Genencor Reports Second Quarter Financial Results Establishes
Company Record for Quarterly Product Revenues PALO ALTO, Calif.,
July 29 /PRNewswire-FirstCall/ -- Genencor International, Inc.
(NASDAQ:GCOR) today reported that for the quarter ended June 30,
2004, net income available to common stockholders was $12.1
million, or $0.20 per diluted share, compared to $5.8 million or
$0.10 per diluted share during the same period in 2003. Product
revenues increased by 7% to $96.2 million, compared to $89.7
million in the second quarter of 2003. Total revenues in the second
quarter were $109.9 million, compared to $96.3 million for the same
period in 2003. Fees and royalty revenues were $13.8 million in the
second quarter of 2004 as compared to $6.6 million in the prior
year. For the second quarter of 2004, Genencor generated $17.5
million in operating income and $18.8 million in cash flow from
operations. For the six months ended June 30, 2004, total revenues
were $204.3 million, compared to $192.0 million for the same period
in 2003. Net income available to common stockholders was $23.3
million, or $0.38 per diluted share for the six months ended June
30, 2004, compared to $10.5 million or $0.18 per diluted share for
that same period in 2003. "The combination of an increase in
product revenues driven by increases in all of our product
categories and the $10 million in revenue from the sale of our
vaccine program to Innogenetics, have made this a very strong
quarter for earnings," said Ray Land, Senior Vice President and
Chief Financial Officer. Financial Results by Segment The
Bioproducts segment develops and delivers products and services for
the industrial, consumer and agri-processing markets to a global
customer base. All of the company's current product revenues are
derived from this segment. For the second quarter 2004, the
Bioproducts segment achieved operating income of $14.2 million as
compared to operating income of $17.7 million for the second
quarter of 2003, primarily due to reduced fee and royalty revenues.
For the six months ended June 30, 2004, the Bioproducts segment
achieved operating income of $38.2 million as compared to operating
income of $36.8 million for the same period in 2003. The Health
Care segment is primarily engaged in the performance of research
and development, securing intellectual property and the
establishment of strategic investments and collaborations in
support of our product objectives in the health care market. For
the second quarter of 2004, the Health Care segment reported
operating income of $3.2 million as compared to an operating loss
of $7.5 million for the same period in 2003. For the six months
ended June 30, 2004, the Health Care segment experienced an
operating loss of $3.6 million as compared to an operating loss of
$15.4 million for the same period in 2003. Business Update "We are
very pleased with our strong financial performance during the
second quarter and with our record-setting product revenues," said
Jean- Jacques Bienaime, chairman, chief executive officer and
president of Genencor. "The continuing strength of our business
along with exciting new initiatives, we believe, bode well for the
future," said Bienaime. Bioproducts Genencor's Bioproducts segment
set a quarterly product revenue record for the company in the
second quarter of 2004, driven by increases in all product revenue
categories. Particular strength was seen in the fermentation
alcohol, sweeteners and the food & beverage specialty markets.
Globally, most regions reported increased sales, with Asia Pacific
reflecting double-digit growth. As announced earlier in the month,
Genencor, along with the U.S. Department of Energy's National
Renewable Energy Laboratory, were selected by R&D Magazine for
inclusion on its list of Top 100 Technologically Significant
Products for 2004. The recognition was for progress made on the
development of an economical process for the conversion of biomass
to ethanol, a critical step in creating a viable biorefinery
industry. During the second quarter, Genencor moved closer to the
commercialization of new products for the growing biodefense
industry. The company has manufactured sample quantities of enzymes
that neutralize sarin nerve gas and other organophospate-based
agents and is providing samples to formulators for development into
foams, sprays and detergents for use by both military and civilian
first responders, such as fire departments, police and hazardous
material response teams. The enzymes were developed in
collaboration with the U.S. Army Edgewood Chemical Biological
Center. Commercialization is expected in the fourth quarter of
2004. Plans are underway to expand the collaboration for the
development of enzyme systems to decontaminate a broad range of
chemical and biological weapon agents. Genencor continued its
progress toward commercialization of proprietary enzyme products
that effectively reduce prion infectivity. Prions are widely seen
as the causative agent of Bovine Spongiform Encephalopathy
(commonly known as mad cow disease), and its human variant,
Cruetzfelt-Jakob Disease. Once necessary regulatory approvals have
been received, Genencor expects to commercialize products for use
in hospitals and other medical and dental settings, as well as in
the meat packing and meat processing markets. While dependent upon
many variables, we believe the developing markets for enzymatic
solutions to prion infectivity and biodefense could offer an
initial estimated market opportunity of $100 million to $150
million in five to seven years. During the second quarter of 2004,
DuPont and Tate & Lyle PLC announced a new venture to
manufacture 1,3 propanediol, which is used to make DuPont's
Sorona(TM) polymer. The manufacturing process is expected to
