ZymoGenetics (ZGEN)

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ZymoGenetics Reports First Quarter 2010 Financial Results
- Results Show Improved Financial Performance and Strengthened Financial Position -

- Pipeline Advancement and Increased RECOTHROM Market Penetration Highlighted -

Press Release Source: ZymoGenetics, Inc. On Tuesday May 4, 2010, 4:00 pm
SEATTLE--(BUSINESS WIRE)--ZymoGenetics, Inc. (NASDAQ:ZGEN - News) today reported its financial results for the quarter ended March 31, 2010. For the first quarter of 2010, the company’s net loss declined to $2.4 million, or $0.03 per share, an improvement from the $18.1 million, or $0.26 per share, reported for the first quarter of 2009. The decreased loss resulted from higher revenues as well as lower operating expenses.

“With last year’s significant changes to our strategy and operations behind us, we’re pushing forward in 2010 focused on our key assets, including randomized comparative Phase 2 studies of PEG-Interferon lambda for hepatitis C and IL-21 for cancer,” said Douglas E. Williams, Ph.D., Chief Executive Officer of ZymoGenetics. “We’re making progress toward our goals for the year and, with the capital we raised in January, we believe we have the financial resources we need to reach important milestones for all of our key assets.”

On January 12, 2010, the company completed an underwritten follow-on public offering, which resulted in net proceeds to the company of $90.8 million. As of March 31, 2010, the company had $228.3 million of cash, cash equivalents and short-term investments.

Financial Results

Revenues for the first quarter of 2010 increased to $35.5 million from $24.8 million for the first quarter of 2009. The increase was attributable to higher collaboration and license revenues and a doubling of sales of RECOTHROM® Thrombin, topical (Recombinant) in the United States.

Net sales of RECOTHROM were $9.0 million for the first quarter of 2010 compared to $4.5 million for the first quarter of 2009 and were approximately the same as U.S. net sales for the fourth quarter 2009. While both the company’s market share and hospital unit demand for the product increased in the first quarter of 2010 versus the fourth quarter of 2009, these trends were offset by a reduction in the level of wholesaler inventories.

Collaboration and license revenues were $26.2 million for the first quarter of 2010 compared to $20.0 million in the first quarter of the prior year. The increase was primarily related to recognition of revenue associated with the December 2009 license agreement with Novo Nordisk for IL-21 antagonists. Incremental revenues related to the company’s PEG-Interferon lambda collaboration with Bristol-Myers Squibb also contributed to the increase. These increases were partially offset by reduced revenues from collaborations with Bayer and Merck Serono, which ended in the fourth quarter of 2009, and from Novo Nordisk milestone payments that were earned in the first quarter of 2009 but not in the first quarter of 2010.

Costs and expenses for the first quarter of 2010 decreased to $35.6 million from $40.8 million for the first quarter of 2009. The decrease was largely attributable to expense reductions resulting from the company’s 2009 restructuring, which is expected to continue to benefit the company’s expense structure in coming quarters.

Research and development expenses for the first quarter of 2010 were $19.7 million, a decrease of $5.0 million from the first quarter of 2009. The decrease was primarily attributable to reduced employee-related costs resulting from headcount reductions made in 2009, partially offset by an increase in the company’s share of development costs from the PEG-Interferon lambda collaboration with Bristol-Myers Squibb.

Selling, general and administrative expenses for the first quarter of 2010 were $14.0 million, compared to $15.0 million for the first quarter of 2009. The decrease was primarily related to reduced employee-related costs and the discontinuation of Bayer commission expense, which is now being charged against a liability recorded in December 2009. These reductions were partially offset by increased patent and legal costs.

Business Highlights

ZymoGenetics has made substantial progress toward achieving its 2010 business objectives, as shown by the following:

Stock Offering

The company sold 16,100,000 shares of its common stock in January 2010, resulting in net proceeds of approximately $90.8 million after payment of underwriting discounts, commissions and expenses.

PEG-Interferon lambda (Phase 2)

Pharmacokinetic results for the Phase 1b PEG-Interferon lambda clinical trial were presented at the European Association for the Study of the Liver annual meeting in April 2010. The findings indicate that weekly administration of fixed doses of PEG-Interferon lambda is appropriate. That regimen is currently being evaluated in an ongoing Phase 2 clinical trial. Patient enrollment in Part A of the Phase 2 study was completed in February 2010, and enrollment in Part B of the study is expected to begin during the next several months.

RECOTHROM (Marketed product)

Hospital unit demand for RECOTHROM continued to increase in the first quarter of 2010 by approximately 14% versus the fourth quarter of 2009. The company’s estimated share in dollars of the stand-alone thrombin market increased from approximately 17% in the fourth quarter of 2009 to approximately 19% in the first quarter of 2010. Additionally, the company presented results at the American Burn Association annual meeting from a Phase 4 post-approval study that support the safety profile of RECOTHROM in pediatric patients.

Interleukin-21 (IL-21, Phase 2)

Overall survival and progression free survival data continue to be generated in the Phase 2a study of IL-21 in metastatic melanoma. Results of the study will be presented at the American Society of Clinical Oncology annual meeting on June 5, 2010 in an oral presentation. The company and its collaborator, the National Cancer Institute of Canada Clinical Trials Group, are preparing to initiate a randomized Phase 2b study of IL-21 in metastatic melanoma.

Conference Call and Webcast Information

ZymoGenetics First Quarter 2010 Financial Results Conference Call will be held on May 4, 2010 at 4:30 p.m. Eastern Time and may be accessed at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.zymogenetics.com&esheet=6274831&lan=en_US&anchor=www.zymogenetics.com&index=1&md5=943ced442ba838fc8a9949e434c7e531 or by dialing 1-877-407-0778 (International: 201-689-8565). Participants should dial in to the call approximately 10 minutes prior to the scheduled start time to register. A live audio webcast and slide presentation can be accessed by going to: http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.zymogenetics.com&esheet=6274831&lan=en_US&anchor=www.zymogenetics.com&index=2&md5=96bf6cc16f3f589bb7c8cc9a4ba6a9b5. The webcast will be archived for 60 days.

For replay, please visit http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.zymogenetics.com&esheet=6274831&lan=en_US&anchor=www.zymogenetics.com&index=3&md5=6c5128f885d27ec14a3d470ae996b05e or use the following information:


•U.S. callers: 877-660-6853
•International callers: 201-612-7415

Replay passcode account #: 286

Conference ID #: 349411