Genzyme: Company Analysis

Table of Contents

1. Corporate Overview

• Genzyme is the fourth-largest biotechnology company in the world with a revenue base of US$2.2 billion in 2004.
• 1.1 Corporate History
  • Genzyme was founded in June 1981. 1986: It became a public company with an IPO in June.
• 1.2 Key Facts
  • Assets for 2004 stood at US$6.07 billion, R&D Spending for 2004 at US$377.9 million
• 1.3 Subsidiaries/Affiliates
  • List of its Subsidiaries and Affiliates
• 1.4 Organizational Chart
• 1.5 Profiles of Key People
  • Henri A. Termeer was appointed President of Genzyme Corporation in 1983, and became its CEO in 1985 and Chairman in 1988.
• 1.6 Recent Developments
  • The company launched Colorectal Cancer Test to determine appropriate Camptosar dosage in December 2005.

2. Business Description

• 2.1 Business Segments
  • It is grouped into five different business segments: Transplant, Biosurgery, Renal, Therapeutics and Diagnostics/Genetics.
  • 2.1.1 Products/Services
    • Therapeutics, Renal, Diagnostics, Transplant & Immune Mediated Disorders, , Biosurgery
• 2.2 Geographical Segmentation
  • Genzyme markets its products primarily in the US and Europe. The US accounts for 55% of its market.
• 2.3 Key Partnerships/Alliances
  • Medtronic Inc. and Genzyme Corporation formed a joint venture.
  • The evaluation of DX-88 for HAE is being conducted by Dyax under its collaboration with Genzyme Corporation.

3. SWOT Analysis

• 3.1 Strengths
  • Elaborate therapeutic focus
  • Deep product pipeline
  • Global commercial infrastructure
• 3.2 Weaknesses
  • High dependence on Cerezyme
  • Maturing products--Synvisc and Cerezyme
• 3.3 Opportunities
  • Enzyme Replacement Therapy for Pompe Disease
  • Booming HDD MarketGenetic profiling and diagnostic testing in Oncology
• 3.4 Threats
  • Imports of cheaper substitutes
  • Risk of foreign exposure
  • Guidelines and recommendations restrict product use

4. Key Business Strategies

• Inorganic Growth Route
• Expansion of Product Pipeline
• Planning Clinical Trials for Enzyme Deficiency
• Increasing Global Presence
• Growth in Infrastructure Investment

5. Financial Performance

• 5.1 Financial Highlights
  • Revenue increased 24% in the Q305 to US$708.1 million, up from US$569.2 million in the same quarter last year.
• 5.2 Five-Year Financial Summary
  • Revenue increased by 752.5 million in 2000 to US$2201.1 million in 2004.
  • R&D expenditure increased from US$112.8 million in 2000 to US$391.8 million in 2004.
• 5.3 Ratio Analysis
  • Genzyme' s gross margin improved marginally over the past three years.
  • Genzyme' s net profit margin stood at of 3.9%. in 2004.
  • Genzyme' s ROA, ROC and ROE were 1.6%, 1.9% and 2.4% for the year 2004.
• 5.4 Market Indicators
  • 5.4.1 Stock Chart
    • Genzyme shares are up 27.8% year-to-date, compared with returns of 21% for the S&P 500 Biotech over the same period.
  • 5.4.2 Earnings Estimates
    • Net income is expected to show a consistent increase at a four-year CAGR of about 86%. EPS is expected to grow at a CAGR of about 73.2%.

