Consolidated Statements of Oper
Consolidated Statements of Operations (USD $) | ||||
In Thousands, except Per Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Revenues: | ||||
Net product sales | $1,115,425 | $1,071,801 | $2,152,669 | $2,078,069 |
Net service sales | 105,693 | 90,622 | 207,192 | 176,486 |
Research and development revenue | 7,392 | 8,711 | 17,520 | 16,640 |
Total revenues | 1,228,510 | 1,171,134 | 2,377,381 | 2,271,195 |
Operating costs and expenses: | ||||
Cost of products sold | 288,899 | 241,343 | 524,461 | 458,082 |
Cost of services sold | 61,624 | 58,987 | 121,874 | 114,561 |
Selling, general and administrative | 354,128 | 347,305 | 672,089 | 665,691 |
Research and development | 210,522 | 381,861 | 417,447 | 644,658 |
Amortization of intangibles | 63,945 | 55,605 | 121,543 | 111,263 |
Contingent consideration expense | 9,090 | 0 | 9,090 | 0 |
Total operating costs and expenses | 988,208 | 1,085,101 | 1,866,504 | 1,994,255 |
Operating income | 240,302 | 86,033 | 510,877 | 276,940 |
Other income (expenses): | ||||
Gains (losses) on investments in equity securities, net | (105) | 9,153 | (681) | 9,928 |
Gain on acquisition of business | 24,159 | 0 | 24,159 | 0 |
Other | (2,056) | 582 | (3,035) | 1,073 |
Investment income | 4,144 | 13,352 | 9,494 | 28,222 |
Interest expense | 0 | (1,149) | 0 | (2,804) |
Total other income (expenses) | 26,142 | 21,938 | 29,937 | 36,419 |
Income before income taxes | 266,444 | 107,971 | 540,814 | 313,359 |
Provision for income taxes | (78,870) | (38,407) | (157,754) | (98,524) |
Net income | $187,574 | $69,564 | $383,060 | $214,835 |
Net income per share: | ||||
Basic (in dollars per share) | 0.69 | 0.26 | 1.42 | 0.8 |
Diluted (in dollars per share) | 0.68 | 0.25 | 1.39 | 0.77 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 269,958 | 266,904 | 270,406 | 267,127 |
Diluted (in shares) | 274,852 | 284,262 | 276,225 | 285,028 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Thousands | Jun. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | $731,930 | $572,106 |
Short-term investments | 74,504 | 57,507 |
Accounts receivable, net | 1,138,828 | 1,036,940 |
Inventories | 586,686 | 453,437 |
Prepaid expenses and other current assets | 138,763 | 208,040 |
Due from Bayer | 74,647 | 0 |
Deferred tax assets | 187,954 | 188,105 |
Total current assets | 2,933,312 | 2,516,135 |
Property, plant and equipment, net | 2,550,269 | 2,306,567 |
Long-term investments | 242,949 | 344,078 |
Goodwill | 1,402,073 | 1,401,074 |
Other intangible assets, net | 2,438,124 | 1,654,698 |
Deferred tax assets-noncurrent | 362,043 | 269,237 |
Investments in equity securities | 67,386 | 83,325 |
Other noncurrent assets | 98,930 | 96,162 |
Total assets | 10,095,086 | 8,671,276 |
Current liabilities: | ||
Accounts payable | 160,271 | 127,869 |
Accrued expenses | 714,974 | 765,386 |
Deferred revenue | 20,710 | 13,462 |
Current portion of contingent consideration obligations | 212,196 | 0 |
Current portion of long-term debt and capital lease obligations | 7,850 | 7,566 |
Total current liabilities | 1,116,001 | 914,283 |
Long-term debt and capital lease obligations | 119,850 | 124,341 |
Deferred revenue-noncurrent | 12,237 | 13,175 |
Long-term contingent consideration obligations | 760,994 | 0 |
Other noncurrent liabilities | 305,535 | 313,484 |
Total liabilities | 2,314,617 | 1,365,283 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value | 0 | 0 |
Common stock, $0.01 par value | 2,701 | 2,707 |
Additional paid-in capital | 5,848,179 | 5,779,279 |
Accumulated earnings | 1,630,856 | 1,247,796 |
Accumulated other comprehensive income | 298,733 | 276,211 |
Total stockholders' equity | 7,780,469 | 7,305,993 |
Total liabilities and stockholders' equity | $10,095,086 | $8,671,276 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Jun. 30, 2009
| Dec. 31, 2008
| |
Consolidated Balance Sheets | ||
Preferred stock, par value per share (in dollars per share) | 0.01 | 0.01 |
Common stock, par value per share (in dollars per share) | 0.01 | 0.01 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | ||
In Thousands | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Cash Flows from Operating Activities: | ||
Net income | $383,060 | $214,835 |
Reconciliation of net income to cash flows from operating activities: | ||
Depreciation and amortization | 208,515 | 183,119 |
Stock-based compensation | 109,831 | 96,952 |
Provision for bad debts | 10,808 | 5,844 |
Contingent consideration expense | 9,090 | 0 |
Gain on acquisition of business | (24,159) | 0 |
(Gains) losses on investments in equity securities, net | 681 | (9,928) |
Deferred income tax benefit | (50,632) | (172,813) |
Tax benefit from employee stock-based compensation | 9,239 | 25,645 |
Excess tax benefits from stock-based compensation | (4,424) | (8,647) |
Other | 4,068 | 1,987 |
Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities): | ||
Accounts receivable | (106,901) | (98,174) |
Inventories | 21,795 | (4,812) |
