GENZYME CEREDASE TREATMENT IND IS BEING URGED BY FDA: COMPANY MAY FILE FOR EXPANDED CLINICAL PROTOCOL THIS SUMMER; $50-$100 MIL. MARKET PREDICTED
Genzyme's Ceredase (glucocerebrosidase) may move into expanded clinical use under a Treatment IND this summer, the company's president Henri Termeer told securities analysts at a May 22 conference in New York. The company is experiencing "tremendous collaboration" from FDA in the development of the orphan product for Gaucher's disease, Termeer told a conference sponsored by Goldman Sachs. As part of FDA's effort with the drug, the agency has recently urged Genzyme to seek a Treatment IND. "The FDA has asked us," Termeer explained, "to consider making the product available under a so-called Treatment IND protocol, so that patients that have a really severe condition of this disease can be helped." Genzyme "is considering" the Treatment IND protocol, Termeer said, and "most likely" will accede to FDA's request this summer. In response to a question, Termeer said that Genzyme would charge for the product under the Treatment IND as permitted by the 1987 regulations. Ceredase is Genzyme's leading therapeutic product development effort. The company expects final approval for the product during 1990. The product is aimed at a U.S. patient population of 10,000 to 20,000. The worldwide population is about double that number. The genetic disease primarily affects children of Jewish descent from Eastern Europe. While the population is limited, Termeer said the company expects annual revenues in the range of $50 mil. to $100 mil. "We are talking about a very significant maintenance market," Termeer noted. He compared the product and the market to the existing hemophiliac and dwarf markets in the U.S. There is no current treatment for Gaucher's disease. Genzyme has orphan status from FDA for Ceredase. While Genzyme pursues Ceredase as a short-term therapeutic product development, the company is also taking on a significant business operations task -- merging in the operations of Integrated Genetics. A stock swap merger between the two eight-year-old companies was announced on April 18; a definitive agreement was reached in mid-May. Genzyme, which has put together three years of profitability in a row (including earnings of $671,000 in 1988), is taking on the turnaround of an unprofitable research startup. Termeer said he had been "questioned in the last few months: 'Why are you taking on all the headaches of a company that clearly was losing a lot of money?'" Termeer said Integrated Genetics brings to Genzyme significant protein research projects that could develop into a product flow in the 1990s. "We don't need these proteins in 1989 or 1990 to reach our goals," Termeer maintained. "We need this capability and some of the proteins which are currently under study for our continued growth in 1993, 1994, 1995." Long-term, Termeer said, "we know this is a very efficient transaction and a very efficient way to get hold of a topnotch team of microbiologists." Despite the accumulating losses at Integrated Genetics, Termeer said it will be a "very efficient" merger as well as a long-term investment. Including the merger, Genzyme hopes to be back to breakeven quickly, perhaps by the fourth quarter of this year. "We are maintaining the forecast we had prior to this merger for 1990 and 1991," Termeer said, projecting sales of "$100 mil. in 1991." Genzyme revenues in 1988 were $25.8 mil., including $18.8 mil. from product sales generated from research tests, bulk clindamycin and hyaluronic acid for cosmetic use. Ceredase and a finished product hyaluronic acid for ophthalmic surgery will be major contributors to Genzyme's sales growth, Termeer said. Those two products could add $40 mil. to $50 mil. in sales during 1991, the Genzyme exec told analysts. Genzyme's hyaluronic acid will be marketed by Alcon. Integrated Genetics may have royalty income from TPA and EPO products overseas to add to the merged companies by the end of 1989, Termeer observed. He did not include those revenues in the $100 mil. projection for 1991. Genzyme stands out among the biotechnology start-up companies in the 1980s as a company successfully able to sustain short-term commercial projects and profits while building the firm. Termeer's analysis of the Integrated Genetics merger plan exemplifies that hard-nosed financial approach to the biotech business. Integrated Genetics' tax-loss carryforwards of $30 mil. are very attractive to Genzyme, Termeer reported. "It's not terribly useful when you lose $1 mil. per month but it is very useful for Genzyme," Termeer said. Genzyme is also interested in finding outside funding sources for some of Integrated Genetics' longer-term projects, such as the Genetic Disease Division (reference lab testing for genetic diseases) and therapeutic protein production in animals. Termeer indicated that Genzyme may be interested in looking for venture capital or other similar forms of outside funding to keep the projects going in order to avoid draining current resources. Termeer said the merged companies will look to fund the longer term products "in a way which will be independent of our own operations." Termeer pointed out that the genetic reference lab is a slow-developing business. The Genetic Disease Division "is the largest reference lab to test for genetic flaws in the country," Termeer said. "It makes no money and it is very early on in terms of its penetration and acceptance . . . We believe this is a very interesting venture." Integrated Genetics' Gene-Trak gene probe division is already funded by a well-heeled partner. "Amoco is paying for all the operating expenses of this company and there is no financial drain on Integrated Genetics or in the future Genzyme because of it," Termeer pointed out. "The gene probe area, although very long-term in nature, is also very exciting." Through personnel cuts (Integrated Genetics has already laid off more than 10%, 25, of its employees) and transferring some of the payroll to outside supported ventures, Termeer said that Genzyme hopes quickly to cut the payroll burden almost in half. He noted, for example, that Genzyme was preparing to hire about 25 new employees anyway and will try to fill those positions with former Integrated Genetics employees. Integrated Genetics was operating at a a $20 mil. annual expenditure level at the time of the merger proposal. Termeer predicts that Genzyme can cut that to a $10 mil. annual level by the end of the year. The current annual revenue rate for Integrated Genetics in 1989 is about $7 mil., Termeer reported. He said the company hopes to increase that to about $10 mil. next year, balancing against the $10 mil. cost structure. Termeer acknowledged that one of Integrated Genetics' original development partners, Ares-Serono, attempted to place a competing cash offer for the biotech firm. He maintained that Serono's primary interest is to protect its source for recombinant fertility products and that Genzyme is close to satisfying those concerns. Ares-Serono is "very interested" in protecting its "position in this area and we're prepared to try to accommodate that," Termeer told the analysts. "We are currently talking to them about a way that is comfortable for them to protect their position in fertility hormones." At the end of 1988, Integrated Genetics listed three projects under development for Serono in preclinical testing: chorionic gonadotropin; follicle stimulating hormone; and luteinizing hormone.
Sign in to continue reading.
New to Pink Sheet?
Start a free trial today!
Register for our free email digests: