Exhibit 99.1
Contact
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INVESTOR RELATIONS MEDIA RELATIONS
John Calhoun, MD, MBA Susan W. Specht, MBA
Director, Corporate Communications & Investor Corporate Communications
Relations Manager
(206) 442-6744 (206) 442-6592
FOR IMMEDIATE RELEASE
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ZYMOGENETICS REPORTS FOURTH QUARTER AND YEAR END 2005 FINANCIAL RESULTS
- Fourth quarter results enhanced by milestone payments earned -
Seattle, February 9, 2006 -- ZymoGenetics, Inc. (NASDAQ: ZGEN) today reported
its financial results for the fourth quarter and year ended December 31, 2005,
which were better than expected due to increased fourth quarter revenue from
milestone payments. For the fourth quarter of 2005, the company reported a net
loss of $15.1 million, or $0.23 per share, compared to a net loss of $23.4
million, or $0.41 per share, for the prior year period. For the full year 2005,
the company reported a net loss of $78.0 million, or $1.28 per share, compared
to a net loss of $88.8 million, or $1.64 per share, for the prior year.
ZymoGenetics strengthened its financial position in 2005, ending the year with
$366.3 million of cash, cash equivalents and short-term investments, which
compares to $325.0 million as of the end of 2004. The increase resulted from the
completion of a common stock offering in August 2005, which generated net
proceeds of $126.4 million.
"We are delighted with the progress that we have made this year," stated Bruce
L.A. Carter, Ph.D., President and Chief Executive Officer of ZymoGenetics.
"rhThrombin advanced towards commercialization by moving into Phase 3 clinical
testing, TACI-Ig has been very well tolerated and we are generating promising
data, and IL-21 is also progressing in clinical development. At the same time,
we strengthened our financial position and the company is well positioned for
the future."
ZymoGenetics reported 2005 revenues of $42.9 million for the full year and $15.4
million for the fourth quarter, compared to $35.7 million and $9.7 million for
the prior year and quarter, respectively. Increases in revenues from option
fees, license fees and milestone payments more than offset a decline in royalty
revenue. Option fee revenue increased as a result of a research and development
strategic alliance with Serono completed in late 2004. Increased revenues from
license fees and milestone payments resulted from the Serono alliance and the
license of rFactor XIII to Novo Nordisk in late 2004. Also in the fourth quarter
of 2005, the company earned milestone payments from BioMimetic Therapeutics
related to FDA approval of its GEM 21S(TM) product for the treatment of
periodontal disease and from Novo Nordisk related to the start of clinical
testing of rFactor XIII in cardiac surgery.
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ZymoGenetics 2005 Year-End Results
2/9/06
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Research and development expenses in 2005 totaled $97.2 million for the full
year and $26.0 million for the fourth quarter, both of which increased slightly
from the $94.3 million and $25.4 million reported for the prior year and
quarter, respectively. There has been substantial growth in the company's
internal product development capabilities over the past year, including the
hiring of experienced development personnel and the start of pilot-scale
manufacturing operations. However, the increased cost of this growth was almost
entirely offset by a reduction in costs for contracted services, particularly
related to the manufacture of rhThrombin.
General and administrative expenses in 2005 totaled $22.8 million for the year
and $5.8 million for the fourth quarter, which compares to $19.0 million and
$5.9 million reported for the prior year and quarter, respectively. The primary
factor contributing to these increases was increased costs of preparing for
product commercialization. Specifically, costs associated with rhThrombin market
research and pre-launch planning have increased.
Non-operating items shifted from net other expense in 2004 to net other income
in 2005 due to higher investment income, driven primarily by higher interest
rates and secondarily by higher investment balances.
2005 HIGHLIGHTS
During 2005, ZymoGenetics made the following significant advancements in its
product development programs and other critical business areas:
rhThrombin
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o Analysis of data from Phase 2 clinical studies in four different surgical
settings was completed, showing that rhThrombin appeared to be safe and
well tolerated, with no increased incidence of antibody formation relative
to placebo, and demonstrating the anticipated hemostatic effect. Study
results were presented at relevant scientific and medical meetings
throughout the year.
o An end of Phase 2 meeting was held with the FDA in June, which led to the
finalization of the Phase 3 clinical protocol and the related statistical
analysis plan.
o The Phase 3 pivotal clinical trial began in late October and enrollment
continued thereafter at a pace consistent with plans.
