Genzyme is getting to the point where the law of large numbers start to look really daunting. The Cambridge, MA-based biotech company has been so successful for so long, it gets harder every year to sustain the breakneck sales and profit growth that investors in the company have come to expect.
So what to do? The company has assembled an R&D portfolio that includes its traditional strength in treating rare genetic diseases, and expands into the high-stakes, highly competitive markets of cardiovascular disease, cancer, and multiple sclerosis. The company’s executives, led by CEO Henri Termeer, offered glimpses yesterday into how this strategy is evolving at the annual investor day.
Before diving too deep into the details, Genzyme executive vice president Peter Wirth showed an intriguing slide on how far the company has come. Back near the peak of the high tech bubble in January 2000, Genzyme (NASDAQ: [[ticker:GENZ]]) ranked No. 14 among all biotech companies in stock market valuation, with a relatively puny $3.8 billion. Nine years later, Genzyme has more than quadrupled in value to about $16 billion, and now ranks behind only Amgen, Gilead Sciences, and Celgene by that measurement. Interestingly, Genzyme is one of only seven of the top 15 biotech companies from those heady days at the turn of the millennium that have had the staying power to remain independent. (The slide is in the Section 1 presentation if you’d like to see the full list for yourself.)
It’s an impressive record, but like I said, it’s not easy to boost revenues as much as 20 percent a year when you’re working from a baseline of $5.15 billion to $5.35 billion—which is Genzyme’s ballpark forecast for this year. To keep the pipeline moving, the company is going to carefully sock away a lot of the $5.6 billion in cash it expects to generate between now and the end of 2011. It plans to spend about one-third of this—$1.9 billion—to expand and maintain global infrastructure, another $1 billion on share buybacks to boost the stock price, and another $700 million for milestone payments to potential partners with promising drugs in early stages of development. Keeping the pipeline stocked with multiple drugs with decent sales potential, rather than relying on one or two megahits, is clearly a key to the plan.
“All products have life cycles, and you need multiple products, and multiple life cycles, to create a sustainable future for a company,” Wirth said.
So which ones are the innovative new medicines that Genzyme thinks will help patients, and the company’s bottom line? Here are highlights of what the company had to show investors:
—Genzyme is clearly pumped about its new oral pill for Gaucher’s disease (pronounced go-SHAYZ). The new drug, called GENZ-112638, was designed to be a more convenient way to maintain treatment of patients who rely on Cerezyme, an injectable drug that is Genzyme’s biggest seller. But it turns out that a Phase II trial showed it might be better than just a maintenance therapy. Patients on the oral drug
