Exhibit 99.1
ZymoGenetics Reports Fourth Quarter and Year End 2003
Financial Results;
Three Proteins Advanced to Clinical Testing in 2003
SEATTLE--(BUSINESS WIRE)--Feb. 12, 2004--ZymoGenetics, Inc.
(Nasdaq:ZGEN) today reported its financial results for the fourth
quarter and year ended December 31, 2003, which were consistent with
expectations. For the fourth quarter of 2003, the company reported a
net loss of $17.0 million and $0.33 loss per share, compared to net
income of $11.0 million and earnings per share of $0.23 in the prior
year period. The company's profitable 2002 fourth quarter was driven
by a one-time lump sum license fee earned in the settlement of a
patent infringement lawsuit. For the year 2003, the company reported a
net loss of $58.2 million and $1.23 loss per share, compared to a net
loss of $30.4 million and $0.75 loss per share for the prior year.
ZymoGenetics ended the year 2003 in a strong financial position,
with approximately $300 million of cash, cash equivalents and
short-term investments. This amount includes approximately $71 million
of net proceeds raised in a follow-on offering of common stock, which
was completed in October.
"The year 2003 was one of significant progress for ZymoGenetics,
with the initiation of clinical trials for three of our product
candidates," stated Bruce L.A. Carter, Ph.D., President and Chief
Executive Officer of ZymoGenetics. "With the anticipated start of
IL-21 clinical trials in the first half of 2004, we will have moved
four proteins into clinical development in less than 18 months, an
impressive accomplishment for a company our size. With the money
raised in the October stock offering, we have the financial strength
required to move these product candidates forward aggressively over
the next several years and exploit their full potential."
ZymoGenetics reported 2003 revenues of $26.0 million for the full
year and $5.8 million for the fourth quarter, compared to $52.8
million and $34.1 million for the prior year and quarter,
respectively. The revenue decreases resulted from a one-time lump sum
payment earned in the fourth quarter of 2002 for a license granted in
connection with the settlement of a patent infringement lawsuit.
Operating expenses in 2003 totaled $91.6 million for the full year
and $24.3 million for the quarter, both of which were relatively
constant compared to the $90.6 million and $25.2 million reported for
the prior year and fourth quarter, respectively. Although the
company's product development and occupancy costs were higher in 2003,
the increases were largely offset by cost reimbursements earned from
Novo Nordisk related to the preclinical development of Interleukin-21
and by lower legal and consulting expenses and general cost reduction
initiatives undertaken by the company.
Product Development Highlights
During 2003, there were significant advancements within
ZymoGenetics' four designated product development programs:
rFactor XIII
-- Initiated and completed single and multi-dose Phase 1 clinical
trials in healthy volunteers. These studies evaluated the
safety and tolerability of rFactor XIII at doses producing
circulating Factor XIII levels up to nearly 300% of normal.
There were no serious adverse events and no evidence of
antibody formation against rFactor XIII.
-- Initiated and completed a single-dose Phase 1 clinical trial
in patients congenitally deficient for Factor XIII. There were
no serious adverse events and all subjects treated at
therapeutic doses showed normalized blood clot strength and
stability as measured in vitro for at least one month
following administration of rFXIII, which is consistent with
the established role of Factor XIII in hemostasis.
rhThrombin
-- Initiated and completed manufacture of rhThrombin product for
use in Phase 1 and Phase 2 clinical trials
-- Initiated and completed toxicology studies required for
initiation of clinical trials
-- Filed an IND application, gained FDA clearance and began
treatment in the dose escalation part of a Phase 1/2 clinical
trial in spinal surgery patients
-- Entered into a long-term manufacturing agreement for the
production of rhThrombin to be used in Phase 3 clinical trials
and for commercial sale
TACI-Ig
-- Completed manufacture of TACI-Ig product for use in Phase 1
clinical trials
-- Completed toxicology studies required for initiation of
clinical trials
-- Began a Phase 1 single-dose clinical trial in healthy
volunteers to evaluate safety, pharmacokinetics and markers of
B cell function
Interleukin-21
-- Initiated and completed manufacture of IL-21 product for use
in Phase 1 clinical trials
-- Completed toxicology studies required for initiation of
clinical studies showing that IL-21 is well tolerated in
animal models and that support moving forward into clinical
testing
-- Completed other activities necessary to support IND filing and
start of clinical testing in the first half of 2004
In addition, the Company strengthened its pipeline of
pre-development candidates; continued to build-up its internal
development capabilities with the hiring of a number of experienced
personnel; and initiated a building expansion project that will
include a pilot-scale protein manufacturing facility to support
clinical development of future product candidates.
Outlook for 2004
The Company has established a series of milestones for 2004,
including the following:
-- Initiate Phase 1 clinical trials of TACI-Ig in systemic lupus
erythematosus (SLE) and rheumatoid arthritis patients
-- Initiate Phase 1 clinical trial of Interleukin-21 in
metastatic melanoma and renal cell carcinoma patients
-- Initiate Phase 1 clinical trial of rFactor XIII in patients
undergoing cardiopulmonary bypass procedures
-- Initiate pivotal study of rFactor XIII in patients with
congenital Factor XIII deficiency
-- Complete Phase 2 clinical trials of rhThrombin as a topical
hemostat in four different surgical settings
-- Designate a fifth clinical development candidate from the
company's portfolio of pre-development stage proteins
-- Complete construction of a pilot-scale protein manufacturing
facility to be used to produce future clinical supplies
"By the end of 2004, we expect to be well on our way toward the
commercialization of rhThrombin and rFactor XIII, our two recombinant
blood clotting proteins," commented Dr. Carter. "We also believe we
will be on the verge of demonstrating the exciting medical promise of
TACI-Ig and IL-21, the first two novel, proprietary proteins to emerge
from our genomics-based discovery engine."
