Exhibit 99.1
ZymoGenetics Reports Fourth Quarter and Year End 2004 Financial Results;
Highlights Include Pipeline Advancement, Strategic Transactions and Stronger
Financial Position
SEATTLE--(BUSINESS WIRE)--Feb. 10, 2005--ZymoGenetics, Inc.
(Nasdaq:ZGEN) today reported its financial results for the fourth
quarter and year ended December 31, 2004, which were consistent with
its expectations. For the fourth quarter of 2004, the company reported
a net loss of $23.4 million, or $0.41 per share, compared to a net
loss of $17.3 million, or $0.34 per share, for the prior year period.
For the year 2004, the company reported a net loss of $88.8 million,
or $1.64 per share, compared to a net loss of $59.6 million, or $1.26
per share, for the prior year. The increased net loss reflects the
company's increasing investment in its product candidates as they
advance through the clinical development process.
ZymoGenetics ended the year in a strong financial position, with
$325 million of cash, cash equivalents and short-term investments.
This amount includes $96 million received in the fourth quarter
related to two major transactions: a strategic alliance with Serono
S.A. and a license of recombinant Factor XIII to Novo Nordisk A/S.
"The year 2004 was one of significant progress for ZymoGenetics,
with our three internal product candidates being tested over the
course of the year in a growing number of clinical indications,"
stated Bruce L.A. Carter, Ph.D., President and Chief Executive Officer
of ZymoGenetics. "Our alliances with Serono and Novo Nordisk have
given us added financial strength and should enable us to discover
more product candidates and push more candidates through development
and commercialization."
ZymoGenetics reported 2004 revenues of $35.7 million for the full
year and $9.7 million for the fourth quarter, compared to $26.0
million and $5.8 million for the prior year and quarter, respectively.
The 38% increase for the year 2004 primarily resulted from higher
royalty and license fee revenues. Royalties increased due to higher
sales of underlying products as well as favorable effects of exchange
rate fluctuations. License fee revenues were higher as a result of
transactions completed during the year with Novo Nordisk, Amgen and
Serono.
Research and development expenses in 2004 totaled $94.3 million
for the full year and $25.4 million for the quarter, both of which
increased from the $63.5 million and $17.0 million reported for the
prior year and quarter, respectively. The increases were primarily
attributable to increased clinical development costs, including those
resulting from higher development staffing levels and external
contracts for process development and manufacturing of the company's
product candidates, as well as increased payments to Serono to cover
the company's share of TACI-Ig development costs. Also contributing to
the increases were cost reimbursements in the prior year earned from
Novo Nordisk related to the preclinical development of IL-21, which
were recorded as reductions to expense.
General and administrative expenses in 2004 totaled $19.0 million
for the year and $5.9 million for the quarter, both of which increased
over amounts reported for the prior year and quarter of $15.8 million
and $4.3 million, respectively. The increases reflect costs associated
with compliance with the Sarbanes-Oxley Act of 2002; legal costs
related to business development activities; state and local taxes
related to transaction fees received; and growth in other areas
supporting the company's business, particularly strategic marketing
and human resources.
The company's 2004 net loss reflected non-cash stock-based
compensation expense of $9.3 million and $1.5 million for the year and
fourth quarter, respectively.
2004 Highlights
During 2004, ZymoGenetics made the following significant
advancements in its product development programs and other critical
business areas:
rhThrombin
-- Completed a Phase 1 clinical study in spinal surgery
-- Initiated and completed patient treatment in four Phase 2
clinical studies in spinal surgery, liver resection,
peripheral artery bypass surgery, and formation of vascular
access grafts for dialysis
-- Presented initial results of the Phase 2 clinical study in
spinal surgery
-- Manufactured bulk drug substance at commercial scale for use
in Phase 3 clinical trials
TACI-Ig
-- Completed a Phase 1 single-dose clinical trial in healthy
volunteers, demonstrating safety, half-life and effects on
B-cell function consistent with preclinical studies
-- Initiated two Phase 1b clinical studies in rheumatoid
arthritis and systemic lupus erythematosus patients
-- Initiated Phase 1b clinical studies examining TACI-Ig as a
potential treatment for B-cell cancers
Interleukin-21
-- Initiated a Phase 1 clinical trial examining IL-21 as a
potential treatment for metastatic melanoma and renal cell
carcinoma
-- Demonstrated in preclinical studies the potential synergy
between IL-21 and anti-cancer monoclonal antibodies
Business Development
-- Completed a strategic alliance with Serono designed to
increase research and development throughput, while
reducing funding requirements and maintaining the right to
50% of U.S. profits from products co-developed
-- Completed a license of rFactor XIII to Novo Nordisk,
increasing the potential value of the program and
retaining substantial economic interest
-- Signed a license agreement with Amgen for exclusive
worldwide rights to patents covering a metabolic disease
target discovered using ZymoGenetics' genomics-based
discovery platform.