TACI-Ig
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o The company and its collaborative partner, Serono, continued to enroll and
treat patients with systemic lupus erythematosus, rheumatoid arthritis
(RA), and multiple myeloma in Phase 1b studies, and initiated additional
studies in non-Hodgkin's lymphoma (NHL) and chronic lymphocytic leukemia.
o The Phase 1b RA study was completed, data were analyzed, and preliminary
results were disclosed in early January 2006 showing that TACI-Ig appeared
to be safe and well tolerated, and clear biologic responses were observed,
which appeared to correlate with clinical benefit.
o Results from a long-term preclinical toxicology study of TACI-Ig were
presented in November, showing the expected pharmacology with no safety
concerns after treatment twice weekly for 39 weeks.
o Interim results were presented in December from the first three patient
cohorts in the Phase 1b multiple myeloma clinical study, showing lack of
toxicity, few drug-related adverse events, and stabilization of disease in
four of nine patients.
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ZymoGenetics 2005 Year-End Results
2/9/06
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Interleukin-21
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o Part A of a Phase 1 clinical trial, examining IL-21 as a potential
treatment for metastatic melanoma and renal cell carcinoma, was completed.
Data were presented in May and November, showing activation of the immune
system consistent with the proposed mechanism of action, preliminary
evidence of anti-tumor activity, and tolerable side effects. Additionally,
a dosing regimen was established for Part B of the study.
o Part B of the Phase 1 clinical trial was initiated in July and enrollment
of 12 metastatic melanoma patients and 12 renal cell carcinoma patients was
completed.
o A collaborative agreement with Novo Nordisk was completed, providing the
framework for data and cost sharing as well as development of a single
product worldwide. Novo Nordisk has previously licensed the rights to IL-21
outside North America.
o An IND amendment was filed with the FDA in December with a proposed
clinical protocol for testing IL-21 in combination with Rituxan(R) in NHL
patients who have failed previous treatment with Rituxan alone.
Financial
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o A 7.5 million share follow-on offering of common stock was completed in
August, generating net proceeds of $126.4 million.
o A milestone payment was earned upon FDA approval of GEM 21S, a product
developed by BioMimetic Therapeutics, Inc. for treatment of periodontal
disease. The active ingredient in GEM 21S is PDGF-BB, a protein licensed to
BioMimetic Therapeutics by the company.
o Novo Nordisk began a Phase 1 study of recombinant Factor XIII in cardiac
surgery, which triggered a milestone payment to the company.
Other
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o The company decided to advance Interleukin-29 (IL-29) into clinical
development as a potential treatment for Hepatitis C infection.
o The company completed start-up of its pilot-scale protein manufacturing
facility and began GMP manufacturing of IL-29 to supply clinical trials
planned for 2006.
o Nicole Onetto, M.D. was hired as Senior Vice President and Chief Medical
Officer.
o David H. MacCallum, an investor and former healthcare investment banker,
was appointed to the company's board of directors.
OUTLOOK FOR 2006
The company has established a series of milestones for 2006, including the
following:
o Complete the ongoing rhThrombin Phase 3 clinical trial, analyze data and
disclose initial findings in the second half of the year;
o File with the FDA a Biologics License Application (BLA) for rhThrombin
before the end of the year;
o Present the results of the Phase 1b study of TACI-Ig in rheumatoid
arthritis in the first half of the year;
o Complete the ongoing Phase 1b study of TACI-Ig in systemic lupus
erythematosus in the first half of the year and present results in the
second half of the year;
o Initiate Phase 2 clinical testing of TACI-Ig in at least one autoimmune
disease indication;
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ZymoGenetics 2005 Year-End Results
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o Complete patient treatment in all of the ongoing Phase 1b studies of
TACI-Ig in B-cell malignancies;
o Initiate a Phase 1 clinical trial in the first half of the year to test
IL-21 in combination with Rituxan;
o Analyze and present results from Part B of the IL-21 Phase 1 monotherapy
study in metastatic melanoma and renal cell carcinoma;
o Together with partner Novo Nordisk, initiate Phase 2 clinical testing of
IL-21 as a monotherapy for the treatment of renal cell carcinoma and/or
metastatic melanoma; and
o Initiate Phase 1 clinical testing of IL-29 as a treatment for Hepatitis C
infection in the second half of the year.
