<PAGE>
Filed by Genzyme Corporation (Commission File No. 000-14680)
pursuant to Rule 425 under the Securities Act of 1933
Subject Company: GelTex Pharmaceuticals, Inc. (Commission File No. 000-26872)
This material is not a substitute for the prospectus/proxy statement
Genzyme and GelTex will file with the Securities and Exchange Commission.
Investors are urged to read that document because it will contain important
information, including detailed risk factors. The proxy statement/prospectus and
other documents filed by Genzyme and GelTex with the SEC will be available free
of charge at the SEC's website (www.sec.gov) and from Genzyme or GelTex.
This material contains forward-looking statements, including statements
about the consummation and anticipated timing of the merger, the potential
market opportunity for Renagel, the expected drivers of growth for the market
opportunity, the anticipated impact of Renagel on Genzyme's future growth, the
potential short and long-term revenues from Renagel, the expected benefits of
the merger, the value of the merger consideration, the tax-free nature of the
transaction, the anticipated impact of the acquisition on Genzyme's earnings,
cash-earnings-per-share, and development programs, Genzyme's plans concerning
the operation of GelTex's business after the merger, estimates concerning the
current and future dialysis patient population, the anticipated impact of
Renagel on patient morbidity and mortality, the cost of care for patients, plans
to launch a new tablet formulation of Renagel, the anticipated benefits of the
tablet formulation, plans to announce trial data, plans to initiate clinical
trials of Renagel, GT 160-246, and other product candidates, estimates
concerning the C. DIFFICILE COLITIS patient population, expectations concerning
GelTex's product candidates and polymer technology platform. Actual results may
materially differ due to numerous factors, including without limitation
conditions in the financial markets relevant to the proposed merger, the receipt
of regulatory and other approvals of the transaction, the operational
integration associated with the transaction and other risks generally associated
with such transactions, increasing market acceptance of Renagel, increasing
doses of Renagel, market acceptance of Renagel tablets, the competitive
environment for the dialysis market, the results of clinical trials, the
efficacy and safety of products, enrollment rates for clinical trials, the
content and timing of submissions to and decisions by regulatory authorities,
the availability of reimbursement from third-party payers, the ability to
manufacture sufficient quantities of product for development and
commercialization activities, the accuracy of the companies' information about
the dialysis and the C. DIFFICILE COLITIS patient populations and the market for
Renagel, the accuracy of the companies' expectations about growth in the
dialysis patient population, the ability of Genzyme to successfully
commercialize products and the risks and uncertainties described in Genzyme and
GelTex's reports filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, including without limitation
Exhibit 99.2 to Genzyme's Annual Report on Form 10-K for the year ended December
31, 1999, as amended. GENZ stock is a series of common stock of Genzyme
Corporation. Therefore, holders of GENZ stock are subject to the risks and
uncertainties described in the aforementioned reports.
The following is a transcript of a September 11, 2000 conference call
with analysts, investors and others regarding the proposed transaction between
Genzyme Corporation and GelTex Pharmaceuticals, Inc.
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GENZYME CORP.
MODERATOR: HENRI TERMEER
SEPTEMBER 11, 2000
7:00 A.M. MT
Operator: Ladies and gentlemen, thank you for standing by.
Welcome to the Genzyme Corporation conference call.
At this time, all participants are in a listen only
mode. Later, we will conduct a question and answer
session. At that time, if you have a question, you
will need to press the one followed by the four on
your telephone. As a reminder, this conference is
being recorded Monday, September 11, 2000. I would
now like to turn the conference over to Mr. Henri
Termeer, Chairman, President, and Chief Executive
Officer of Genzyme. Please go ahead, sir.
Henri Termeer: Thank you very much and thank you all for being here
on the call with very short notice. Due to the call,
we will be making some forward-looking statements so
as usual we refer you to our published and filed
statements with the SEC.
This is a very, very fine and tremendously remarkable
moment for the partnership between Genzyme and
GelTex. We will be working together as two companies
working on a product that has increasingly become
more and more exciting in terms of its clinical
application. The product, of course, is Renagel. And
this morning we are announcing the merger of these
two companies and it is a merger that is really
founded in strength. It is reacting to the momentum
that we are experiencing and Renagel had the momentum
also that GelTex is experiencing on a number of other
programs that make this combination of these two
companies really one of--of tremendous leverage. The
driving force, of course, really is Renagel and we
will be hearing some comments from Dr. Naseem Amin
this morning to give you an update as to what's
happening there. This is a clinical picture that's
developing that makes us feel quite confident indeed
that Renagel is a blockbuster potential product and
in that sense it is different from - in the Genzyme
General picture where we have many products, but most
of these products are very [unintelligible] oriented.
Genzyme of course is extremely successful over there
over many years, but at this deal was in a relatively
modest spacing complex.
In the case of Renagel, we feel it is a very large
patient population. There are a million plus kidney
patients, hymodialysis patients currently out there.
This is a growing market. This is growing at the rate
of 7 or 8 percent globally and we would expect that
in the next nine years or so, this market will grow
to 1.7, 1.8 million patients. And Renagel is a
product that can influence the treatment of these
patients as we have now seen in early experience, in
clinical experience. And that really gives us the
kind of confidence that is leading to this
transaction so that both companies really can focus
in one significant strategic action to make sure it's
totally optimized, the opportunity that this is in
front of us. In my mind, this is a transforming
transaction for Genzyme. We--this product has become,
in our mind, the strongest driver of growth in the
medium and longer-term as well. It is in the very
early stage of market introduction, about a year and
a half, two years, yeah, year and a half thereabouts
into the market. We've seen the script growing
increasingly. We've had twice changes in our forecast
for this year, again at this press release you'll
notice that we changed our focus for this year.