-- Generated, in the aggregate including the agreements named
above, over $110 million of cash received from transaction
fees and related equity investments
Other
-- Completed construction of a 45,000 square-foot facility
expansion, which includes a pilot-scale facility for the GMP
manufacture of products to supply future clinical trials
-- Hired Douglas E. Williams, Ph.D. as Executive Vice President,
Research and Development and Chief Scientific Officer
-- Appointed James A. Harper, former Group Vice President of
Global Marketing and Sales at Eli Lilly, to the board of
directors
Outlook for 2005
The Company has established a series of milestones for 2005,
including the following:
-- Complete the analysis of rhThrombin Phase 2 data and present
initial findings in the first quarter
-- Initiate a Phase 3 pivotal study of rhThrombin as a topical
surgical hemostat in the second half of the year
-- Complete the ongoing Phase 1b studies of TACI-Ig in rheumatoid
arthritis and systemic lupus erythematosus in the second half
of the year
-- Establish a maximum tolerated dose and complete the ongoing
Phase 1 study of IL-21 in metastatic melanoma and renal cell
carcinoma
-- Present interim results of the IL-21 Phase 1
-- File an Investigational New Drug application in the second
half of the year to test IL-21 in combination with Rituxan(R)
"With the planned start of rhThrombin Phase 3 pivotal studies
later this year, we expect to take a big step toward our goal of
commercializing therapeutic proteins," commented Douglas E. Williams,
Ph.D., Executive Vice President and Chief Scientific Officer of
ZymoGenetics. "We believe we have the potential to generate clinical
proof of concept data in 2005 that demonstrate the exciting medical
promise of TACI-Ig and IL-21, the first two novel, proprietary
proteins to emerge from our genomics-based discovery engine."
2005 Financial Expectations
The company expects that a number of factors will contribute to
increased research and development expenses in 2005. These factors
include:
-- costs of expanded clinical trial activity for ongoing product
development programs;
-- increased staffing to support the advancing programs,
particularly in the clinical, medical, regulatory,
manufacturing and quality areas; and
-- costs of operating the company's new pilot-scale manufacturing
facility.
Partially offsetting these factors, the Company has shifted the
manufacture of rhThrombin registration lots from late 2005 into early
2006. As a result, the company believes that its total research and
development expenses in 2005 will increase by less than 10%. General
and administrative expenses are expected to increase by up to 25% in
2005, reflecting the company's increasing investment in market
research and pre-launch planning for rhThrombin. Revenues are expected
to slightly exceed those reported in 2004. The company estimates that
its 2005 net loss will fall within the range of $80 million to $90
million, or $1.38 to $1.55 per share. These estimates to do not
reflect non-cash stock option compensation expense to be recorded
pursuant to recently issued accounting rules. The company anticipates
recording this expense beginning in the third quarter of 2005.
Besides funding its net operating loss in 2005, the company
expects to incur capital expenditures of approximately $6 million to
$8 million in 2005. Overall net usage of cash in 2005 is expected to
approximate the net loss, thus enabling the company to end the year
with over $230 million in cash and investments.
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. The Company is
developing a diverse pipeline of potential proprietary product
candidates that are moving into and through clinical development.
These span a wide array of clinical opportunities that include
bleeding, autoimmune diseases and cancer. 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.
These forward-looking statements 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 ZymoGenetics' public filings with the Securities and Exchange
Commission, including ZymoGenetics' Annual Report on Form 10-K for the
year ended December 31, 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,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
(unaudited)
Revenues:
Royalties $3,106 $2,311 $11,288 $9,397
Option fees 2,558 1,875 8,183 7,500
License fees and milestone
payments 4,053 1,605 16,223 9,060
--------- --------- --------- ---------
Total revenues 9,717 5,791 35,694 25,957
Operating expenses:
Research and development,
excluding noncash
stock-based compensation 25,415 16,989 94,287 63,461
General and administrative,
excluding noncash
stock-based compensation 5,854 4,253 19,007 15,846
Noncash stock-based
compensation expense 1,474 1,683 9,295 7,054
--------- --------- --------- ---------
Total operating
expenses 32,743 22,925 122,589 86,361
--------- --------- --------- ---------
Loss from operations (23,026) (17,134) (86,895) (60,404)
Other income (expense), net (366) (143) (1,861) 833
--------- --------- --------- ---------
Net loss $(23,392) $(17,277) $(88,756) $(59,571)
========= ========= ========= =========
Basic and diluted net loss per
share $(0.41) $(0.34) $(1.64) $(1.26)
========= ========= ========= =========
Weighted-average number of
shares used in
computing net loss per share 56,932 51,113 54,157 47,317
========= ========= ========= =========
BALANCE SHEETS
(in thousands)
December 31,
-------------------
2004 2003
--------- ---------
Cash, cash equivalents and short-term investments $324,998 $299,892
Other current assets 9,512 8,652
Property and equipment, net 71,960 62,341
Other assets 5,714 5,024
--------- ---------
Total assets $412,184 $375,909
========= =========
Current liabilities $37,149 $21,131
Lease obligations 66,085 50,629
Construction advance from landlord -- 7,918
Other non-current liabilities 30,400 8,316
Shareholders' equity 278,550 287,915
--------- ---------
Total liabilities and shareholders' equity $412,184 $375,909
========= =========
CONTACT: ZymoGenetics
Investor Relations
John Calhoun, MD, MBA
Director, Corporate Communications & Investor Relations
206-442-6744
OR
Media Relations
Susan W. Specht, MBA
Corporate Communications Manager
206-442-6592