utilize Genencor's metabolic pathway engineering technology, and,
according to a statement issued by DuPont and Tate & Lyle, the
first plant is expected to start up in 2006. Health Care Genencor's
Health Care segment continued to make progress during the second
quarter, focusing its attention and resources on targeted cancer
biotherapeutics. As previously announced, Genencor advanced its
first product candidate for treating cancer into investigational
new drug (IND)-enabling development earlier this year. Based upon
the Antibody Directed Enzyme Prodrug Therapy (ADEPT) platform, the
lead product candidate will initially target significant unmet
medical needs in colorectal carcinoma. According to the American
Cancer Society, colorectal cancer is the third most common form of
the disease and, in 2004, was responsible for approximately 56,000
deaths in the U.S. alone. The company's preliminary timeline
anticipates filing an IND in late 2005 with clinical trials to
follow thereafter. Earlier this year, Genencor sold its therapeutic
vaccine program to Innogenetics for $10 million in up-front fees
and may receive further payments of up to $87 million as
development milestones are reached. In addition, Genencor would
receive royalties on future product sales. In finalizing this
transaction, Genencor transferred to Innogenetics sponsorship of
the IND and Phase I clinical trial for its lead hepatitis B product
candidate, plus intellectual property, research compounds and
various third party relationships. The Health Care segment is now
focused entirely on discovery, in-licensing and development of
therapeutic products for the oncology market. 2004 Guidance Total
revenues for 2004 are estimated to be in the range of $400 million
to $406 million. Genencor anticipates research and development
expenses for the full year 2004 to fall in the range of $73 million
to $74 million. Operating income is expected to be in the $41
million to $42 million range. Genencor estimates net income
available to common stockholders of between $24 million and $25
million, or between $0.38 and $0.40 earnings per diluted share
(EPS), in 2004. The company's prior EPS guidance was $0.36 to
$0.40. As the year progresses, Genencor will provide updates to its
annual guidance as appropriate in its quarterly earnings releases.
Genencor does not provide quarterly guidance. About Genencor
Genencor International is a diversified biotechnology company that
develops and delivers innovative products and services into the
health care, agri-processing, industrial and consumer markets.
Using an integrated set of technology platforms, Genencor's
products deliver innovative and sustainable solutions to many of
the problems of everyday life. Genencor traces its history to 1982
and has grown to become a leading biotechnology company, with over
$380 million in year 2003 annual revenues. Genencor has principal
offices in Palo Alto, California; Rochester, New York; and Leiden,
the Netherlands. This press release contains forward-looking
statements as defined by the Private Securities Litigation Reform
Act of 1995. These include statements concerning plans, objectives,
goals, strategies, future events or performance and all other
statements which are other than statements of historical fact,
including without limitation, statements containing words such as
"believes," "anticipates," "expects," "estimates," "projects,"
"will," "may," "might" and words of a similar nature. Such
statements involve risks and uncertainties that could cause actual
results to differ materially from those projected. Some important
factors that could cause actual results to differ include
dependence on the efforts of third parties, such as DuPont and Tate
& Lyle PLC; dependence on new and uncertain technology and its
uncertain application to new business ventures; regulatory actions
or delays, or uncertainties related to product development, testing
or manufacturing; ability to form and maintain strategic alliances;
ability to complete certain transactions and to realize anticipated
benefits from acquisitions; dependence on certain intellectual
property rights of both Genencor and third parties, such as the
U.S. Army Edgewood Chemical Biological Center; the competitive
nature of Genencor's industry and risks of obsolescence of certain
technology; and the high risk nature of efforts to develop viable
products for the health care market including the possibility that
clinical or preclinical testing may reveal unsuccessful results or
undesirable side effects. These and other risk factors are more
fully discussed in Genencor's most recent Annual Report on Form
10-K and Quarterly Report on Form 10-Q filed with the United States
Securities and Exchange Commission. The forward-looking statements
contained in this release represent the judgment of Genencor as of
the date of this report. Genencor disclaims, however, any intent or
obligation to update any forward-looking statements. Conference
Call Information You are invited to listen to Genencor's second
quarter financial results conference call that will be broadcast
live over the Internet on July 29 at 5:00 p.m., EDT, with
Jean-Jacques Bienaime, chairman, chief executive officer and
president of Genencor, and Raymond J. Land, senior vice president
and chief financial officer of Genencor. The company will discuss
forward-looking information and review financial results on this
call. To access the webcast, please log on to the Internet at
http://www.shareholder.com/genencor/medialist.cfm . Please connect
to the website at least 15 minutes prior to the call to ensure
adequate time to register and log on. The webcast will be made
available at this URL, as well as posted to the "Investor
Relations" section of Genencor's website, http://www.genencor.com/.