Again, to about 37 million in the second half of the
year versus approximately 18 million in the first
half of the year, 50 percent increase between the
first half and the second half. End of the year it's
about
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$45 million. We feel quite confident that the
momentum of the product leads us to give you and
guide us now for next year of $90 million plus for
Renagel.
We are building the significant manufacturing
facility in Europe, in Haverhill, that will enable us
in the year 2000, late 2002, to significantly
implement the costs of goods sold for the program as
well. It's a very, very exciting program indeed drive
by the clinical advocacy that the product is showing.
It's a unique product. It has two actions. It works
both at--as a product that avoids the use of calcium
and the lowering and the management very optimized
management of phosphate levels. But it also lowers
LDL and it is just a combination of these two actions
that we believe has a tremendous opportunity to
significantly change the major problems, medical
problems, that these patients have. [Inaudible] 50
percent of the MEDL patients die of cardiovascular
disease. So we're very excited indeed.
We have a few speakers here this morning that will
further give you some details in terms of Renagel
and, of course, next to me is Mark Skaletski the CEO
of GelTex. He will speak about GelTex and it's
broader contacts. Of course, Renagel is one aspect of
GelTex, but GelTex has a very effective and
productive technology platform that now in six short
years has produced two NDAs in two very significant
markets. Through this merger, Genzyme General will
have access to this very, very productive platform
and we're very excited about that as well.
Overall, the sense of the partnership and corporation
and the knowledge that both organizations have about
each other give us tremendous confidence that we will
be able to carry forward the momentum that had been
created in the last number of years. So let me ask at
this moment for Mark-Mark Skaletski to make some
comments. After Mark, Dr. Naseem Amin will make
some comments on the clinical picture that is
changing so dramatically and is partially responsible
for this transaction this morning and then Christi
Van Heek will talk about the business aspects of
Renagel. We are, of course, are reacting to this
opportunity by expanding our coverage globally,
around the product. And Peter Wirth, our Executive
Vice President who has been largely responsible
within Genzyme to make the transaction come together,
will talk about the deal details. And then I will
close off with some few last comments. Mark?
Mark Skaletski: Thank you, Henri, and good morning everyone. First I
want to say is that we share the excitement and the
enthusiasm that Henri described about combining these
two companies, GelTex and Genzyme. One of the things
that's wonderful about a consolidation like this is
that both companies are looking at it from a position
of strength. GelTex, as Henri said, in the past six
years has developed and gotten approved two new
chemical entities. We're all very proud of that. We
have a strong pipeline which I'll mention in a
moment, but now's the time for us to do this. Our
Board is very enthusiastic about this opportunity
because one of the things as we looked at GelTex from
a product development standpoint, we're extremely
good obviously at discovering and development
products. We don't have the commercial resource and
as many of you have said, that in order to maximize
your return, you have to be a player on the
commercial side, other than just a licensing company.
And obviously now with Genzyme, we will get the
benefit of all of that on the commercial side. We
agree that this is also a defining moment for GelTex.
One of the situations, one of the concerns that
people have about companies that do these kinds of
combinations is how will the organizations deal with
each other and work with each other. As Henri
mentioned, we have the benefit of not only being next
door to each other virtually, but we've been
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working together now for several years on the Renagel
joint venture. And what's wonderful from my
perspective is that people who are working on this
program don't view themselves as GelTex's employees
or Genzyme employees. They are part of the Renagel
team and what this team has accomplished to date is
magnificent and what's going to happen in the future
is gonna make everyone stand up and listen.
In terms of going forward with our pipeline, Henri
mentioned, our Welchol product which was recently
approved by the FDA, our partners, Sankyo-Park Davis
actually is having their kickoff meeting starting
today and that product will be on--available on the
market over the next week or so. And again, that's a
very exciting product for us. You'll be hearing and
seeing a lot of activity from Sankyo in terms of how
they're promoting this product.
We recently announced that, we put another product in
the clinic for C. DIFFICILE, an antibiotic associated
diarrhea product that we completed phase 1 and we'll
be initiating phase 2 in the near future. This is one
of the products as we look at our pipeline, that I
believe that Genzyme will take a serious look at
developing this product and commercializing it
because it fits perfectly into the strength of the
Genzyme sales force. We also have a second generation
Welchol product in phase 2 and data on that will be
forthcoming in the later part of this year.
We haven't spoken a lot about our other products that
we have in our pipeline, but you'll be hearing over
the next several months, products such as an oral
iron compound that we'll be filing an IND on next
year, as well as a psoriasis compound out of our
relationship with SunPharm that we acquired at the
end of last year. And then finally, we'll begin
talking more now as you see in the release about our
anti-obesity program which has progressed
significantly over the past year and this is an
opportunity that could be extremely exciting and we
will talk more about that during the conference time
frame this year.
Other than that, I just want to thank everybody on
the Genzyme side and on the GelTex side who worked so
hard over this last few days to make this happen. I
also want to recognize one person on the GelTex side.
