Growing product sales led Genzyme Corp. to report higher-than-expected first-quarter earnings, while raising its guidance for the year.

Non-GAAP revenue for the three months ending March 31 totaled $629.9 million, a 28 percent increase from the $491.3 million reported for the first quarter of 2004. The company's net income for the quarter totaled $131.1 million, or 51 cents per share, compared to $85.6 million, or 37 cents per share, last year.

The consensus estimate for the quarter was 49 cents per share.

The quarter "exceeded our expectations," said Henri Termeer, chairman and CEO, during a conference call Thursday morning, adding that Genzyme had given prior guidance estimating non-GAAP of 45 cents to 48 cents per share. "This allows us to increase and narrow" the earnings-per-share guidance for the year, increasing projections from between $2.08 and $2.16 to between $2.12 and $2.18.

Those figures do not reflect the amortization of $41.2 million or a charge of $9.5 million for the research and development purchased earlier this year from German company Verigen AG. (See BioWorld Today, Feb. 9, 2005.)

"This was clearly a solid quarter for Genzyme," said analyst Adam Walsh, of Jefferies & Co., adding that the upside was driven by "the strength in core product sales and the gross margin expansion, both of which are very positive for the company."

The increase in guidance speaks to the "strength of the underlying business," Walsh told BioWorld Today. "The history of this company is that it has typically been outperforming expectation on a consistent basis, and I would expect that to continue."

Genzyme's stock was down following the earnings call. Shares (NASDAQ:GENZ) lost $1.20 Thursday to close at $59.62.

"I think that's related to a big run-up going into the earnings announcement," Walsh said.

He acknowledged there could be "some tangential concerns surrounding Renagel," the company's phosphate binder for end-stage renal disease patients on hemodialysis, which recently has gained a competitor in Basingstoke, UK-based Shire Pharmaceuticals Group plc's Fosrenol. "But, I think, the growth year over year for [Renagel] is robust."

Plus, he added, the fact that Genzyme expects to release top-line data later this year from its Dialysis Clinical Outcomes Revisited study evaluating the difference in mortality and morbidity outcomes for patients receiving Renagel vs. calcium-based phosphate binders, indicates the "franchise should continue to perform very well." Overall, the company was careful on earnings forecast for this quarter.

In addition to the competition with Renagel, "we were integrating and absorbing the ILEX [Oncology Inc.] transaction and associated R&D expenditures, and we were also integrating the Synvisc sales force in the U.S., Germany and other European markets," Termeer said.

"We came in right on plan, and we feel comfortable to give guidance of $420 million to $430 million in revenue for the year."

For the first quarter, sales of Renagel totaled $99.4 million, up 19 percent from $83.5 million in the first quarter a year ago. The product has shown increasing market penetration, particularly in Europe, though a part of the overall increase comes from a 4.5 percent hike in the U.S. sales price of the product, said Michael Wyzga, Genzyme's vice president of finance and chief financial officer.

The company's therapeutic products all increased in sales. Fabrazyme (agalsidase beta), an enzyme-replacement therapy for Fabry's disease, rose 84 percent to $70 million, compared to $38.1 million in the first quarter of 2004. About $30.1 million of that is from Europe, and Genzyme has submitted proposed labeling changes to the European regulatory authorities to include results from a Phase IV trial designed to confirm the clinical benefit of Fabrazyme. A similar application is expected to be submitted to the FDA.

Sales of Cerezyme (imiglucerase for injection) for Type I Gaucher's disease, rose 11 percent from the same quarter last year, from $203 million to $226 million. The company's thyrotropin alfa for injection, Thyrogen, reported sales of $17.7 million for the quarter, up 27 percent from $14 million a year ago.

The Cambridge, Mass.-based company also reported an increase in sales of Synvisc, a viscosupplementation product to treat pain associated with osteoarthritis of the knee, from $22.4 million to $44 million, a jump that reflects Genzyme's January agreement to acquire full control of product sales and marketing from Madison, N.J.-based Wyeth Pharmaceuticals. Genzyme agreed to pay Wyeth $121 million in exchange for all end-user revenue. (See BioWorld Today, Nov. 5, 2004.)

First-quarter sales of the transplant products Thymoglobulin (anti-thymocyte globulin, rabbit) and Lymphoglobulin (anti-thymocyte globulin, equine) totaled $27.2 million, up from $25 million for the first quarter last year. Revenue from the diagnostics and genetics business increased by 52 percent, from $52.1 million to $79.4 million, and the company's oncology revenue totaled $11.5 million. Oncology revenue includes profits and royalties from Campath (alemtuzumab for injection) and sales of Clolar, which was approved in December for pediatric use to treat leukemia.

Genzyme plans to formally launch Clolar (clofarabine) May 14.

The company's research and development expenses totaled about $114.7 million, a 24 percent increase from a year ago, due to an increase in oncology research and the integration of San Antonio-based ILEX, acquired in a $1 billion stock purchase early last year, and the integration of New York-based Impath Inc.'s oncology testing business, also acquired last year. (See BioWorld Today, March 1, 2005, and March 2, 2005.)

Ongoing development programs include the preparation of a marketing application for Myozyme (alglucosidase alfa), expected to be submitted around the middle of the year in the U.S., followed by submissions in Canada, Australia and Japan, for the treatment of patients with Pompe disease.

The company began a Phase III trial during the first quarter of tolevamer, a non-absorbed polymer therapy to treat Clostridium difficile-associated diarrhea, and has an ongoing Phase II trial of its HIF-alpha gene therapy in peripheral arterial disease.

Genzyme ended with quarter with about $1.1 billion in cash and marketable securities.