2004 Financial Expectations
The company expects that a number of factors will contribute to a
significant increase in research and development expenses in 2004.
These factors include:
-- costs for scale-up and production of pivotal and commercial
product for the rhThrombin and rFactor XIII programs;
-- costs of significantly expanded clinical trial activity,
particularly with respect to rhThrombin and TACI-Ig;
-- increased staffing to support expanded product development
efforts, particularly in the clinical, medical, regulatory and
quality areas; and
-- reduced cost reimbursements from Novo Nordisk with respect to
development of IL-21.
Based on these factors, the company believes that its total
research and development expenses in 2004 will fall within the range
of $100 million to $110 million, depending on the actual timing of
these factors. Revenues and general and administrative expenses are
both expected to increase modestly in 2004. The company estimates that
its 2004 net loss will fall within the range of $85 million to $95
million, or $1.60 to $1.80 per share.
Besides funding its net operating loss in 2004, the company
expects to incur net capital expenditures of approximately $6 million
to $8 million, which includes the company's share of costs for ongoing
facility expansion. Overall, taking into account the effect of
non-cash expenses and capital expenditures, the company expects its
use of cash in 2004 to approximate its net loss. If the company enters
into any major new licensing or collaborative transactions, its use of
cash could be lower.
About ZymoGenetics
ZymoGenetics is a biopharmaceutical company focused on the
discovery, development and commercialization of therapeutic proteins
for the prevention or treatment of human diseases. Using a product
discovery engine that combines ZymoGenetics' strengths in biology,
protein chemistry, molecular and cellular biology and bioinformatics,
ZymoGenetics is developing a pipeline of potential proprietary product
candidates. These span a wide array of clinical opportunities,
including bleeding, autoimmune diseases, cancer and cardiovascular
disease. ZymoGenetics intends to commercialize these product
candidates through internal development, collaborations with partners,
and out-licensing of patents from its extensive patent portfolio. For
further information, visit www.zymogenetics.com.
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
This Act provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about
themselves so long as they identify these statements as
forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to
differ from the projected results. In some cases, you can identify
forward-looking statements by terminology such as "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intend," "may,"
"might," "plan," "potential," "predict," "should" or "will" or the
negative of those terms or comparable terminology. The forward-looking
statements in this press release are based on the current intent and
expectations of the management of ZymoGenetics. These statements are
not guarantees of future performance and involve risks and
uncertainties that are difficult to predict. ZymoGenetics' actual
results and the timing and outcome of events may differ materially
from those expressed in or implied by the forward-looking statements
because of risks associated with our unproven discovery strategy,
preclinical and clinical development, regulatory oversight,
intellectual property claims and litigation and other risks detailed
in the company's public filings with the Securities and Exchange
Commission, including the company's Annual Report on Form 10-K for the
year ended December 31, 2002 and its prospectus supplement filed with
the Commission on October 16, 2003. Except as required by law,
ZymoGenetics undertakes no obligation to update any forward-looking or
other statements in this press release, whether as a result of new
information, future events or otherwise.
ZYMOGENETICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
2003 2002 2003 2002
-------- ------- -------- --------
(unaudited)
Revenues:
Royalties $ 2,311 $ 1,613 $ 9,397 $ 7,995
Option fee 1,875 1,875 7,500 7,500
License fees, milestones and
other 1,604 30,604 9,060 37,280
-------- ------- -------- --------
Total revenues 5,790 34,092 25,957 52,775
Operating expenses:
Research and development,
excluding noncash
stock-based compensation 19,684 19,342 72,020 66,469
General and administrative,
excluding noncash
stock-based compensation 2,926 4,152 12,488 16,925
Noncash stock-based
compensation expense 1,683 1,746 7,054 7,188
-------- ------- -------- --------
Total operating expenses 24,293 25,240 91,562 90,582
-------- ------- -------- --------
Income (loss) from operations (18,503) 8,852 (65,605) (37,807)
Interest and other income 1,515 2,133 7,381 7,391
-------- ------- -------- --------
Net income (loss) (16,988) 10,985 (58,224) (30,416)
Preferred stock dividend and
accretion -- -- -- (1,718)
-------- ------- -------- --------
Net income (loss) attributable
to common shareholders $(16,988) $10,985 $(58,224) $(32,134)
======== ======= ======== ========
Basic net income (loss) per
share $ (0.33) $ 0.24 $ (1.23) $ (0.75)
======== ======= ======== ========
Weighted-average number of
shares used in computing
basic net income (loss) per
share 51,113 45,797 47,317 42,578
======== ======= ======== ========
Diluted net income (loss) per
share $ (0.33) $ 0.23 $ (1.23) $ (0.75)
======== ======= ======== ========
Weighted-average number of
shares used in computing
diluted net income (loss) per
share 51,113 47,641 47,317 42,578
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BALANCE SHEETS
(in thousands)
December 31,
-------------------
2003 2002
-------- --------
Cash, cash equivalents and short-term investments $299,892 $285,438
Other current assets 8,652 5,970
Property and equipment, net 28,018 17,253
Other assets 5,024 3,572
-------- --------
Total assets $341,586 $312,233
======== ========
Current liabilities $ 30,009 $ 20,131
Non-current deferred revenue and gain 17,203 19,730
Other non-current liabilities 5,185 3,104
Shareholders' equity 289,189 269,268
-------- --------
Total liabilities and shareholders' equity $341,586 $312,233
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CONTACT: ZymoGenetics, Inc.
Susan W. Specht, 206-442-6592