Bob Carpenter who is one of the founders of GelTex
and a member of the board of GelTex, had an awful lot
to do with the success of this company and I would
like to recognize Bob for his involvement in the
company. And Henri, with that, I'll turn it back to
you.
H. Termeer: OK, thank you very much, Mark. At this moment, let me
ask that same--Dr. Naseem Amin to make some comments
with regards to the clinical picture around Renagel.
Naseem Amin: Thank you, Henri. Good morning everyone. What I
wanted to do in the next few minutes is to outline
for you why we at Genzyme and GelTex and in the
Renagel partnership are so excited about this
product. And what--recent information has made us
re-evaluate this product in terms of it's role in
managing dialysis patients. As you are all aware, the
dialysis population have pretty dismal outcomes. In
the last decade, if you look, the average mortality
rate in this population is around 22 percent and has
really not changed. If you look at the mortality rate
in the dialysis population, it's around 30 times
greater than in general population matched for age,
race, and gender. And what has been driving this
mortality? Obviously, many people have felt that it's
patient population has severe comobility. But very
recently, in late 1998, just as we were launching
Renagel, the results came out showing that support
for us in calcium phosphorous product were
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independent risk factors for this population after
you adjusted for all the other factors we know that
lead to poor outcomes.
And more recently in the NEW ENGLAND JOURNAL OF
MEDICINE, in May of this year, for the first time in
a--in a study. we saw the implication of calcium as a
potential risk factor for leading to progression of
coronary calcification in this population as very
clearly delineated in a healthy population of young
people who you would not expect to have severe
comobility. These two pivotal studies have really
made us re-evaluate Renagel. These were independent
studies of studies that we have been partaking of
internally. You've heard of us talk in the past about
the study that we were doing to try and prove that
Renagel reduces the progression of coronary
calcification. That study is underway at present and
we are expecting to have the first year follow up
data be available in Q2 of next year--Q1 to Q2 of
next year. That is going to be an ongoing study and
it's objective is to show that we can impact in a
pathological way, coronary calcification, which in
the general population has been clearly linked with a
progression of arteriosclerosis and cardiac disease.
The current study that we have and the insights that
we've received from that, tell us that we have the
ability to lower the phosphorous and the calcium
phosphorous product into the normal range, without
giving these patients a calcium load that the
Skaletski people showed clearly was a risk factor for
the progression of coronary calcification. We believe
that by lowering these parameters into the normal
range, that we can convince physicians that a dosage
of Renagel should be increased and that you can
successfully manage its parameters by increasing
dosage.
The other thing we are waiting to see is obviously
the progression of coronary calcification. There are
two attributes of Renagel that Henri mentioned that
make up--believe that this product has benefits
beyond just lowering phosphorous and calcium
phosphorus products. The lacking of calcium and in
combination with a very potent lipid lowering effect.
In our previous studies if you look, we had an effect
on LDL cholesterol ranging from 40 percent down to 20
percent, an average of around 30 percent reduction in
LDL cholesterol. In our one year extension study, we
saw an elevation in HDL cholesterol, the good
cholesterol, showing that an LDL to HDL ratio
attribute that was very comparable to many of the
most potent lipid lowering agents on the market. So
this combination of lipid lowering in combination
with a lack of calcium, we believe has a real
potential for impacting cardiac disease in this
population.
Now what is the data internally that we have seen
that gives us a belief that that will indeed be the
case? The first clues we have is a publication that
will be shortly coming out in the literature by the
US Audious [sp] folks, Holling Collins at the
University of Minnesota did a very carefully
controlled study where he adjusted for all the known
risk factors and what he saw was a reduction after
one year of Renagel in both morbidity and mortality.
Morbidity where hospitalization was reduced by
overall, by 50 percent in this population. And that
hospitalization reduction was predominantly driven by
cardiac and vascular events. There was no reduction
in hospitalization due to other events. The other
reduction--thing we saw was that there was a 33
percent reduction in overall mortality, again
predominantly driven by cardiac event. Now this study
was a case controlled study, but it gives us this
first information that what we have internally
believed that the attributes of this product may well
bear fruition in future studies. For that reason, we
are embarking upon in Q1 of next year, a prospective
randomized study where we plan to confirm these very
important findings that we have seen. So it's a
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combination of, in summary, a combination of a real
poor outcome in this population, the attributes of
the product and our existing clinical studies that
make us believe that we have a real opportunity in
this population to reduce both morbidity and
mortality.
H. Termeer: Thank you Amin. At this moment, let me ask Christi
Van Heek, the President of Genzyme Therapeutics--the
first general manager of the Renagel joint venture or
partnership, to give us some description of the
commercialization.
Christi Van Heek: Thank you, Henri. Let me first just highlight what
the key drivers are that we believe will fuel
Renagel's future growth and will result in $500
million in sales in five years and $1 billion in 10
years.
First, as you are aware, is the market size is
growing has not seem alluded to worldwide at a rate
of about 7 to 8 percent. That's without any major
improvements that we can demonstrate in mortality. In
fact, if you use that growth rate, that will total a
number of dialysis patients in 10 years of almost 2
million. We also anticipate that on a
patient-to-patient basis, the revenues will increase
as physicians use in fact higher doses to more
aggressively manage hyperfasphetimia.
Next, there really is a growing concern today among
physicians about the calcium intake and the impact on
coronary artery calcification. And the result, the
impact on morbidity and mortality and it's not seemed
mentioned, we plan to confirm the reduction in
mortality that was seen in the Collins study in a
prospective study powered to demonstrate the
reduction in mortality.