You may also dial-in to the conference call at 888-428-4478
(domestic) or 612-332-0718 (international). Please call in
approximately ten minutes before the call is scheduled to begin.
Genencor International, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (Amounts in thousands, except
per share data) Three Months Ended Six Months Ended June 30, June
30, 2004 2003 2004 2003 (unaudited) (unaudited) Revenues: Product
revenue $96,173 $89,744 $187,712 $179,782 Fees and royalty revenues
13,759 6,603 16,583 12,226 Total revenues 109,932 96,347 204,295
192,008 Operating expenses: Cost of products sold 55,031 51,786
105,496 102,627 Research and development 17,527 16,833 34,407
33,293 Sales, marketing and business development 9,366 7,902 17,686
15,601 General and administrative 9,412 7,982 17,914 15,783
Amortization of intangible assets 1,148 1,498 2,323 2,890 Other
expense/(income) (90) 54 (7,995) 759 Total operating expenses
92,394 86,055 169,831 170,953 Operating income 17,538 10,292 34,464
21,055 Non operating expenses/(income): Investment expense -- 1,018
-- 1,018 Interest expense 1,006 1,569 2,542 3,589 Interest income
(822) (1,558) (1,693) (2,403) Total non operating expenses/(income)
184 1,029 849 2,204 Income before income taxes 17,354 9,263 33,615
18,851 Provision for/(benefit from) income taxes 3,471 1,644 6,723
4,712 Net income $13,883 $7,619 $26,892 $14,139 Net income
available to holders of common stock $12,064 $5,800 $23,254 $10,501
Earnings per common share: Basic $0.20 $0.10 $0.39 $0.18 Diluted
$0.20 $0.10 $0.38 $0.18 Weighted average common shares: Basic
59,305 58,570 59,285 58,534 Diluted 60,826 60,230 61,050 59,515
Genencor International, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (Amounts in thousands) June 30,
December 31, 2004 2003 (unaudited) Assets Current assets: Cash and
cash equivalents $155,084 $166,551 Other current assets 167,998
158,661 Total current assets 323,082 325,212 Property, plant and
equipment, net 224,120 232,902 Goodwill 29,380 29,380 Intangible
assets, net 43,961 47,075 Other assets 74,590 77,853 Total assets
$695,133 $712,422 Liabilities, Redeemable Preferred Stock and
Stockholders' Equity Current liabilities $92,522 $102,168 Long-term
debt and capital lease obligations 36,054 65,308 Other long-term
liabilities 31,872 32,259 Total liabilities 160,448 199,735
Redeemable preferred stock 180,663 177,025 Stockholders' equity
354,022 335,662 Total liabilities, redeemable preferred stock and
stockholders' equity $695,133 $712,422 Genencor International, Inc.
and Subsidiaries Unaudited Segment Information (Amounts in
thousands) For the three months ended June 30, 2004 Bioproducts
Health Segment Corporate Consolidated Care Subtotal and Other
Totals Product revenue $96,173 $-- $96,173 $-- $96,173 Fees and
royalty revenues 3,759 10,000 13,759 -- 13,759 Total revenues
99,932 10,000 109,932 -- 109,932 Research and development 12,198
5,329 17,527 -- 17,527 Operating income/(loss) 14,212 3,216 17,428
110 17,538 For the three months ended June 30, 2003 Bioproducts
Health Segment Corporate Consolidated Care Subtotal and Other
Totals Product revenue $89,744 $-- $89,744 $-- $89,744 Fees and
royalty revenues 6,453 150 6,603 -- 6,603 Total revenues 96,197 150
96,347 -- 96,347 Research and development 10,914 5,919 16,833 --
16,833 Operating income/(loss) 17,737 (7,536) 10,201 91 10,292 For
the six months ended June 30, 2004 Bioproducts Health Segment
Corporate Consolidated Care Subtotal and Other Totals Product
revenue $187,712 $-- $187,712 $-- $187,712 Fees and royalty
revenues 6,358 10,225 16,583 -- 16,583 Total revenues 194,070
10,225 204,295 -- 204,295 Research and development 23,174 11,233
34,407 -- 34,407 Operating income/(loss) 38,154 (3,581) 34,573
(109) 34,464 For the six months ended June 30, 2003 Bioproducts
Health Segment Corporate Consolidated Care Subtotal and Other
Totals Product revenue $179,782 $-- $179,782 $-- $179,782 Fees and
royalty revenues 12,001 225 12,226 -- 12,226 Total revenues 191,783
225 192,008 -- 192,008 Research and development 21,234 12,059
33,293 -- 33,293 Operating income/(loss) 36,795 (15,442) 21,353
(298) 21,055 DATASOURCE: Genencor International, Inc. CONTACT:
media, Valerie Tucker, +1-650-846-7571, or investors, Tom Rathjen,
+1-650-846-5000, both of Genencor International, Inc. Web site:
http://www.genencor.com/
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