"From a research and development perspective, our highest corporate priority in
2006 is the completion of the rhThrombin Phase 3 pivotal study to enable filing
of a license application with the FDA before the end of the year," commented
Douglas E. Williams, Ph.D., Executive Vice President and Chief Scientific
Officer of ZymoGenetics. "However, with our broad pipeline of high-potential
product candidates, there is much more to be excited about in the coming year.
Advancement of both TACI-Ig and IL-21 into Phase 2 studies, and the start of
IL-29 clinical testing, will make 2006 a very important year for the company's
long-term success."
2006 FINANCIAL EXPECTATIONS
The company expects that a number of factors will contribute to an increased net
loss in 2006. Of these factors, an increase in research and development expenses
will be the most significant, driven by the advancement and expansion of the
company's clinical development pipeline. More specifically, the following items
will have the greatest impact on research and development expenses:
o Costs of the rhThrombin Phase 3 program, including clinical trials and
manufacture of product needed to support a BLA filing;
o Manufacture of initial rhThrombin bulk drug inventory for eventual
commercial sale;
o Increased clinical trial costs for TACI-Ig and IL-21 with the initiation of
Phase 2 testing and expansion of IL-21 testing into combination therapy;
and
o Increased staffing to support the advancing programs, particularly in the
clinical, medical, quality and regulatory areas.
As a result, the company believes that its total research and development
expense in 2006 will increase by 30 to 40 percent over 2005. General and
administrative expense is expected to increase by 20 to 30 percent in 2006,
reflecting increased costs associated with preparing for the marketing and sales
of rhThrombin. These estimates do not reflect noncash stock option compensation
expense to be recorded pursuant to Statement of Financial Accounting Standards
No. 123R. As a result of adopting this new accounting standard on January 1,
2006, the company anticipates recording additional expense currently estimated
at $19 million to $21 million, of which approximately 65 percent is expected to
be allocated to research and development expense, with the remainder to general
and administrative expense. Total revenues are expected to be 15 percent to 25
percent lower than those reported in 2005, primarily due to lower license fee
and milestone revenue. The company estimates that its 2006 net loss will be
within the range of $135 million to $150 million, or $2.03 to $2.26 per share,
including noncash stock option-related expense.
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ZymoGenetics 2005 Year-End Results
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Besides funding its net operating loss in 2006, the company expects to incur
capital expenditures of approximately $6 million to $8 million. The company
expects overall net usage of cash in 2006 to be within the range of $125 million
to $140 million.
ABOUT ZYMOGENETICS
ZymoGenetics is a biopharmaceutical company focused on the discovery,
development and commercialization of therapeutic proteins for the 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 candidates 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 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, 2004. 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.
-Financial Tables Follow-
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ZymoGenetics 2005 Year-End Results
2/9/06
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ZYMOGENETICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
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2005 2004 2005 2004
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(unaudited) (unaudited)
Revenues:
Royalties $ 1,628 $ 3,106 $ 7,510 $ 11,288
Option fees 2,659 2,558 10,637 8,183
License fees and milestone payments 11,154 4,052 24,762 16,223
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Total revenues 15,441 9,716 42,909 35,694
Operating expenses:
Research and development, excluding noncash
stock-based compensation 26,047 25,415 97,221 94,287
General and administrative, excluding
noncash stock-based compensation 5,814 5,853 22,802 19,007
Noncash stock-based compensation expense 187 1,474 2,913 9,295
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Total operating expenses 32,048 32,742 122,936 122,589
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Loss from operations (16,607) (23,026) (80,027) (86,895)
Other income (expense), net 1,521 (366) 2,000 (1,861)
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Net loss $ (15,086) $ (23,392) $ (78,027) $ (88,756)
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Basic and diluted net loss per share $ (0.23) $ (0.41) $ (1.28) $ (1.64)
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Weighted-average number of shares used in
computing net loss per share 65,709 56,932 60,928 54,157
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BALANCE SHEETS
(in thousands)
December 31,
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2005 2004
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(unaudited)
Cash, cash equivalents and short-term investments $ 366,311 $ 324,998
Other current assets 8,884 9,512
Property and equipment, net 71,803 71,960
Other assets 6,355 5,714
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Total assets $ 453,353 $ 412,184
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Current liabilities $ 31,736 $ 37,149
Lease obligations 66,754 66,085
Other non-current liabilities 21,200 30,400
Shareholders' equity 333,663 278,550
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Total liabilities and shareholders' equity $ 453,353 $ 412,184
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