Also as Collins demonstrated, we plan to confirm in
this study, a reduction in hospitalization. In this
study, resulted in a savings per patient annually of
$17,000 per year.
Let me now just give a update on the current
situation as it stands. As I mentioned, a recent new
clinical data has caused the physicians to examine
their current use of calcium based binders and we've
seen as a result, an increase in prescriptions over
the last several months. Just as a reminder in second
quarter, total prescriptions grew by 18 percent as
well as NRX's increased and in July alone the cure
actions [sp] increased by 10 percent with new
prescriptions growing at a even faster rate of 14
percent. Most recently, we launched Renagel in three
European countries, in Germany, the largest market,
UK, and Italy. We've been very pleased with the
results we've seen in those countries at launch. As
well, we expect to launch Renagel in both France and
Spain by the end of this year.
As you know, we're going to introduce the new tablet
form of Platcion this month in the United States both
in the 800 milligram and 400 milligram tablet which
we believe will allow physicians to more aggressively
manage phosphorous into the normal range.
In order to expedite reaching physicians both inside
and outside the United States with this new data, we
will expand our existing sales organizations both in
the US as well as outside the US.
Since launch, we have experienced revenue growth of
about 25 percent on average, quarter-to-quarter. And
really with all these factors combined that I've just
mentioned, we are raising our forecasts as Henri
indicated to $45 million this year and will expect to
double sales in 2001.
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H. Termeer: Thank you very much, Christi. Peter Wirth will give
us the details of the deal.
Peter Wirth: Thank you, Henri. This transaction is structured as a
merger of GelTex into Genzyme in which each GelTex
shareholders can elect to receive either .7272 shares
of Genzyme General Division common stock or $47.50 in
cash. There is a proration amount which is designed
to maintain the cash portion of the transaction at 50
percent. So in the aggregate, Genzyme expects to
issue approximately 7.8 million shares of its general
division common stock and pay approximately $508
million in cash in the transaction. That's a
transaction value of slightly over $1 billion based
on the Friday closing price of Genzyme of $65.31. The
merger is subject to approval by the Genzyme or by
the GelTex shareholders and we are also required to
obtain various regulatory approvals under the Hart
Scott Rodino Act.
We believe that we will be able to close this
transaction by year end. We expect that there will be
merger related targets in the fourth quarter,
including some charges for in process, research, and
development, but we have not yet completed the work
to determine what those charges will be. We also
expect that this acquisition will become accretive to
Genzyme on the basis of earnings per share, prior to
amortization and depreciation during 2002. I think
that touches the highlights of the transaction.
H. Termeer: All right. Peter, thank you very much.
H. Termeer: Just to make a few comments, we will be able to do it
in a road shows in the next few days. It so happens
that there are some conferences, that we're all ready
scheduled at presenting at. One was a Morse and
Cabbott luncheon, here in Boston at Maison Robert and
that's tomorrow at noon and then at 11:30, I will be
presenting at the Bear Stearns conference in New
York. We will be setting up a conference on
Wednesday, yes, that's Wednesday this week. We will
also be setting up teams to communicate to investors
and obviously all lines are open for any kind of
communication that needs to take place. Let me at
this moment, open it up for Q&A and see whether we
can, over the next half hour or so respond to those
questions that are immediately there. Operator?
Operator: Ladies and gentlemen, if you have a question, please
press the one followed by the four on your telephone.
You will hear a three tone prompt acknowledging your
question. If your question has been answered and you
would like to withdraw that request, you may do so by
pressing one, three. If you are using a speakerphone,
please pick up your handset before pressing the
numbers.
One moment please for the first question. Bill Tanner
from SG Cowen, please go ahead.
Bill Tanner: Hi, good morning. I've got a few questions. One
wondering about the additional studies that are going
to be conducted on Renagel to look at sort of the
lipid profile and if somebody could comment on the
scope of what it looks like such studies would have
to really entail? And you know, really what is the
plan from a registration standpoint?
M. Skaletski: I think we have clearly demonstrated in previous
studies the benefit of lipid lowering in our treat to
goal study, we will be confirming that in the
secondary study, second study. However, I think
you're talking ability morbidity and mortality study.
That is envisioned to be a 2,000 patient study over
several years. The primary outcome is expected to be
a
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reduction in cardiac hospitalization and a secondary
employ will be a reduction, so a second end point
will be reduction in mortality.
B. Tanner: OK and so then with respect to the increase in the
number of sales people, I'm assuming this is going to
be an increase in people detailing renal docs, is
that correct.
C. Veheck: That's correct. We're going to increase the mythology
team in the US by approximately 10 as well as the
same in Europe, Bill.
B. Tanner: OK. And then finally, I guess, where do you envision
the other products, as Mark mentioned, that are in
GelTex's pipeline? Are these going to stay in Genzyme
General? Is the R&D expense going to be accounted for
there?
H. Termeer: Yes, they will be.
B. Tanner: OK, all right, thank you.
Operator: The next question comes from Caroline Copithorne from
Morgan Stanley Dean Witter.
