ZymoGenetics (ZGEN)

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UPDATE 1-Zymogenetics says Merck Serono discontinues MS trials

* Says trials showed increased MS activity in one study

* Says other trials to continue

Sept 28 (Reuters) - Biotechnology firm Zymogenetics Inc (ZGEN.O) said its licensee, Merck Serono SA, discontinued trials of its experimental drug, atacicept, for the treatment of multiple sclerosis (MS).

Zymogenetics said the decision by Merck Serono, a unit of German drugmaker Merck KGaA (MRCG.DE), was based on a recommendation from an independent data monitoring panel, which observed an increase in MS disease activity in the treatment arm compared to the dummy drug in a study.

Two ongoing studies of atacicept -- to treat rheumatoid arthritis and systemic lupus erythematosus -- are continuing, as no comparable issues have been identified, the company said in a regulatory filing.

Merck Serono has the global development and marketing rights for atacicept against autoimmune diseases such as MS and rheumatoid arthritis.

Shares of Zymogenetics closed at $6.15 Friday on Nasdaq. (Reporting by Anuradha Ramanathan in Bangalore; Editing by Vinu Pilakkott