Prepaid expenses and other current assets | (903) | (15,295) |
Income taxes payable | 32,958 | 13,288 |
Accounts payable, accrued expenses and deferred revenue | (2,680) | (52,692) |
Cash flows from operating activities | 600,346 | 179,309 |
Cash Flows from Investing Activities: | ||
Purchases of investments | (64,394) | (289,129) |
Sales and maturities of investments | 150,739 | 319,758 |
Purchases of equity securities | (7,363) | (81,472) |
Proceeds from sales of investments in equity securities | 1,473 | 16,169 |
Purchases of property, plant and equipment | (318,324) | (251,785) |
Distributions from equity method investments | 0 | 6,595 |
Acquisitions | (117,073) | 0 |
Purchases of other intangible assets | (18,345) | (75,400) |
Other | (5,198) | 2,571 |
Cash flows from investing activities | (378,485) | (352,693) |
Cash Flows from Financing Activities: | ||
Proceeds from the issuance of our common stock | 53,508 | 127,008 |
Repurchases of our common stock | (107,134) | (143,012) |
Excess tax benefits from stock-based compensation | 4,424 | 8,647 |
Payments of debt and capital lease obligations | (4,305) | (3,886) |
Increase (decrease) in bank overdrafts | (14,303) | 29,309 |
Other | 3,660 | 2,804 |
Cash flows from financing activities | (64,150) | 20,870 |
Effect of exchange rate changes on cash | 2,113 | (20,811) |
Increase (decrease) in cash and cash equivalents | 159,824 | (173,325) |
Cash and cash equivalents at beginning of period | 572,106 | 867,012 |
Cash and cash equivalents at end of period | $731,930 | $693,687 |
Description of Business
Description of Business | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Description of Business | 1.Description of Business We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare disorders, renal disease, orthopaedics, cancer, transplant and immune disease, and diagnostic and predictive testing. In the fourth quarter of 2008, we changed our segment reporting structure to better reflect the way we manage and measure the performance of our businesses. Under the new reporting structure, we are organized into four financial reporting units, which we also consider to be our reporting segments: Genetic Diseases, which develops, manufactures and distributes therapeutic products, with an expanding focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as lysosomal storage disorders, or LSDs. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme, Myozyme and Aldurazyme; Cardiometabolic and Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure, and endocrine and cardiovascular diseases. The unit derives substantially all of its revenue from sales of Renagel/Renvela (including sales of bulk sevelamer), Hectorol and Thyrogen; Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial-based products, with an emphasis on products that meet medical needs in the orthopaedics and broader surgical areas. The unit derives substantially all of its revenue from sales of Synvisc/Synvisc-One, the Sepra line of products, Carticel and Matrix-induced Autologous Chondrocyte Implantation, or MACI; and Hematologic Oncology, which develops, manufactures and distributes products for the treatment of cancer. Prior to May29, 2009, the unit derived substantially all of its revenue from sales and royalties received on sales of Campath, clofarabine (which is marketed under the names Clolar and Evoltra), and Mozobil, which received marketing approval in the United States in December2008 and in Europe in July2009. On May29, 2009, we acquired from Bayer the worldwide marketing and distribution rights to Campath, Fludara (fludarabine phosphate) and Leukine (sargramostim). Since that date, sales of Fludara and Leukine have been included in this unit along with sales of Campath. Our transplant business unit, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of graft rejection in organ transplantation and other hematologic and auto-immune disorders, and our genetics business unit, which provides testing services for the oncology, prenatal and reproductive markets, were formerly reported as separate reporting segments. Effective as of the fourth quarter of 2008, we include our transplant and genetics business units under the caption "Other." We also report the activities of our MS, diagnostic products, bulk pharmaceuticals and immune mediated disease business units under the caption "Other." These operating segments did n |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Basis of Presentation and Significant Accounting Policies | 2.Basis of Presentation and Significant Accounting Policies Basis of Presentation Our unaudited, consolidated financial statements for each period include the statements of operations, balance sheets and statements of cash flows for our operations taken as a whole. We have eliminated all intercompany items and transactions in consolidation. We have reclassified certain 2008 data to conform to our 2009 presentation. We prepare our unaudited, consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under