Caroline Copithorne: Morning. Couple of quick questions. I guess first on
Renagel, if someone, maybe Christi, could walk
through with all of the drivers, what sort of time
line do you expect on reaching that $500 million
revenue level over five years and $1 billion over 10
years. Sort of what data points or milestones we
should look for in getting to that? Obviously this
2,000 patient study is important. And then on the
costs side. What sort of improvements should we look
for in cost of goods sold in 2002 with the European
manufacturing plant and what kind of synergies or
cost savings should we look for in the contribution
for-from GelTex over what the current projections are
for that company?
C. Van Heek: OK, let me respond first to the drivers. Just to
remind everybody, in this year, we will have doubled
sales from last year of about $19.6 to $45 million
this year. We fully expect that we will double sales
as well for next year 2001 as we projected. So, we
expect to continue to see a rate of growth as we have
seen in the prescriptions on a month-to-month and
quarterly basis and quarter-to-quarter in revenues.
The two trigger points I think that will help or will
determine the growth to $500 million in five years
are the results of both the treat to goal studies as
well as the mortality study. Let me ask Amin to
comment on the timing of the results of those.
N. Amin: Yes, the first year follow-up there for the treat to
goal study is expected over Q--early Q2 of next year.
This will be--there will be a second and third year
follow up into 2002 and 2003, but the first year data
will be, as I said, expected in Q2 of 2001. The
treat--the mortality study, we expect to accrue
patients into Q1 and Q2 of next year into 2001. The
expected follow up for hospitalization and morbidity
is two years and for mortality, it's two and a half
years. So expecting a timing of 2004 to 2005 for
morbidity and mortality.
H. Termeer: OK, let me just make some comments on this. We are
currently experiencing very significant growth in a
number of patients that are being taken on the
product as is indicated by just first half to second
half this year, 50 percent growth and going for $45
million to in excess of $90 million is our guidance
for next year. So we would expect, Caroline, if you
think about the first $500 million that was
mentioned, actually my quote we've pretty much a
momentum on that direction, that is quite
comfortable. Over that
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period of time, we're going to get a lot of studies
that come out, actually each year and at this time
again and next year a number of other studies will
come out. And the--of course, the morbidity and
mortality study, where we've had different points
where, as Amin indicated, where information becomes
available. The complete study will be completed in
2004 but by 2002-2003, we will have different data
available as well. That will significantly change the
leverage of the product to where, you know, you can
start to make all kinds of projections in terms of
levels of what will happen on the market. We would
expect the suiting and optimize the doses. Even as
the current price levels, you would get in revenue
picture, of something like 2 to 2,500 per year, per
patient year. And you can do the calculations given
the number of patients which everybody well
understands. The driver here is not so much alone.
Our ability to communicate into the marketplace to
make conversions, probably also is cost avoidance.
Indeed, if we do show, continue to show the effect of
cost avoidance here in terms of hospitalization which
is more than 50 percent of the hymodialysis patients
cost per year. I understand the numbers in the United
States are even more extreme like that. 25 percent
deals with the hymodialysis costs, $50,000 deals with
the hospitalization costs. There will be a tremendous
interest on the system to start to influence and
impact those costs. Collins study implies a $17,000
per year reduction in hospitalization costs in the
patient population that he studied. And so we
will--there are a number of drivers here short of the
Genzyme marketing, this product that will pull the
product into the marketplace because of the very,
very high costs associated with the treatment of
these patients. So it's tough to say what a
[unintelligible] will do once the morbidity,
mortality study is firmly grounded in the randomized
2,000 patient trial. But between now and then, we
would fully expect that the trends that we currently
are experiencing, both in here and in very early,
surprising to me, very early time in Germany which is
a tough, tough market right now to do anything in. We
see very, very important acceptance of the product
early on. We will have more regular growth rate on a
quarter-to-quarter basis over this period of time.
There's a staff function that could be extremely
exciting once the mortality/morbidity study is
finalized.
The next question?
Man: Cost of goods.
H. Termeer: Yeah, cost of goods question came up. As I mentioned
earlier, we are currently in construction in
Haverhill just outside of Cambridge in the U.K., a
single purpose plant that will produce sevelamer
material that is the active material for this
product. This plant should be completed and approved
in the year 2002, which will then allow us to
significantly change the cost of goods sold. I think
that it is reasonable to think of at least 10 status
points of costs of goods sold to be taken off the
current numbers. The potential is more than that, but
at least 10 making it a product that would have a
margin [inaudible] of the product.
Was there any other questions, Caroline?
C. Copithorne: The question about the potential synergies or what
cost savings you are looking for compared to the
current expectations for GelTex?
H. Termeer: OK, in terms of GelTex, we are very, very impressed
with GelTex as a company. It is a company that only
has 110 and has been very productive. So this
synergies in terms of costs are the usable ones
related to not having to run as separate public
companies. But
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they-we are very impressed with the productivity of
the organization and we fully expect that the
organization will continue pretty much in it's
present form, directed to fit into the Genzyme
General picture but without significant
organizational synergies. We're not compensating
those.
C. Copithorne: OK, thank you.
Operator: Next question comes from Meirav Chovav from Salomon
Smith Barney, please go ahead.
Meirav Chovav: Hi, I have several questions. Regarding the estimate
of $500 million in five years and then $1 billion in
ten years, what sort of a market penetration -
percentage market penetration do those numbers
represent? And then a question that I have is there
is a new calcium method that could have an impact in
this area which are the calcium ammetics which could
be on the market in '03, which obviously I don't
believe would alleviate the need for phosphate
binders, but may reduce the dosage of the phosphate
binders that are required. I was wondering if your
clinical person could comment on that? And my last
question is a financial question. When you do include
depreciation and amortization how--what's the--when
is this going to be accretive for Genzyme? Thank you
very much.
