10
BioTech Stock Report, March 2003
growth is expected from the likely ap-
provals of two new products in the U.
S. this year. Fabrazyme to treat Fabry's
disease received a positive review by
the FDA advisory board and Aldura-
zyme for MPS-1 disease appears to be
on track for FDA approval. And with
the Renagel inventory issue now
mostly resolved according to the com-
pany, we believe Genzyme is on solid
footing.
With the addition of Fabrazyme
and Aldurazyme, Genzyme's commer-
cial therapeutic drugs portfolio looks
well diversified with Cerezyme/
Ceredase for Gaucher's disease; Rena-
gel, a phosphate binder polymer;
Thryogen, a diagnostic drug for fol-
low-up thyroid cancer detection, Wel-
chol, Genzyme's cholesteral binding
drug, and Genzyme's Diagnostics plat-
forms.
The only concern that may put a
damper on Genzyme's revenue growth
is the potential competition to
Cerezyme in Europe from Oxford Gly-
cosciences' Zavesca, and to Renagel
in the U.S. from Shire's Fosrenol
(European and U.S. approval expected
in mid-2003 and late 2003, respec-
tively).
Nonetheless, Genzyme's share
price has fallen and represents an op-
portunity.
IDEC's/NASDAQ: IDPH (BSR
#19: Lymphoma) stock has been weak
of late and is now trading below the
industry average 28X 2003 EPS despite
its above average prospects for
growth. While it is apparent that some
turnover in IDEC's shareholder base
may be ongoing, we view the stock as
attractive over the long haul.
Rituxan shows continued penetra-
tion gains in the non-Hodgkin's lym-
phoma (NHL) and chronic lymphocytic
leukemia (CLL) markets and the long-
term outlook for Rituxan is still positive
based on new indications (NHL main-
tenance therapy, rheumatoid arthritis,
money and pipeline. But Enzon is tak-
ing on risk as, according to the confer-
ence call, Enzon has not seen any new
clinical data for NPS's key drugs,
Preos and Cincalcet HCl, except the 12-
month data for Preos. What is also
worrisome is that Amgen, NPS's part-
ner in the development of Cincalcet
HCl, has been tight-lipped about Cin-
calcet HCl. Drivers for NPS are the
FDA filing in 2003 for Cinacalcet HCl
and the anticipated release of Phase III
clinical data this fall. If the clinical de-
velopment is positive, the drugs can
lead the new company to profitability.
It appears NPS may have gotten the
better end of the deal.
With regard to Preos, the new
company will have stiff competition
with Eli Lilly's Forteo, which is already
on the market for osteoporosis and
functions in a manner similar to Preos.
Overcoming Forteo's market share is
not impossible, but will pose a signifi-
cant hurdle for Preos. Cincalcet HCl
has less competition and fits nicely
with Amgen's market strategy to pro-
vide therapies for kidney dialysis pa-
tients who suffer from secondary HPT.
The fact that Amgen is associated with
Cincalcet HCl is a good sign.
Genzyme/NASDAQ: GENZ (BSR
#8: Cardiovascular) guidance for 2003
earnings per share is $1.25 - $1.35 ver-
sus consensus estimates of $1.38.
While earnings for the first quarter of
2003 are expected to be in the range of
$.30-$.32 per share. Consensus esti-
mates are $.32 per share. Revenue in
2003 of $1.25 to $1.3 billion will be
driven by sales growth of Renagel for
kidney dialysis patients. The revenue
forecast is in line with Wall Street's
consensus view of $1.27 billion.
Genzyme attributes its lower 2003
earnings guidance to higher marketing
costs for their drugs, but the company
expects 2004 to be an extremely good
year.
Increased revenue and earnings
NASDAQ: DNDN (BSR #72: Pep
Talk) said it would buy Corvas for
$72.9 million in stock to expand its ex-
perimental drug portfolio and raise
cash to fund development.
The deal is expected to close in
the second quarter of 2003. As we
mentioned previously, we once cov-
ered Dendreon, but then dropped the
company from our radar because of the
lack of cash, small pipeline and effi-
cacy issues with Provenge. But with
the Corvas deal, Dendreon's cash po-
sition will be stronger and its product
pipeline expanded. This combination
should provide enough resources and
momentum to form a sustainable com-
pany. Furthermore, Dendreon said it
expects the added cash to give it in-
creased leverage in its negotiations
with a bigger partner that can help im-
prove the market potential of Pro-
venge.
The consolidation trend continues
in the biotech sector. Enzon/
NASDAQ: ENZN (BSR #59: Pending
Approval) and NPS Pharmaceuticals
Inc., announced their intention to
"merge as equals" with nearly equal
divisions of board seats and share-
holder ownership. The merger is ex-
pected to close in June 2003. NPS and
Enzon said by combining both man-
agement and scientific talent it would
become a new biotechnology com-
pany. Enzon will provide the commer-
cial infrastructure and both the reve-
nue and cash flow from its four mar-
keted products. While NPS has a late
stage pipeline that includes two high-
profile drugs that are being developed
for the treatment of osteoporosis and
secondary hyperparathyrodism (HPT).
With the proposed merger, Enzon
will lose its status as a profitable bio-
tech company and become one that
may become profitable sometime down
the road, perhaps by 2006. However,
the companies believe value is created
when combining their resources,
