Consolidated Statements of Oper
Consolidated Statements of Operations (USD $) | ||||
In Thousands, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Revenues: | ||||
Net product sales | $953,686 | $1,058,296 | $3,106,355 | $3,136,365 |
Net service sales | 102,436 | 92,586 | 309,628 | 269,072 |
Research and development revenue | 1,392 | 9,402 | 18,912 | 26,042 |
Total revenues | 1,057,514 | 1,160,284 | 3,434,895 | 3,431,479 |
Operating costs and expenses: | ||||
Cost of products sold | 296,881 | 225,691 | 821,342 | 683,773 |
Cost of services sold | 62,526 | 59,517 | 184,400 | 174,078 |
Selling, general and administrative | 367,347 | 331,170 | 1,039,436 | 996,861 |
Research and development | 219,275 | 305,242 | 636,722 | 949,900 |
Amortization of intangibles | 71,280 | 55,295 | 192,823 | 166,558 |
Contingent consideration expense | 28,197 | 0 | 37,287 | 0 |
Total operating costs and expenses | 1,045,506 | 976,915 | 2,912,010 | 2,971,170 |
Operating income | 12,008 | 183,369 | 522,885 | 460,309 |
Other income (expenses): | ||||
Losses on investments in equity securities, net | (651) | (14,129) | (1,332) | (4,201) |
Gain on acquisition of business | 0 | 0 | 24,159 | 0 |
Other | 616 | (133) | (2,419) | 940 |
Investment income | 4,544 | 11,793 | 14,038 | 40,015 |
Interest expense | 0 | (792) | 0 | (3,596) |
Total other income (expenses) | 4,509 | (3,261) | 34,446 | 33,158 |
Income before income taxes | 16,517 | 180,108 | 557,331 | 493,467 |
Provision for income taxes | (522) | (60,512) | (158,276) | (159,036) |
Net income | $15,995 | $119,596 | $399,055 | $334,431 |
Net income per share: | ||||
Basic (in dollars per share) | 0.06 | 0.44 | 1.48 | 1.25 |
Diluted (in dollars per share) | 0.06 | 0.42 | 1.45 | 1.19 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 268,957 | 269,176 | 269,923 | 267,767 |
Diluted (in shares) | 273,741 | 288,179 | 275,375 | 286,003 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Thousands | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | $679,559 | $572,106 |
Short-term investments | 169,153 | 57,507 |
Accounts receivable, net | 993,206 | 1,036,940 |
Inventories | 601,939 | 453,437 |
Other current assets | 164,362 | 208,040 |
Deferred tax assets | 188,329 | 188,105 |
Total current assets | 2,796,548 | 2,516,135 |
Property, plant and equipment, net | 2,695,231 | 2,306,567 |
Long-term investments | 140,160 | 344,078 |
Goodwill | 1,402,926 | 1,401,074 |
Other intangible assets, net | 2,377,025 | 1,654,698 |
Deferred tax assets-noncurrent | 386,142 | 269,237 |
Investments in equity securities | 75,872 | 83,325 |
Other noncurrent assets | 96,384 | 96,162 |
Total assets | 9,970,288 | 8,671,276 |
Current liabilities: | ||
Accounts payable | 164,879 | 127,869 |
Accrued expenses | 735,446 | 765,386 |
Deferred revenue | 18,046 | 13,462 |
Current portion of contingent consideration obligations | 170,478 | 0 |
Current portion of long-term debt and capital lease obligations | 7,988 | 7,566 |
Total current liabilities | 1,096,837 | 914,283 |
Long-term debt and capital lease obligations | 118,154 | 124,341 |
Deferred revenue-noncurrent | 11,769 | 13,175 |
Long-term contingent consideration obligations | 834,188 | 0 |
Other noncurrent liabilities | 294,009 | 313,484 |
Total liabilities | 2,354,957 | 1,365,283 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value | 0 | 0 |
Common stock, $0.01 par value | 2,652 | 2,707 |
Additional paid-in capital | 5,612,569 | 5,779,279 |
Accumulated earnings | 1,646,851 | 1,247,796 |
Accumulated other comprehensive income | 353,259 | 276,211 |
Total stockholders' equity | 7,615,331 | 7,305,993 |
Total liabilities and stockholders' equity | $9,970,288 | $8,671,276 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Sep. 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 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash Flows from Operating Activities: | ||
Net income | $399,055 | $334,431 |
Reconciliation of net income to cash flows from operating activities: | ||
Depreciation and amortization | 329,359 | 276,042 |
Stock-based compensation | 156,141 | 143,141 |
Provision for bad debts | 14,700 | 9,065 |
Contingent consideration expense | 37,287 | 0 |
Losses on investments in equity securities, net | 1,332 | 4,201 |
Gain on acquisition of business | (24,159) | 0 |
Deferred income tax benefits | (74,949) | (236,307) |
Tax benefits from employee stock-based compensation | 10,956 | 57,149 |
Excess tax benefits from stock-based compensation | (3,309) | (17,470) |
Other | 8,517 | 2,936 |
Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities): | ||