H. Termeer: I would expect the last question very much depending
on the curve that we will get there by 2004 including
the good will charges and 2002 on a cash basis. So
late 2003, I was just shown here by Peter. So a year
later, that will be the cash basis. In terms of the
market share assumption, the simplest way to look at
it is to say that our--about two and a half to
2.7--1.7-1-1/2 million patients. The cost per patient
given optimized dosages of Renagel, make this about
$3.5 to $4 billion market in all patients around the
world for treatment. So when we talk about $1
billion, we're talking about a quarter of that. And
so that's a very straight forward, simplistic way to
look at what is the market share assumption. It's
very tough to mention that in this patient population
that is suffering so much and there's a mortality of
22 percent a year, when you have a product that
indeed has a reduced cost and a reduced mortality,
that you would not have much higher market share in
terms of the use of this product. But it does maybe
allow also for us the products to exist in the same
space. But it's not too easy to exist in the same
space as a produce that has both the lipid lower
activity, the LDL activity that was mentioned by
Amin and the ability to manage the prospect term
levels, very aggressively to the normal range. This
combination of these two activities have really made
it such an attractive proposition. Let me now ask
Amin to comment if he can on the calcium comment that
Meirav made.
N. Amin: Yeah, I would like to just comment. We have obviously
been following the calcium methods very closely. Just
to remind everyone, they're primary indication is to
reduce hyperparathyrhoidism to control PTH, not
phosphorous. 95 percent of patients need phosphorus
binders and they will continue to need phosphorus
binding agents. The question is even in a world where
calcium ammetics exist, is there a role for vitamin D
which is needed for normal physiological function or
will calcium ammetic replace vitamin D. We do not
believe that calcium ammetics will eliminate the
vitamin D market. We still see a clear role for
vitamin D use. In terms of the impact on Renagel, we
see that Renagel will continue to be needed as a
phosphate binding agent. Whether calcium ammetics
exist or not. I want to remind you that the
recommended diet and daily dietary intake of calcium
in the normal population is s1 to 1-1-1/2 grams. In
order
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to get cal to use calcium based binders, you need
four or five times that amount on average to control
phosphorous. So we will still need a phosphate
binding agent like Renagel. We do not believe that
there will be a need for a lowering the calcium
further because of a calcium ammetic agent coming
along.
M. Chovav: Actually I was thinking whether the dosage of calcium
or phosphorous binding agents may go down, that was
a--.
N. Amin: No, I think the phosphate--the dose of phosphate
binder you need is primarily driven by phosphate
intake, not by calcium intake, so the phosphate
binding is purely dose dependent. And so using a
calcium ammetic agent will not alter your ability to
control phosphorous energy eye trap.
M. Chovav: And the other question I had in response to Henri's
comment, when you talk about 1.5 million dialysis
patients, are you referring to the patients that are
end-stage renal failure? Because I believe there's
225,000 in the US? Or are you referring to people
that are not at end-stage renal failure but are, you
know, suffering from renal failure?
H. Termeer: No, no, I was referring to end-stage renal failure
and about 280,000 in the US, if my numbers are
correct and about 1 million currently globally,
counting Europe, Latin America, and Asia. And the
growth rate is about 7 to 8 percent of the year
without mortality changing, mortality rate changing
which you recall is fairly high, it was 22 percent
for the United States each year. It's quite amazing
isn't it, that we are adding in this population about
70 plus thousand new patients each year who are
placed along that line for the--and the market for
things to grow. So the opportunity for multiplying
here, we can influence the mortality rate enormous.
M. Chovav: OK, thank you very much.
Operator: Your next question comes from Samuel Isaly from
Orbimed, please go ahead, sir.
Samuel Isaly: Yes, good morning, this is Sam Isaly. Could you go
thought a couple of things? Number one, could you
simply go through the share count a little bit to get
to the $1 billion or so in total transaction value?
And I guess you are using a headline number of $47.50
as the price per share? On--along that line as well,
what sort of change of control benefits are there to
management in this transaction? Either parachute to
payments or accelerated vesting, are there change of
control provisions in your Sankyo contract that could
change that contract? Might the Sankyo people not
prefer to be partners with GelTex or not prefer to be
partners with Genzyme, but like with GelTex? And then
lastly, I'm not yet persuaded on the price. I think
if everybody knew that sales of Renagel would be $90
million next year, they'd be quite excited anyhow.
Henri Termeer, you've earlier this year negotiated a
favorable with Cell Genesys, we appreciate your good
negotiating skills. What are the shareholder votes
needed to complete this transaction?
H. Termeer: Yeah, I think most of the comments that you are
making are really directed to Mark, CEO of GelTex, so
let me ask Mark to respond to them and maybe Peter
Wirth to respond on the share count. Let me do it
this way. Peter, you start first to get the details
of the transaction on the--.
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P. Wirth: Share Count? GelTex has approximately 21.4 million
shares outstanding as of a couple of days ago. If you
take that number and multiply it by the $47.50, you
come to a transaction value of $1.16 billion--17
million. GelTex also has options outstanding. About
2.5 million outstanding. Those options will be
converted into an additional 2 million share of
Genzyme's stock. That is not included in the
transaction costs.