these rules, we condense or omit certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States. These financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and results of operations. Since these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in Exhibit13 to our 2008 Form10-K. Revenues, expenses, assets and liabilities can vary from quarter to quarter. Therefore, the results and trends in these interim financial statements may not be indicative of results for future periods. The balance sheet data as of December31, 2008 that is included in this Form10-Q was derived from our audited financial statements. Our unaudited, consolidated financial statements for each period include the accounts of our wholly owned and majority owned subsidiaries. As a result of our adoption of Financial Accounting Standards Board, or FASB, Interpretation No., or FIN, 46R, "Consolidation of Variable Interest Entities," we also consolidate certain variable interest entities for which we are the primary beneficiary. For consolidated subsidiaries in which we have less than a 100% ownership interest, we record minority interest expense in "Other" in our consolidated statements of operations (representing the ownership interest of the minority owner) because the amount was immaterial for all periods presented. We use the equity method of accounting to account for our investments in entities in which we have a substantial ownership interest (20% to 50%) which do not fall in the scope of FIN46R, or over which we exercise significant influence. Our consolidated net income includes our share of the earnings or losses of these entities. Any material subsequent events have been considered for disclosure through the filing date of this Form10-Q. Recent Accounting Pronouncements Periodically, accounting pronouncements and related information on the adoption, interpretation and application of accounting principles generally accepted in the United States are issued or amended by the various U.S. financial accounting regulatory groups. The following table provides a description of the types of accounting pronouncements that are frequently issued or amended: Accounting Regulatory Group Type of Pronouncement Issued or Amended Accounting Principles Board APB Opinion No., or APB FASB FASB Statement of Financial Accounting Standards No., or FAS FAS |
Fair Value Measurements
Fair Value Measurements | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Fair Value Measurements | 3.Fair Value Measurements A significant number of our financial instruments are carried at fair value. These assets and liabilities include: fixed income investments; investments in publicly-traded equity securities; derivatives; and contingent consideration obligations. Fair Value MeasurementDefinition and Hierarchy FAS157 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FAS157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e.,the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, FAS157 permits the use of various valuation approaches, including market, income and cost approaches. FAS157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. The fair value hierarchy is broken down into three levels based on the reliability of inputs. We have categorized our fixed income, equity securities, derivatives and contingent consideration obligations within the hierarchy as follows: Level1These valuations are based on a "market approach" using quoted prices in active markets for identical assets. Valuations of these products do not require a significant degree of judgment. Assets utilizing Level1 inputs include money market funds, U.S. government securities, bank deposits and exchange-traded equity securities; Level2These valuations are based primarily on a "market approach" using quoted prices in markets that are not very active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Fixed income assets utilizing Level2 inputs include U.S. agency securities, including direct issuance bonds and mortgage-backed securities, asset-backed securities, corporate bonds and commercial paper. Derivative securities utilizing Level2 inputs include forward foreign-exchange contracts; and Level3These valuations are based on various approaches using inputs that are unobservable and significant to the overall fair value measurement. Certain assets and liabilities are classified within Level3 of the fair value hierarchy because they trade infrequently and, therefore, have little or no transparency. The fair value measurement of the contingent consideration obligations related to the acquisition from Bayer is valued using Level3 inputs. Valuation Techniques Fair value is a market-based measure considered from the perspective of a market participant who would buy the asset or assume the liability rather than our own specific measure. All of our fixed income securities are priced using a variety of daily data sources, largely readily-available market data and broker quotes. To validate these prices, we compare the fair values of our fixed income investments using market data from observable and corroborated sources. We also perform the fair value calculations for our derivatives and equity securities using market data |