Accounts receivable | 53,044 | (99,579) |
Inventories | 20,539 | (12,651) |
Other current assets | (12,301) | (7,107) |
Accounts payable, accrued expenses and deferred revenue | 40,369 | (19,786) |
Cash flows from operating activities | 956,581 | 434,065 |
Cash Flows from Investing Activities: | ||
Purchases of investments | (244,208) | (382,954) |
Sales and maturities of investments | 336,918 | 412,690 |
Purchases of equity securities | (7,548) | (87,695) |
Proceeds from sales of investments in equity securities | 2,365 | 16,519 |
Purchases of property, plant and equipment | (480,436) | (433,987) |
Distributions from equity method investments | 0 | 5,995 |
Acquisitions | (57,238) | (16,561) |
Purchases of other intangible assets | (29,838) | (82,898) |
Other | (7,096) | 5,161 |
Cash flows from investing activities | (487,081) | (563,730) |
Cash Flows from Financing Activities: | ||
Proceeds from the issuance of our common stock | 76,125 | 294,603 |
Repurchases of our common stock | (413,874) | (143,012) |
Excess tax benefits from stock-based compensation | 3,309 | 17,470 |
Payments of debt and capital lease obligations | (5,908) | (5,281) |
Increase (decrease) in bank overdrafts | (17,552) | 20,889 |
Other | (5,237) | 2,854 |
Cash flows from financing activities | (363,137) | 187,523 |
Effect of exchange rate changes on cash | 1,090 | (6,134) |
Increase in cash and cash equivalents | 107,453 | 51,724 |
Cash and cash equivalents at beginning of period | 572,106 | 867,012 |
Cash and cash equivalents at end of period | $679,559 | $918,736 |
Description of Business
Description of Business | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, 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 genetic disease 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 a 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 and the mobilization of hematopoietic stem cells and is developing a product for the treatment of MS. This unit derives substantially all of its revenue from sales of Campath, clofarabine (which is marketed under the names Clolar and Evoltra), Fludara, Leukine and Mozobil. Formerly, we included our MS business unit under the caption "Other." As a result of our recent acquisition of certain products and development programs from Bayer, as described under the heading "Acquisition from Bayer" in Note6., "Strategic Transactions," to these consolidated financial statements, our MS business unit is now material. We have aggregated our Hematologic Oncology and MS reportable segments and now report the activities of these two segments under the caption "Hematologic Oncology." 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 |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, 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, commonly referred to as U.S.GAAP. In June 2009, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No., or FAS, 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles." FAS168 identifies the FASB Accounting Standards Codification, or ASC, as the authoritative source of U.S.GAAP. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative U.S.GAAP for SEC registrants. FAS168 is effective for financial statements issued for interim reporting periods ending after September15, 2009. The ASC does not change or alter existing U.S.GAAP and, therefore, it does not have an impact on our financial position, results of operations or cash flows. 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 but does not include all disclosures required by U.S.GAAP. Our unaudited, consolidated financial statements for each period include the accounts of our wholly owned and majority owned subsidiaries. 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 account for our investments in entities not subject to consolidation using the equity method of accounting if we have a substantial ownership interest (20% to 50%) in or exercise significant influence over the entity. Our consolidated net income includes our share of the earnings or losses of these entities. Any material subsequent events have been considered for disclosu |
Fair Value Measurements
Fair Value Measurements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Fair Value Measurements | 3. Fair Value Measurements A significant number of our assets and liabilities are carried at fair value. These include: fixed income investments; investments in publicly-traded equity securities; derivatives; and contingent consideration obligations. Fair Value MeasurementDefinition and Hierarchy Fair value is defined 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, we are permitted to use various valuation approaches, including market, income and cost approaches. We are required to follow an established fair value 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 from observable and corroborated sources. We determine the fair value of the contingent consideration obligations based |
Net Income Per Share
Net Income Per Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, 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 September30, Nine Months Ended September30, 2009 2008 2009 2008 Net incomebasic $ 15,995 $ 119,596 $ 399,055 $ 334,431 Effect of dilutive securities: Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes(1) 1,885 5,658 Net incomediluted $ 15,995 $ 121,481 $ 399,055 $ 340,089 Shares used in computing net income per common sharebasic 268,957 269,176 269,923 267,767 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) 3,209 8,081 4,106 7,665 Restricted stock units 1,565 871 1,335 618 Other 10 365 11 267 Dilutive potential common shares 4,784 19,003 5,452 18,236 Shares used in computing net income per common sharediluted(1,2) 273,741 288,179 275,375 286,003 Net income per common share: Basic $ 0.06 $ 0.44 $ 1.48 $ 1.25 Diluted $ 0.06 $ 0.42 $ 1.45 $ 1.19 (1) Prior to January1, 2009, 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 for the three and nine months ended September30, 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 September30, Nine Months Ended September30, 2009 2008 2009 2008 Shares issuable under our stock plans 21,108 3,123 16,474 3,121 |
Comprehensive Income
Comprehensive Income | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, 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 September30, Nine Months Ended September30, 2009 2008 2009 2008 Net income $ 15,995 $ 119,596 $ 399,055 $ 334,431 Other comprehensive income (loss): Foreign currency translation adjustments 48,546 (172,636 ) 82,178 (66,963 ) Pension liability adjustments, net of tax(1) 2,019 2,090 Unrealized gains (losses) on securities, net of tax: Unrealized gains (losses) arising during the period, net of tax 6,358 475 (4,592 ) 5,186 Reclassification adjustment of (gains) losses included in net income, net of tax (378 ) (141 ) (538 ) (6,039 ) Unrealized gains (losses) on securities, net of tax(2) 5,980 334 (5,130 ) (853 ) Other comprehensive income (loss) 54,526 (170,283 ) 77,048 (65,726 ) Comprehensive income (loss) $ 70,521 $ (50,687 ) $ 476,103 $ 268,705 (1) Tax amounts for all periods were not significant. (2) Net of $(3.4)million of tax for the three months ended and $2.9million of tax for the nine months ended September30, 2009, and $(0.2)million of tax for the three months ended and $0.5million of tax for the nine months ended September30, 2008. |
Strategic Transactions
Strategic Transactions | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Strategic Transactions | 6. Strategic Transactions Effective January 1, 2009, we account for business combinations completed on or after January1, 2009 in accordance with the revised guidance for accounting for business combinations, which modifies the criteria that must be met to qualify as a business combination and prescribes new accounting requirements. Among various other requirements and differences, the following table illustrates how we account for specific elements of our business combinations prior to and on or after January1, 2009: Element Prior to January1, 2009 On or after January1, 2009 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 Capitalized as cost of acquisition when contingency was resolved No subsequent re-measurement Measured at fair value and recorded on acquisition date Re-measured in subsequent periods with an adjustment to earnings Negative goodwill (excess of the value of acquired assets over consideration transferred) Offset other long-lived intangibles acquired Recognized as a gain in earnings 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 Acquisition of Assets from Targeted Genetics Corporation On September8, 2009, we entered into an agreement with Targeted Genetics Corporation to acquire certain gene therapy manufacturing assets for $7.0million. We acquired intellectual property and materials used in manufacturing Adeno-Associated Virus, or AAV, vectors. We paid Targeted Genetics Corporation a nonrefundable upfront payment of $3.5million in September2009 and will also make additional payments totaling $3.5million upon achievement of certain technology transfer-based milestones. We recorded a total of $7.0million as a charge to research and development expenses for our Genetic Diseases reporting segment in our consolidated statements of operations for the three and nine months ended September30, 2009. The payment for the milestones and the transition of the technology are all expected to be completed by the first quarter of 2010. Acquisition from Bayer On May29, 2009, we completed a transaction with Bayer to: exclusively license worldwide rights to commercialize alemtuzumab for MS; exclusively license worldwide rights to alemtuzumab for B-cell chronic lymphocytic leukemia, or B-CLL, and all o |
Inventories
Inventories | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Inventories | 7. Inventories September30, 2009 December31, 2008 (Amounts in thousands) Raw materials $ 112,691 $ 96,986 Work-in-process 287,331 141,094 Finished goods 201,917 215,357 Total $ 601,939 $ 453,437 In May2009, 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 June2009, 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, Vesivirus 2117, in a bioreactor used for Cerezyme production. We recorded charges totaling $23.7million for the three months ended and $37.9million for the nine months ended September30, 2009 to cost of products sold in our consolidated statements of operations, for costs related to the remediation of this facility, including the sanitization of the facility, idle capacity and overhead expenses and the write off of certain production materials. When we suspended production at our Allston facility, we had significant Cerezyme work-in-process material. We decided not to process the majority 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 incurred a write off of approximately $8million for the nine months ended September30, 2009. In August2009, the FDA communicated to us steps it recommends we take prior to forward processing the remaining 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 mid-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 $3million for the inventory value of this remaining material. We had two lots of Cerezyme in inventory that were finished before production was suspended at our Allston facility. Both lots were released during the third quarter of 2009. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, 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 nine months ended September30, 2009 (amounts in thousands): As of December31, 2008 Adjustments As of September30, 2009 Genetic Diseases $ 339,563 $ $ 339,563 Cardiometabolic and Renal 319,882 319,882 Biosurgery 7,585 7,585 Hematologic Oncology 640,137 640,137 Other(1) 93,907 1,852 95,759 Goodwill $ 1,401,074 $ 1,852 $ 1,402,926 (1) The adjustments to Other include foreign currency revaluation adjustments for goodwill denominated in a foreign currency. We are required to perform impairment tests related to our goodwill annually and whenever events or changes in circumstances suggest that the carrying value of an intangible asset may not be recoverable. We completed the required annual impairment tests for our $1.4billion of net goodwill in the third quarter of 2009 and determined that no impairment charges were required. Other Intangible Assets The following table contains information about our other intangible assets for the periods presented (amounts in thousands): As of September30, 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) $ 2,180,620 $ (824,819 ) $ 1,355,801 $ 1,919,074 $ (692,235 ) $ 1,226,839 Distribution rights(2) 428,478 (213,451 ) 215,027 399,768 (170,892 ) 228,876 Patents 188,651 (128,307 ) 60,344 194,560 (121,763 ) 72,797 License fees 98,833 (45,422 ) 53,411 98,123 (39,824 ) 58,299 Customer lists 86,526 (41,328 ) 45,198 83,729 (34,271 ) 49,458 Trademarks 60,596 (46,264 ) 14,332 60,556 (42,194 ) 18,362 Other 2,039 (1,972 ) 67 Total finite-lived other intangible assets 3,043,704 (1,299,591 ) 1,744,113 2,757,849 (1,103,151 ) 1,654,698 Indefinite-lived other intangible assets: IPRD(3) 632,912 632,912 Total other intangible assets $ 3,676,616 $ (1,299,591 ) $ 2,377,025 $ 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 May2009. 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 |
Investments in Equity Securitie
Investments in Equity Securities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Investments in Equity Securities | 9. Investments in Equity Securities We recorded the following losses on investments in equity securities, net of charges for impairment of investments, for the periods presented (amounts in thousands): Three MonthsEnded September30, Nine MonthsEnded September30, 2009 2008 2009 2008 Gross gains (losses) on investments in equity securities $ (36 ) $ (8,819 ) $ 422 $ 2,398 Less: charges for impairment of investments (615 ) (5,310 ) (1,754 ) (6,599 ) Losses on investments in equity securities, net $ (651 ) $ (14,129 ) $ (1,332 ) $ (4,201 ) Gross gains (losses) on investments in equity securities for both the three and nine months ended September30, 2008 includes a charge of $10.0million to write off the purchase price of an exclusive option to acquire equity in a private company as a result of our termination of the option agreement prior to the exercise deadline. Gross gains (losses) for the nine months ended September30, 2008 also includes a gain of $10.3million recorded in the second quarter of 2008 resulting from the liquidation of our investment in the common stock of Sirtris for net cash proceeds of $14.8million. Charges for impairment of investments for all periods presented represents the write down of our investments in certain venture capital funds to fair value at the end of each period. At September30, 2009, our stockholders' equity includes $14.2million of unrealized gains and $0.2million of unrealized losses related to our strategic investments in equity securities. |
Revolving Credit Facility
Revolving Credit Facility | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Revolving Credit Facility | 10. Revolving Credit Facility As of September30, 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 September30, 2009, we were in compliance with these covenants. |
Shareholders Equity
Shareholders Equity | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Stockholders' Equity | 11. Stockholders' Equity Stock Repurchase In May2007, our board of directors authorized a stock repurchase program to repurchase 20,000,000 shares of our outstanding common stock over a three year period that began in June2007. The board authorized the expenditure of up to $1.5billion to purchase those shares. 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 nine months ended September30, 2009, we repurchased 7,500,000 shares of our common stock under this program at an average price of $55.16 per share for a total of $413.9million in cash, including fees. Since June2007, when we first began repurchasing shares of our common stock under this program, we have repurchased a cumulative total of 13,000,000 shares of our common stock at an average price of $60.63 per share for a total of $788.5million 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 September30, Nine Months Ended September30, 2009 2008 2009 2008 Pre-tax stock-based compensation expense, net of estimated forfeitures, charged to: Cost of products and services sold(1) $ (7,575 ) $ (6,926 ) $ (22,379 ) $ (19,751 ) Selling, general and administrative expense (24,648 ) (24,222 ) (86,301 ) (79,015 ) Research and development expense (14,058 ) (14,645 ) (47,374 ) (43,322 ) Total (46,281 ) (45,793 ) (156,054 ) (142,088 ) Less: tax benefit from stock options 12,700 14,025 40,433 43,396 Total stock-based compensation expense, net of tax $ (33,581 ) $ (31,768 ) $ (115,621 ) $ (98,692 ) Effect per common share: Basic $ (0.12 ) $ (0.12 ) $ (0.43 ) $ (0.37 ) Diluted $ (0.12 ) $ (0.11 ) $ (0.42 ) $ (0.35 ) (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 manufa |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, 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. Beginning in August 2009, we have received six letters from alleged shareholders demanding that our board of directors take action on our behalf to remedy breaches of fiduciary duty by our directors and officers. The demand letters are primarily premised on allegations that we made materially false and misleading disclosures and failed to disclose material information to shareholders with respect to manufacturing issues and compliance with GMP. Several of the letters also assert that certain of our officers and directors took advantage of their knowledge of material non-public information about Genzyme to illegally sell stock they personally held in Genzyme. Our board of directors has designated a special committee of three independent directors to oversee the investigation of the allegations made in the demand letters and to recommend to the independent directors of the board whether any action should be instituted on our behalf against any officer or director. The committee has retained independent legal counsel. If the independent members of our board of directors were to make a determination that it was in our best interest to institute an action against any officers or directors, any monetary recovery would be to our benefit. In April2005, 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 |
