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Executive Summary

Genzyme is exploring the therapeutic potential of remodeled glycoproteins and will seek agreements with larger firms for the development of such products, the biotech firm indicated in a recent prospectus detailing its inaugural public offering. "The company intends to apply its technology in collaboration with genetic engineering and major pharmaceutical companies to remodel recombinant glycoproteins products in yeast and insect cells by these companies to make them commercially viable products," the prospectus states. "Examples of therapeutic glycoproteins to which the company's remodeling technology may be applicable include tissue plasminogen activator, Factor VIII, erythropoietin, monoclonal antibodies, interleukin 1, 2 and 3, and beta and gamma interferons." Integral to Genzyme's glycoprotein research is a proprietary process for remodeling the carbohydrate portion of recombinant molecules, which the Boston-based company believes makes possible the use of lower cost expression systems such as yeast and insect cells. The firm believes that the technology, developed jointly with scientists from MIT, can improve the therapeutic efficacy of glycoproteins because it "provides a method for both increasing the serum lifetime of certain glycoproteins and targeting such glycoproteins to specific cell types." The company said that a patent application filed in March claims protection "for the methodology to remodel carbohydrate structures found on glycoproteins in nature." Genzyme holds a 10-year, exclusive worldwide license from MIT for the technology. The company cautions, however, that significant additional development work is necessary to prove the remodeling technology's effectiveness. The prospectus points out that Genzyme currently "has no agreements, understandings or funding arrangements with any company for the further development of this technology." For the nearer term, Genzyme said it is applying certain aspects of its glycoprotein remodeling technology toward the development of two potential orphan drug products -- the enzymes glucocerebrosidase (GCR) and ceramide trihexosidase (CTH). Both compounds address enzyme-deficiency diseases affecting relatively small patient populations. GCR, which already has orphan status, is currently undergoing clinical trials at NIH for the treatment of Gaucher's disease. "If these trials are successful, the company intends to obtain the necessary FDA approvals to market this product," the prospectus states. Gaucher's disease is found in 10,000-20,000 patients in the U.S. CTH is now in preclinical study at NIH for treatment of Fabry's disease, a chronic genetic disorder found in approximately 2,000 U.S. patients. Genzyme, which is supplying CTH under contract, said it plans to apply to the FDA for sponsorship of the compound as an orphan drug. The company has also developed a proprietary fermentation process for producing hyaluronic acid (HA), and has identified five potential applications for the ingredient: ophthalmic devices and aids in ophthalmic surgery; dermatological treatments and soft tissue implants; reduction of tissue trauma in general surgery; orthopedic devices; and drug delivery systems. Hyaluronic acid is currently marketed as a device primarily for use in ophthalmic surgery by Pharmacia, MedChem, and most recently, CooperVision. Also, the Israeli firm, Bio-Technology General, announced two years ago that it had the capability to product 400 kg of recombinant HA annually. The company is also a producer of one bulk pharmaceutical, the vasodilator nicofuranose, which it sells to "a major pharmaceutical company." Genzyme said it is developing several products that are coming off patent, "including one scheduled for introduction in 1987." The company said it is planning further penetration of the generic market by working with established drug marketing companies seeking an exclusive manufacturer for a particular generic drug. In the diagnostic area, Genzyme manufactures tests for diabetes, coronary artery disease and pancreatic disease. The firm noted that sales of diagnostic enzyme products accounted for 39% or $3 mil. of the company's total 1985 revenues of $7.7 mil. The company's two largest customers, Eastman Kodak and Technicon, accounted for 10% ($770,000) and 7% ($540,000), respectively, of Genzyme's 1985 revenues. While diagnostic enzyme and chemical sales continue to make up a large portion of Genzyme's revenues, that segment's contribution as a percentage of total revenues has declined over the years. "The acquired product lines accounted for 87%, 79% and 56% in 1983, 1984 and 1985, respectively," the prospectus notes. "New products including reagents and pharmaceutical intermediates represent the major source of revenue growth." Genzyme's public offering of 2.25 mil. shares is expected to raise between $19-$23 mil., based on an initial offering price of between $8.50 and $10 per share. Kidder, Peabody, Montgomery Securities and Cowen & Co. are comanaging the deal. Genzyme employs 169 people, of which 116 are located at two facilities in the U.K., with the remainder in the U.S. chart omitted.

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