Net Income Per Share
Net Income Per Share | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Net Income Per Share | 4.Net Income Per Share The following table sets forth our computation of basic and diluted net income per common share (amounts in thousands, except per share amounts): Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Net incomebasic $ 187,574 $ 69,564 $ 383,060 $ 214,835 Effect of dilutive securities: Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes(1) 1,886 3,772 Net incomediluted $ 187,574 $ 71,450 $ 383,060 $ 218,607 Shares used in computing net income per common sharebasic 269,958 266,904 270,406 267,127 Effect of dilutive securities: Shares issuable upon the assumed conversion of our 1.25% convertible senior notes(1) 9,686 9,686 Stock options(2) 3,555 7,123 4,554 7,712 Restricted stock units 1,303 538 1,221 491 Other 36 11 44 12 Dilutive potential common shares 4,894 17,358 5,819 17,901 Shares used in computing net income per common sharediluted(1,2) 274,852 284,262 276,225 285,028 Net income per common share: Basic $ 0.69 $ 0.26 $ 1.42 $ 0.80 Diluted $ 0.68 $ 0.25 $ 1.39 $ 0.77 (1) Prior to January1, 2009, in accordance with EITF04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share," the shares issuable upon redemption of $690.0million in principal of our 1.25% convertible senior notes were included in diluted weighted average shares outstanding for purposes of computing diluted earnings per share, unless the effect was anti-dilutive. There are no similar adjustments to the computation of diluted earnings per share forthe three and six months ended June30, 2009, because we redeemed these notes, primarily for cash, on December1, 2008. (2) We did not include the securities described in the following table in the computation of diluted earnings per share because these securities were anti-dilutive during the corresponding period (amounts in thousands): Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Shares issuable upon exercise of outstanding options 19,732 4,258 14,191 3,120 |
Comprehensive Income
Comprehensive Income | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Comprehensive Income | 5.Comprehensive Income The components of comprehensive income for the periods presented are as follows (amounts in thousands): Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Comprehensive income, net of tax: Net income $ 187,574 $ 69,564 $ 383,060 $ 214,835 Other comprehensive income (loss): Foreign currency translation adjustments 153,780 (3,981 ) 33,632 105,673 Pension liability adjustments, net of tax(1) (7 ) 71 Unrealized gains (losses) on securities, net of tax: Unrealized gains (losses) arising during the period, net of tax 9,657 806 (10,950 ) 4,711 Reclassification adjustment of (gains) losses included in net income, net of tax 37 (5,628 ) (160 ) (5,898 ) Unrealized gains (losses) on securities, net of tax(2) 9,694 (4,822 ) (11,110 ) (1,187 ) Other comprehensive income (loss) 163,474 (8,810 ) 22,522 104,557 Comprehensive income $ 351,048 $ 60,754 $ 405,582 $ 319,392 (1) Tax amounts for all periods were not significant. (2) Net of $(5.6) million of tax for the three months ended and $6.3million of tax for the six months ended June30, 2009 and $2.7million of tax for the three months ended and $0.7million of tax for the six months ended June30, 2008. |
Strategic Transactions
Strategic Transactions | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Strategic Transactions | 6.Strategic Transactions We account for business combinations completed prior to January1, 2009 in accordance with FAS141 and business combinations completed on or after January1, 2009 in accordance with FAS141R. FAS141R modifies the criteria that must be met to qualify as a business combination and prescribes new accounting requirements that differ significantly from FAS141. Among various other requirements and differences, the following table illustrates how we account for specific elements of our business combinations under FAS141 and FAS141R: Element Prior to January1, 2009, FAS141 On or after January1,2009, FAS141R Transaction costs Capitalized as cost of acquisition Expensed as incurred Exit/Restructuring costs Capitalized as cost of acquisition if certain criteria were met Expensed as incurred at or subsequent to acquisition date IPRD Measured at fair value and expensed on acquisition date, or capitalized as an intangible asset if certain criteria were met Measured at fair value and capitalized as an intangible asset and tested for impairment until completion of program Amortized from date of completion over estimated useful life Contingent consideration Recorded at acquisition date only to the extent of negative goodwill Measured at fair value andrecorded on acquisition date Capitalized as cost of acquisition when contingency was resolved Re-measured in subsequent periods with an adjustment to earnings No subsequent re-measurement Negative goodwill (excess of the value of acquired assets over consideration transferred) Offset other long-lived intangibles acquired Recognized as a gain in our consolidated statements of operations Changes in deferred tax assets and valuation allowances Recorded as adjustments to goodwill Recorded as tax expense Adjustments to acquisition accounting Recorded in the current period financial statements Recorded as adjustments to prior period financial statements Strategic Alliance with Osiris Therapeutics,Inc. In October 2008, we entered into a strategic alliance with Osiris Therapeutics,Inc., or Osiris, whereby we obtained an exclusive license to develop and commercialize Prochymal and Chondrogen, mesenchymal stem cell products, outside of the United States and Canada. Osiris will commercialize Prochymal and Chondrogen in the United States and Canada. We paid Osiris a nonrefundable upfront payment of $75.0million in November 2008 and an additional $55.0million nonrefundable upfront license fee in July 2009, both of which were recorded as charges to research and development expense in our consolidated statement of operations in the fourth quarter of 2008. The results of these programs are included under the category "Other" in our segment disclosures. The full description of our strategic alliance with Osiris is provided in NoteC., "Mergers, Acquisitions and Strategic TransactionsStrategic Alliance with Osiris," to our consolidated financial statements included in Exhibit13 to our 2008 Form10-K. Acquisition from Bayer On May29, 2009, we complete |
Inventories
Inventories | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Inventories | 7.Inventories June30, 2009 December31, 2008 (Amounts in thousands) Raw materials $ 109,211 $ 96,986 Work-in-process 256,870 141,094 Finished goods 220,605 215,357 Total $ 586,686 $ 453,437 In May 2009, in connection with our acquisition of the worldwide rights to the oncology products Campath, Fludara and Leukine from Bayer, we acquired a total of $136.4million of inventory, including $15.3million of Campath inventory, $22.9million of Fludara inventory and $98.2million of Leukine inventory. In June 2009, we announced that we had interrupted production of Cerezyme and Fabrazyme, and shipments of Cerezyme, at our Allston facility to sanitize the facility after identifying a virus, Vesivirus2117, in a bioreactor used for Cerezyme production. We recorded charges totaling $14.2million to cost of products sold in our consolidated statements of operations for the three and six months ended June30, 2009 for the initial costs related to the remediation of this facility, including the sanitization of the facility, idle capacity and overhead expenses while production at the plant was suspended and the write off of certain production materials. When we suspended production at Allston, we had significant Cerezyme work-in-process material. We have decided not to process approximately 80% of this work-in-process material because the material either had expired or we were not sufficiently assured that the material was not contaminated with Vesivirus 2117 and, accordingly, have incurred a write off of $8.4million for the second quarter of 2009. At the end of the business day on Friday, August7, 2009, the FDA communicated to us steps it recommends we take prior to forward processing any Cerezyme work-in-process. The steps recommended by the FDA were consistent with the steps that we independently had planned to implement. The remaining Cerezyme work-in-process material expires in June 2010. If we decide not to process this remaining material or if we process the material and the FDA or another regulatory authority does not allow us to release it, we will incur a write off of approximately $2.7million for the inventory value of this remaining material. In addition, we have two lots of finished Cerezyme product in inventory. If the FDA or another regulatory authority does not allow us to release both of these finished lots, we will incur an additional write off of $3.1million. We capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval. If a product is not approved for sale, it would result in the write off of the inventory and a charge to earnings. Our total inventories at June30, 2009 included $3.6million of Campath inventory, produced at our manufacturing facility in Belgium that has not yet been approved for sale because the facility has not yet received approval to manufacture Campath. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Goodwill and Other Intangible Assets | 8.Goodwill and Other Intangible Assets Goodwill The following table contains the change in our goodwill during the six months ended June30, 2009 (amounts in thousands): As of December31, 2008 Adjustments As of June30, 2009 Genetic Diseases $ 339,563 $ $ 339,563 Cardiometabolic and Renal 319,882 319,882 Biosurgery 7,585 7,585 Hematologic Oncology 322,078 322,078 Other 411,966 999 412,965 Goodwill $ 1,401,074 $ 999 $ 1,402,073 Other Intangible Assets The following table contains information about our other intangible assets for the periods presented (amounts in thousands): As of June30, 2009 As of December31, 2008 Gross Other Intangible Assets Accumulated Amortization Net Other Intangible Assets Gross Other Intangible Assets Accumulated Amortization Net Other Intangible Assets Finite-lived other intangible assets: Technology(1) $ 2,180,455 $ (774,865 ) $ 1,405,590 $ 1,919,074 $ (692,235 ) $ 1,226,839 Distribution rights(2) 416,968 (198,730 ) 218,238 399,768 (170,892 ) 228,876 Patents 188,651 (124,156 ) 64,495 194,560 (121,763 ) 72,797 License fees 98,660 (43,517 ) 55,143 98,123 (39,824 ) 58,299 Customer lists 84,843 (38,767 ) 46,076 83,729 (34,271 ) 49,458 Trademarks 60,573 (44,903 ) 15,670 60,556 (42,194 ) 18,362 Other 2,039 (1,972 ) 67 Total finite-lived other intangible assets 3,030,150 (1,224,938 ) 1,805,212 2,757,849 (1,103,151 ) 1,654,698 Indefinite-lived other intangible assets: IPRD(3) 632,912 632,912 Total other intangible assets $ 3,663,062 $ (1,224,938 ) $ 2,438,124 $ 2,757,849 $ (1,103,151 ) $ 1,654,698 (1) Includes an additional $261.4million of gross technology intangible assets resulting from our acquisition of the worldwide rights to the oncology products Campath, Fludara and Leukine from Bayer in May 2009. Of this amount: $71.0million is related to Campath and will be amortized over ten years; $182.1million is related to Fludara and will be amortized over five years; and $8.3million is related to Leukine and will be amortized over twelve years. (2) Includes an additional $18.3million in the first half of 2009 for additional payments made or accrued in connection with the reacquisition of the Synvisc sales and marketing rights from Wyeth in January 2005. In addition, we will make a series of additional contingent royalty payments to Wyeth based on the volume of Synvisc sales in the covered territories. These contingent royalty payments could extend out to June 2012, or could total a maximum of $293.7million, whichever comes first. To date, $263.9million of the $293.7million has been paid. (3) Includes capitalized IPRD |
Investments in Equity Securitie
Investments in Equity Securities | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Investments in Equity Securities | 9.Investments in Equity Securities In the second quarter of 2008, we recorded a $10.3million gain resulting from the liquidation of our investment in the common stock of Sirtris Pharmaceuticals,Inc., or Sirtris, for net cash proceeds of $14.8million. At June30, 2009, our stockholders' equity includes $11.7million of unrealized gains and $7.4million of unrealized losses related to our strategic investments in equity securities. |
Revolving Credit Facility
Revolving Credit Facility | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Revolving Credit Facility | 10.Revolving Credit Facility As of June30, 2009, we had approximately $12million of outstanding standby letters of credit and no borrowings, resulting in approximately $338million of available credit under our five-year $350.0million senior unsecured revolving credit facility, which matures July14, 2011. The terms of this credit facility include various covenants, including financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of June30, 2009, we were in compliance with these covenants. |
Shareholders Equity
Shareholders Equity | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Stockholders' Equity | 11.Stockholders' Equity Stock Repurchase In May 2007, our board of directors authorized a stock repurchase program to repurchase up to an aggregate maximum amount of $1.50billion or 20,000,000 shares of our outstanding common stock over a three year period that began in June 2007. The repurchases are being made from time to time and can be effectuated through open market purchases, privately negotiated transactions, transactions structured through investment banking institutions, or by other means, subject to management's discretion and as permitted by securities laws and other legal requirements. The manner of the purchase, the amount that we spend and the number of shares we ultimately purchase will be based on a range of factors, including share price. The program does not obligate us to acquire any particular amount of common stock and the program may be suspended at any time at our discretion. During the six months ended June30, 2009, we repurchased 2,000,000shares of our common stock under this program at an average price of $53.55 per share for a total of $107.1million in cash, including fees. Since June 2007, when we first began repurchasing shares of our common stock under this program, we have repurchased a cumulative total of 7,500,000 shares of our common stock at an average price of $64.21 per share for a total of $481.7million in cash, including fees. We recorded the repurchases in our consolidated balance sheets as a reduction to our common stock account for the par value of the repurchased shares and as a reduction to our additional paid-in capital account. Stock-Based Compensation Expense, Net of Estimated Forfeitures We allocated pre-tax stock-based compensation expense, net of estimated forfeitures, based on the functional cost center of each employee as follows (amounts in thousands, except per share amounts): Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Pre-tax stock-based compensation expense, net of estimated forfeitures, charged to: Cost of products and services sold(1) $ (7,570 ) $ (6,311 ) $ (14,804 ) $ (12,825 ) Selling, general and administrative expense (37,817 ) (31,904 ) (61,653 ) (54,793 ) Research and development expense (19,780 ) (16,092 ) (33,316 ) (28,677 ) Total (65,167 ) (54,307 ) (109,773 ) (96,295 ) Less: tax benefit from stock options 15,144 16,834 27,733 29,371 Total stock-based compensation expense, net of tax $ (50,023 ) $ (37,473 ) $ (82,040 ) $ (66,924 ) Effect per common share: Basic $ (0.19 ) $ (0.14 ) $ (0.30 ) $ (0.26 ) Diluted $ (0.18 ) $ (0.13 ) $ (0.30 ) $ (0.23 ) (1) We also capitalized the following amounts of stock-based compensation expense to inventory, all of which is attributable to participating employees that support our manufacturing operations (amounts in thousands): Three Months Ended June30, Six |
Commitments and Contingencies
Commitments and Contingencies | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Commitments and Contingencies | 12.Commitments and Contingencies Legal Proceedings On July29, 2009 and August3, 2009, two purported securities class action lawsuits were filed in the U.S. District Court for the District of Massachusetts against us and our President and Chief Executive Officer. The lawsuits were filed on behalf of those who purchased our common stock during the period from June26, 2008 through July21, 2009 and allege violations of Section10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule10b-5 promulgated thereunder. Each of the suits is premised upon allegations that we made materially false and misleading statements and omissions by failing to disclose instances of viral contamination at two of our manufacturing facilities and our receipt of a list of inspection observations from the FDA related to one of the facilities, which detailed observations of practices that the FDA considered to be deviations from "Good Manufacturing Practices," or GMP. The plaintiffs seek unspecified damages and reimbursement of costs, including attorneys' and experts' fees. We intend to defend these lawsuits vigorously. We are not able to predict the outcome of these lawsuits or estimate the amount or range of any possible loss we might incur if we do not prevail in final, non-appealable determinations of these matters. Therefore, we have not accrued any amounts in connection with these contingencies. In April 2005, Church DwightCo.,Inc., or Church Dwight, filed a suit in U.S. District Court for the District of New Jersey against Abbott Laboratories, or Abbott, claiming that certain over-the-counter pregnancy tests distributed by Abbott between 1999 and 2003 infringed upon patents owned by Church Dwight. During part of this period, a portion of the test kits distributed by Abbott were manufactured by Wyntek Diagnostics,Inc., or Wyntek, which had agreed to indemnify Abbott for patent infringement related costs and damages for these products. In 2002, we acquired Wyntek and assumed the obligations under this agreement. In June 2008, the court issued a ruling awarding Church Dwight approximately $29million in damages based on a jury finding of willful infringement by Abbott. This award has been entered as a final ruling and Abbott has filed an appeal. Because multiple parties, including Abbott, manufactured infringing product for Abbott during this period, any responsibility that we may have for indemnifying Abbott is only for a portion of its costs and damages related to this case. We currently are disputing with Abbott the percentage of infringing product that was supplied by us and may in the future assert additional claims that, if successful, would reduce or relieve us of any liability. Through June30, 2003, we had three outstanding series of common stock, which we referred to as tracking stocks: Genzyme General Stock (which we now refer to as Genzyme Stock); Biosurgery Stock; and Molecular Oncology Stock. On August6, 2007, we reached an agreement in principle to settle for $64.0million the lawsuits related to our 2003 exchange of Genzyme Stock for Biosurgery Stock. We recorded a liability for the settlement payment of $64.0million as a charge to S |
Provision for Income Taxes