6. Competitive Landscape

• 6.1 Industry Overview
  • 6.1.1 Industry Definition and Segmentation
    • Medicinals and Botanicals
    • Pharmaceutical Preparations
    • Diagnostic Substances
    • Biological Products, excluding Diagnostic
  • 6.1.2 Market Overview
    • US biotechnology revenues increased from US$11.2 billion in 1994 to US$46 billion in 2004 at a compounded annual growth rate (CAGR) of 13.7%.
  • 6.1.3 Key Drivers
    • Increasing Elderly Population
    • Government Initiatives
    • Pharma Tie-ups Augment Resources
    • Laws Against Drug Piracy
  • 6.1.4 Major Trends
    • Emphasis on Healthcare
    • Competition from Pharma Companies
    • Losses Pile Up with Spurt in R&D Spend
    • Growing Competition from Europe and Asia-Pacific
    • Change in Sources of Funding
  • 6.1.5 Outlook
    • American biotech industry is expected to start making profits by the year 2009 while revenues are expected to grow to US$100 billion by the end of the decade.
• 6.2 Competition
  • 6.2.1 Competitive Positioning
    • Comparison between Amgen, Genetech, Biogen IDc based on market position, Geographical Presence, R&D Expenditure as % of Sales, Growth Strategy etc.
  • 6.2.2 Geographical Coverage
    • Genzyme leads in Europe while Amgen is way ahead in the US. Genentech and Biogen Idec both have presence in the Asia-Pacific.
  • 6.2.3 Client Base
    • Genentech focuses on Focus on cancer, endocrinology and cardiovascular disease.
    • Biogen focuses on Focus on lymphoma, psoriasis and multiple sclerosis.
• 6.3 Financial Assessment
  • Revenue, Income and Ratio comparison vis-' -vis the competitors.
• 6.4 Stock Market Performance
  • Biogen Idec is the only stock that underperformed over December 04-November 05.
  • Genentech has registered 75.64% return during the past one year.

7. Outlook

• 7.1 Company View
  • Genzyme' s R&D expenditure of US$115.7 million is expected to provide an additional boost to the company' s pipeline.
• 7.2 Analyst View
  • Its primary revenue earner, Cerezyme, is expected to touch US$1 billion in annual sales in 2007.
  • Genzyme' s future is also fraught with major risks:

Appendices

• Appendix 1 Income Statement, 2002-2004
• Appendix 2 Balance Sheet, 2002-2004
• Appendix 3 Mergers & Acquisitions, 2000-2005

List of Figures

• Figure 1.1 Organizational Chart
• Figure 2.1 Product Wise Revenue Mix, 2004
• Figure 2.2 Revenue by Geography, 2004
• Figure 5.1 Profitability Ratio, 2002-2004
• Figure 5.2 Performance Ratio, 2002-2004
• Figure 5.3 Stock comparison, December 2004-November 2005
• Figure 5.4 Estimated Net Income, 2004-2008
• Figure 5.5 Estimated EPS, 2004-2008
• Figure 6.1 Business Segments
• Figure 6.2 Total Revenues, 1999-2004
• Figure 6.3 Market Capitalization, 1999-2005
• Figure 6.4 Total Company Losses, 1998-2004
• Figure 6.5 US Biotechnology Industry Fundraising, 2003-2004
• Figure 6.6 Revenue by Geography, 2004
• Figure 6.7 Revenue Comparison, 2004, 3 year comparison
• Figure 6.7 Net Income Comparison, 2004, 3 year comparison
• Figure 6.9 Market Capitalization, (as on December 20, 2005)
• Figure 6.10 Stock Comparison, December 2004-November 2005

List of Tables

• Table 1.1 Key Facts
• Table 1.2 Top Products
• Table 1.3 Product Development Pipeline
• Table 1.4 Key Pipeline Products
• Table 1.5 Subsidiaries/Affiliates, 2000-2005
• Table 1.6 Recent Developments
• Table 5.1 Financial Highlights, 2004 & 2005
• Table 5.2 Five-Year Financial Summary, 2000-2004
• Table 6.1 Competitive Positioning- Amgen, Genentech, Biogen Idec
• Table 6.2 Client Base- Amgen, Genentech, Biogen Idec
• Table 6.3 Financial Assessment- Amgen, Genentech, Biogen Idec