S. Isaly: Do the--does the vesting accelerate?
P. Wirth: The vesting does not accelerate except for certain
key individuals. I think there are seven named
individuals where it does accelerate.
S. Isaly: Then of the 2.5 million, what number of 2.5
accelerates?
P. Wirth: I don't have that number.
S. Isaly: Well these will be the, you know, the Skaletski's of
the world in the high--the high option numbers right?
M. Skaletski: Yes, Sam, there's seven people that they would
accelerate and that number is approximately 400,000
shares. That's a maximum number. Your other question
on Sankyo, don't forget the relationship with Sankyo
is an arm's length relationship now. Sankyo is
commercializing the products independently of us.
We'll get a royalty on that. So for them, this
transaction is pretty much invisible.
H. Termeer: Are there any other comments in terms of shareholder
growth?
S. Isaly: Yeah, what's needed on the shareholder votes? Have I
got a chance to put my hand up?
N. Amin: Yes, you do. We will require a GelTex shareholder
vote. I believe it's a simple majority.
P. Wirth: Yes.
S. Isaly: 50 percent of those outstanding or those voting?
M. Skaletski: I believe it's outstanding, Sam.
S. Isaly: Percent of outstanding. Thank you.
H. Termeer: OK, next question.
Operator: Tom Vanbuskirk from Silverado Capital, please go
ahead.
Tom Vanbuskirk: Hi. Could you just verify again which regulatory
approvals you are going to need for the transaction?
P. Wirth: The only one that we're aware of is Hart Scott and
Rodino.
T. Vanbuskirk: OK, nothing outside of the US?
P. Wirth: I don't believe so, no.
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T. Vanbuskirk: And do you expect that the SEC is going to make any
kind of extended review of your--of your S-4 or
proxy?
P. Wirth: We don't believe so. We've recently had a full review
for Genzyme in connection with our BioMatrix
transaction, so we think that we've satisfied the SEC
on all of their questions. We actually expect this to
go pretty quickly.
T. Vanbuskirk: Great, thank you.
H. Termeer: Next question.
Operator: Fred Ducowski [sp] from Peterman and Company, please
go ahead.
Fred Ducowksi: Yeah, hi. Are there any products that GelTex has in
the near term that we're expected to hear back
regarding, you know, FDA approval? And on the stock
portion, is that a fixed ratio?
P. Wirth: This is Peter. The second part of that yes, it is a
fixed ratio.
F. Ducowski: OK, on the first part between now and the close, say
we expect to close by year end, are there any FDA
approvals or any approvals that we're expecting from
GelTex.
P. Wirth: No, we have clinical trials ongoing but the two
approvals that we recently received on Renagel
tablets and on Welchol, those are the approvals for
the year.
F. Ducowski: OK and great, thank you.
Operator: Again, ladies and gentlemen, if you do have a
question, please press the one followed by the four
at this time.
Simon Ulcickas from Chase Securities, please go
ahead.
Simon Ulcickas: Hi, I just have two questions. The first is are there
any performance of earnings tests on either party's
side?
Man: No.
S. Ulcickas: And the second question is in regard to especially
Renagel, does Genzyme currently have any products
that would compete for the same treatment?
Man: No.
S. Ulcickas: Great, thank you.
H. Termeer: Any other questions?
Operator: Yes, sir. Mitch Nordon from Riverside Asset
Management, please go ahead.
Mitch Nordon: Yeah, hi, good morning. Just regarding the phase two
clinical trial of Welchol, is there any sort of
condition in the merger agreement about the results
of that clinical trial? I
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guess I'm trying to understand what sort of product
exposure Genzyme is taking here in terms of material
adverse change.
J. Termeer: I cannot mention any particular exposure on the--no,
I--very difficult. Mark do you have a comment there?
M. Skaletski: This is a second phase two product on a clinical
trial that we're having with Welchol, with the second
generation Welchol. We've already seen data from the
first one, so we certainly wouldn't expect any
negative surprises.
M. Nordon: Right, but in the unlikely event that the phase two
clinical results were what you did not expect, would
you have the ability to, I don't know, change your
commitment to the transaction? Would that be
considered materially adverse?
H. Termeer: No. I--we're quite satisfied. We've--the way that we
looked at the cholesterol lowering program is
strictly due to [unintelligible], it's approval, the
solidity of the partnership with Sankyo and it was
not dependent on the outcome, that is currently known
of the second generation product.
M. Nordon: OK, on a--great. Can you mention who the advisers
were, the financial advisers in the transaction.
H. Termeer: On Genzyme's side, this was First Boston--CS First
Boston. And it was Cowen for GelTex.
M. Nordon: Great and one last question. The companies obviously
have an existing relationship. Can you give a little
more background as to, you know, just the genesis of
the transaction and how much due diligence was done
here. I mean are we looking at weeks or months or--.
H. Termeer: Now, because of the existing relationship as you were
saying, there was a lot of knowledge of both
companies on Renagel. And so the amount of time that
we needed to get comfortable on the additional
programs, you know, that's where really where most of
the focus was to learn the general circumstances
around GelTex. And given it's relationship, it took
very little real time. It's--many times over the last
three or four years, as we've worked on this
relationship, I've been asked [unintelligible]
transaction as we today announcements occur and
obviously always was a possibility that this would
occur, so over the years, we increasingly learned
more about each other and--and sort of very, very
easy once we got that increased confirmation around
Renagel and increased conviction as that we had
tremendous leverage as two companies together. And
the sense of the productivity of the product
development platform became something very--of great
interest to Genzyme General. We started to have these
discussion and we came together quite quickly.
