell you that the differences in compliance because remember the patients get it through an outside Medicare approved drug discount card. So we don't have any patient level information on REACH. They simply kind of send us a utilization report and we pay them back for that.

Q: Got it. Thanks.

Operator:

Your next question comes from the line of Matt Duffy of Black Diamond Research.

Q: Thanks for taking my call, good quarter. Just wondered if you could give us the latest update on the D-COR presentations upcoming at ASNHA and how and when we might see that information used out in the field? Thanks.

A: We have two people that could maybe answer this but John if you can take the lead.

A: Sure. There area number of presentations of the data at ASN planned. There's a poster presentation, and I believe that's Thursday. Additionally, we have our Genzyme-sponsored symposia, which is a formal part of the ASN meeting, that's Thursday evening where the data will be presented. And then Friday afternoon there's a late breaking session where, again, Dr. Suki will present that data. So three different, distinct presentations at the ASN meeting, then additionally, the following week it's being presented in the clinical trials section of the American Heart Association meeting in Dallas. I believe that's the 15th.

Q: Are you seeing any impact on this in the field at this point in the dynamics?

A: It's very hard to say. It's very, very early, and I think most physicians want to see data presented in a peer-reviewed forum before they take action. We have people who have been advocates of Renagel and even just seeing this data in a press release confirms their desire to use the product. If you look at the prescriptions in the third quarter we had over 2.1% growth in scripts from Q2 to Q3, which is the highest growth rate we've had since the fourth quarter of 2003. So we're encouraged by that. Whether that's the result of D-COR or just having a couple hundred people in the field now, it's hard to delineate that. But obviously, we're very, very pleased, as Henri said, with the results, and once they're presented in a peer-review forum we expect them to have impact.

Q: Great and then just the timing and it how may it look in terms use out in the field.

A: I am sorry, can you give that question?

Q: By your rep, how soon do you think you can get the information for the reps for their use in the field.

A: The reps of course are as you are, just twist up the press release and it will be extremely _____ per rep cost and to have to this represented at the ASN in a peer-view situation and also have it published in a peer-view journals and that’s a preparation as well. But this is part of what the reps have in their package but it is very much top line in the way you have read it as well, so they are a little bit limited in what they can say.

A: I think we could add that the manuscript has in fact already been sent and with significant interest reflected back from a high impact journal.

Q: Thank you very much.

Operator:

Again I would like to remind everyone if you would like to ask a question please press “*

Comments

[skepticjr:]

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2005 Oct 23 02:12 PM