Provision for Income Taxes | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Provision for Income Taxes | 13.Provision for Income Taxes Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 (Amounts in thousands) Provision for income taxes $ 78,870 $ 38,407 $ 157,754 $ 98,524 Effective tax rate 30 % 36 % 29 % 31 % Our effective tax rate for all periods presented varies from the U.S. statutory tax rate as a result of: income and expenses taxed at rates other than the U.S. statutory tax rate; our provision for state income taxes; the tax benefits from manufacturing activities; benefits related to tax credits; and non-deductible stock-based compensation expenses totaling $21.8million for the three months ended and $31.5million for the six months ended June30, 2009, as compared to $8.7million for the three months ended and $16.7million for the six months ended June30, 2008. In addition, our provision for income taxes for both the three and six months ended June30, 2009 includes $5.3million of income tax benefits resulting from the reversal of a portion of our U.S. tax reserves due to a remeasurement, in accordance with the provisions of FIN48, "Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No.109," based on new information discovered during the second quarter of 2009. We are currently under IRS audit for the tax years 2006 to 2007. We believe that we have provided sufficiently for all audit exposures. We expect to settle the 2006 to 2007 IRS audit within the next twelve months and do not expect that the settlement will have a material impact on our financial position or results of operations. Settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in a reduction of future tax provisions. Any such benefit would be recorded upon final resolution of the audit or expiration of the applicable statute of limitations. |
Segment Information
Segment Information | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Consolidated Financial Statements | |
Segment Information | 14.Segment Information In accordance with FAS131, "Disclosures about Segments of an Enterprise and Related Information," we present segment information in a manner consistent with the method we use to report this information to our management. Applying FAS131, in the fourth quarter of 2008, we changed our segment reporting structure to better reflect the way we manage and measure the performance of our businesses. Under the new reporting structure, we are organized into four reporting segments as described above in Note1., "Description of Business," to these consolidated financial statements. We have revised our 2008 segment disclosures to conform to our 2009 presentation. We have provided information concerning the operations of these reportable segments in the following tables (amounts in thousands): Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Revenues: Genetic Diseases $ 568,153 $ 572,461 $ 1,105,203 $ 1,107,350 Cardiometabolic and Renal 248,000 239,285 490,962 471,123 Biosurgery 139,327 131,215 258,849 242,877 Hematologic Oncology(1) 55,930 28,346 91,837 52,226 Other 216,546 199,370 429,522 396,779 Corporate 554 457 1,008 840 Total $ 1,228,510 $ 1,171,134 $ 2,377,381 $ 2,271,195 Income (loss) before income taxes: Genetic Diseases $ 332,967 $ 366,456 $ 684,941 $ 723,177 Cardiometabolic and Renal(2) 106,711 (78,981 ) 208,929 (50,150 ) Biosurgery 33,750 28,670 62,083 47,457 Hematologic Oncology(1) (29,752 ) (26,606 ) (43,394 ) (52,567 ) Other(3) 29,702 (4,642 ) 22,780 535 Corporate(4) (206,934 ) (176,926 ) (394,525 ) (355,093 ) Total $ 266,444 $ 107,971 $ 540,814 $ 313,359 (1) The results of operations of acquired companies and assets and the amortization expense related to acquired intangible assets are included in segment results beginning on the date of acquisition. (2) Includes a charge of $175.0million recorded in June 2008 and a charge of $69.9million recorded in February 2008 as license fees payments to Isis Pharmaceuticals,Inc., or Isis, for exclusive, worldwide rights to mipomersen. (3) Includes a charge of $18.2million recorded to research and development expense in our consolidated statements of operations in January 2009 for intellectual property we acquired from EXACT Sciences. (4) Loss before income taxes for Corporate includes our corporate, general and administrative and corporate science activities, all of our stock-based compensation expenses, as well as net gains on our investments in equity securities, investment income, interest expense and other income and expense items that we do not specifically allocate to a particular reporting segment. Segment Assets We provide information concerning the assets of our reportable segments in the following table (amount |
Document and Entity Information
Document and Entity Information (USD $) | |||
6 Months Ended
Jun. 30, 2009 | Jul. 31, 2009
| Jun. 30, 2008
| |
Document and Entity Information | |||
Entity Registrant Name | GENZYME CORP | ||
Entity Central Index Key | 0000732485 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-06-30 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $19,124,677,445 | ||
Entity Common Stock, Shares Outstanding | 270,308,386 |