M. Nordon: OK, thanks very much. Congratulations.
H. Termeer: Thanks.
Operator: Somham Pandya from Painewebber, please go ahead.
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Elise Wang: Actually, this is Elise Wang. Actually--I hadn't -I
joined the call a little bit late, but I was
wondering if you could tell us what the level of
dilution on earnings will be next year as well as
your expectation on level of accretion for next
year--2002 rather.
H. Termeer: Elise, I--we absolutely give [unintelligible]
guidance as we--I've gone through the details of the
transaction in terms Of what will be the one-time
charge for R&D and we have, you know, a complete idea
about how next year will work, so we have--I
[unintelligible] a little bit in developing opposite
dilution related to the good will charge next year
and on a cash basis we will become positive the year
following. So 2002 is really a year where we will,
during the year, we will become positive. Major
leverage we would expect in 2003, which is the same
year that we also would expect positive including
good will charges. But give us a little bit of time
before we can give further guidance on this.
E. Wang: OK and then also what is going to be your cash
position post the closing of this deal?
H. Termeer: That's a very good question. Genzyme is about several
hundred million dollars in cash is the short of it
and GelTex has about a little over $100 million in
cash. Genzyme has very cash positive in terms of it's
current operations and so the utilization of cash
here really wasn't ours [inaudible] because we wanted
to apply-maximize the use of cash since we are in
such a positive cash situation at this time. We will
have, I would estimate about $2 to $300 million in
cash within the Genzyme system.
E. Wang: Thank you.
Operator: Caroline Copithorne, please go ahead with your
follow-up question.
C. Copithorne: Hi, just a couple of more questions about the Sankyo
relationship. Can someone review what the economics
are for that relationship? And what the advantages
are from the second generation product that I'm
not--not very familiar with at this point?
M. Skaletski: This is Mark Skaletski. The relationship is a royalty
relationship where we will get royalties based on the
sales of Welchol. We have a relationship with them
relative to the second generation product that's
currently in the clinic that Sankyo is picking up all
development costs for and if that product is
commercialized, there will also be a royalty
relationship on that.
C. Copithorne: And what's the magnitude of that royalty?
M. Skaletski: It was--what we've told people.
C. Copithorne: Or if you can tell--give me what street expectations
are currently for the level of that royalty?
M. Skaletski: It's a sliding scale. As sales go up and you can use
an average in the low teens.
C. Copithorne: OK, thank you.
Operator: Next question comes from Louis Sarkes from Chesapeake
Partners, please go ahead, sir.
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Louis Sarkes: Hi. Have any GelTex shareholders, specifically
management, committed to taking any certain election,
specifically stock, I guess? Secondly, I think you
said that the BioMatrix merger, you'd been through a
full proxy review, is that proxy actually clear and
when might we see that? And then finally, is there a
break up fee here?
H. Termeer: I think on the first question it is no. The second
question, on the break up fee it's--.
M. Skaletski: 31.
H. Termeer: It's $31 million and what--.
M. Skaletski: The middle question is we have had two rounds of
comments from the SEC. We expect to hear back from
them this week on the final rounds of comments, so we
are not yet cleared, but we are in the very final
stages.
L. Sarkes: OK, and when do you hope to have a vote for that
merger?
M. Skaletski: I believe we are targeting early November on that.
L. Sarkes: OK, thanks a lot. Congratulations on the merger.
M. Skaletski: Thank you.
Operator: Michael Emerald from Longfellow Investments, please
go ahead.
Michael Emerald: When we see the actual election, we could elect cash,
we can elect stock. Is there a combination?
P. Wirth: There is a proration mechanism to assure that at
least half of the consideration or exactly half of
the consideration will be cash.
M. Emerald: No, I understand that, but on the election forms,
will there be two specific elections or there will be
a third--or will there be a third election as well?
M. Skaletski: There'll be three boxes. You check all cash, all
stock, or combination.
M. Emerald: And the combination, therefore, would be guaranteed?
I would imagine.
M. Skaletski: I--that's probably correct, yes.
M. Emerald: OK, thank you.
Operator: Once again, ladies and gentlemen, if you do have a
question, please press one, four at this time. Jeff
Bergman from Milton Arbitrage Partners, please go
ahead.
Jeff Bergman: Yes, could you please tell me if there is a cap or a
collar on the stock portion.
M. Skaletski: There is not. It's a fixed exchange ratio.
J. Bergman: OK, thank you.
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Operator: Fred Ducowski, please go ahead with your follow-up
question.
F. Ducowski: My question was answered. Thanks.
Operator: Once again, ladies and gentlemen, if you do have a
question, please press one, four. Gentlemen, I am
showing no further questions at this time. Please
continue with your presentation or any closing
remarks.
H. Termeer: Thank you very much everybody that's been on the call
and still is on the call. Please regard our lines as
open for any questions that may come up as you look
into this transaction. It's clear also and Mark and I
are very excited about what's being created here. We
much look forward to communicating with you as we go
on and as we complete this transaction hopefully
later this year. Thank you very much for being here
on such short notice. We will talk to you soon.
Operator: Ladies and gentlemen that does conclude your
conference for today, you may all disconnect and
thank you for participating.