Provision for Income Taxes
Provision for Income Taxes | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Provision for Income Taxes | 13. Provision for Income Taxes Three MonthsEnded September30, Nine MonthsEnded September30, 2009 2008 2009 2008 (Amounts in thousands) Provision for income taxes $ 522 $ 60,512 $ 158,276 $ 159,036 Effective tax rate 3 % 34 % 28 % 32 % 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; non-deductible stock-based compensation expenses totaling $9.5million for the three months ended and $41.0million for the nine months ended September30, 2009, as compared to $8.8million for the three months ended and $25.6million for the nine months ended September30, 2008; and $2.1million of tax credit benefits from the 2008tax provision to tax return reconciliation and effective settlements of state tax audits. In addition, our provision for income taxes includes income tax benefits of $2.6million for the three months ended and $7.8million for the nine months ended September30, 2009. The income tax benefits result from the reversal of a portion of our U.S. tax reserves due to a remeasurement of our uncertain income tax position liabilities based on new information arising in the second and third quarter of 2009. We are currently under IRS audit for the tax years 2006 to 2007 and various states and foreign jurisdictions for various years. We believe that we have provided sufficiently for all audit exposures. We reasonably expect that our unrecognized tax benefits will decrease by approximately $15million within the next twelve months as we receive clarification of certain tax issues as a result of the audit process. Settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year will likely 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 | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Unaudited, Consolidated Financial Statements | |
Segment Information | 14. Segment Information We present segment information in a manner consistent with the method we use to report this information to our management. 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. In addition, we now aggregate our MS and Hematologic Oncology reporting segments under the caption "Hematologic Oncology." The activities of our MS reporting unit were formerly reported under the caption "Other." 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 September30, Nine Months Ended September30, 2009 2008 2009 2008 Revenues: Genetic Diseases(1) $ 354,288 $ 561,165 $ 1,459,491 $ 1,668,515 Cardiometabolic and Renal 261,160 243,599 752,122 714,722 Biosurgery 145,647 122,962 404,496 365,839 Hematologic Oncology(2) 87,989 34,054 192,183 96,506 Other 207,937 198,119 625,102 584,672 Corporate 493 385 1,501 1,225 Total $ 1,057,514 $ 1,160,284 $ 3,434,895 $ 3,431,479 Income (loss) before income taxes: Genetic Diseases(1) $ 124,356 $ 259,392 $ 809,297 $ 982,569 Cardiometabolic and Renal(3) 114,123 98,670 323,053 48,520 Biosurgery 40,277 23,453 102,360 70,910 Hematologic Oncology(2) (78,449 ) (33,798 ) (135,690 ) (109,211 ) Other(4) 30,227 6,993 66,854 30,374 Corporate(5) (214,017 ) (174,602 ) (608,543 ) (529,695 ) Total $ 16,517 $ 180,108 $ 557,331 $ 493,467 (1) Includes: the impact of supply constraints for Cerezyme and Fabrazyme due to the temporary suspension of production at our Allston facility in June2009;and a charge of $100.0million recorded in July2008 for a nonrefundable upfront fee we paid to PTC Therapeutics,Inc., or PTC, related to our collaboration agreement with PTC to develop and commercialize ataluren for the treatment of genetic diseases caused by nonsense mutations, including Duchenne muscular dystrophy, cystic fibrosis andhemophilia. (2) 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. (3) Includes a charge of $175.0million recorded in June2008 and a charge of $69.9million recorded in February2008 as license fees payments to Isis Pharmaceuticals |
Document and Entity Information
Document and Entity Information (USD $) | |||
9 Months Ended
Sep. 30, 2009 | Oct. 23, 2009
| Jun. 30, 2008
| |
Document and Entity Information | |||
Entity Registrant Name | GENZYME CORPORATION | ||
Entity Central Index Key | 0000732485 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-09-30 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $19,124,677,445 | ||
Entity Common Stock, Shares Outstanding | 265,382,892 |