Exhibit 99.1
Contact
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INVESTOR RELATIONS MEDIA RELATIONS
John Calhoun, MD, MBA Susan W. Specht, MBA
Director, Corporate Communications Associate Director, Corporate
& Investor Relations Communications
(206) 442-6744 (206) 442-6592
FOR IMMEDIATE RELEASE
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ZYMOGENETICS REPORTS FOURTH QUARTER AND YEAR END 2006 FINANCIAL RESULTS
- Investment in pipeline yields substantial progress in
clinical development -
Seattle, February 15, 2007 -- ZymoGenetics, Inc. (NASDAQ: ZGEN) today reported
its financial results for the fourth quarter and year ended December 31, 2006.
For the fourth quarter of 2006, the company reported a net loss of $37.1
million, or $0.55 per share, compared to a net loss of $15.1 million, or $0.23
per share, for the prior year period. For the full year 2006, the company
reported a net loss of $130.0 million, or $1.94 per share, compared to a net
loss of $78.0 million, or $1.28 per share, for the prior year. The increases
were consistent with the company's strategy of aggressively investing in the
advancement of its broad pipeline of product candidates.
ZymoGenetics ended the year in a strong financial position, with $258.4 million
of cash, cash equivalents and short-term investments.
"All of our product development programs made substantial progress in 2006,"
stated Bruce L.A. Carter, Ph.D., President and Chief Executive Officer of
ZymoGenetics. "With the positive Phase 3 results and BLA filing for rhThrombin,
we've laid the groundwork for commercialization. Phase 2 clinical trials are
ongoing for atacicept and IL-21, and both programs are expected to broaden this
year. In addition, we're very excited about the potential of PEG-interferon
lambda, which has begun Phase 1 testing."
ZymoGenetics reported 2006 revenues of $25.4 million for the full year and $4.4
million for the fourth quarter, compared to $42.9 million and $15.4 million for
the prior year and quarter, respectively. Most of the revenue decrease related
to revenue from license fees and milestone payments. Several large milestone
payments were earned in 2005, whereas corresponding amounts were not earned in
2006. Also, the revenue recognition period for a recombinant Factor XIII license
fee, received from Novo Nordisk in 2004, ended in the second quarter of 2006.
Previously, the company had recorded revenue of $2.3 million per quarter under
this license over the period of its related continuing obligations. Option fee
revenue also decreased due to the November 2006 expiration of an option and
license agreement with Novo Nordisk, under which the company had earned $7.5
million per year over a six-year term.
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Research and development expenses in 2006 increased by 29% to $128.5 million for
the full year and $33.8 million for the fourth quarter, compared to $99.6
million and $26.2 million reported for the prior year and quarter, respectively.
There has been substantial growth and expansion of the company's product
development capabilities over the past year, including the hiring of experienced
development personnel. A significant portion of the increases resulted from
growth in headcount and related costs. Other substantial cost increases related
to the manufacture of rhThrombin and fees for filing the rhThrombin Biologics
License Application (BLA) with the FDA. Additionally, pursuant to new stock
option accounting rules that took effect in 2006, stock-based compensation
expense of $3.2 million was recorded for the fourth quarter and $12.1 million
was recorded for the full year.
General and administrative expenses in 2006 totaled $33.2 million for the year
and $9.1 million for the fourth quarter, which compares to $23.3 million and
$5.8 million reported for the prior year and quarter, respectively. The primary
factor contributing to these increases was stock-based compensation expense,
which was responsible for $6.3 million of the increase for the year and $1.8
million of the increase for the fourth quarter. Other factors responsible for
the increases included personnel costs, patent and legal fees and consulting
fees.
Net other income for the fourth quarter of 2006 was comparable to the amount for
the fourth quarter of 2005. For the full year 2006, net other income increased
to $6.3 million, from $2.0 million for the prior year. This increase reflects
higher investment income, which was largely driven by higher rates of interest
earned on investments.
2006 HIGHLIGHTS
During 2006, ZymoGenetics made the following significant advancements in its
product development programs and other critical business areas:
rhThrombin:
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o In July, ZymoGenetics completed a Phase 3 pivotal trial of recombinant
human thrombin. The company reported positive results of this trial in
September at a medical meeting and filed a BLA in December requesting
FDA marketing approval.
o The company is currently enrolling patients in a Phase 2 trial of
rhThrombin delivered via spray applicator as an adjunct to hemostasis
for patients requiring autologous skin grafting for burns and other
traumatic skin injuries. ZymoGenetics began enrolling patients in
August and plans to complete enrollment in this open-label study in Q1
2007.
Atacicept:
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o The company presented results from several Phase 1b clinical trials
that demonstrated the safety and potential efficacy of atacicept as a
therapy for rheumatoid arthritis, systemic lupus erythematosus and
B-cell malignancies. The company is continuing enrollment in a Phase 1b
trial involving patients with B-Chronic Lymphocytic Leukemia (B-CLL).
o In December 2006, ZymoGenetics and its partner Merck Serono initiated a
Phase 2 trial of atacicept with rheumatoid arthritis patients whose
disease has failed to respond to TNF inhibitors. Approximately 320
patients are expected to participate in this trial.
IL-21:
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o ZymoGenetics and its partner Novo Nordisk completed and presented data
from their Phase 1 monotherapy trials of IL-21 in patients with
metastatic melanoma or metastatic renal cell carcinoma. These data
demonstrated a satisfactory toxicity profile and evidence of anti-tumor
activity in several patients treated with this agent was observed.
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o In July, the company initiated a Phase 1 trial combining IL-21 with
Rituxan(R) (a product of Genentech, Inc. and Biogen IDEC) for treatment
of patients with non-Hodgkin's lymphoma, and in October, the company
started a Phase 1/2 trial combining IL-21 with Nexavar(R) (a product of
Bayer Healthcare AG and Onyx Pharmaceuticals, Inc.) for treatment of
patients with renal cell carcinoma.
o In collaboration with its partner Novo Nordisk, a Phase 2 clinical
trial of IL-21 monotherapy for the treatment of patients with
metastatic melanoma was started in July.
PEG-interferon lambda (PEG-IFN lambda; formerly known as Interleukin 29):
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o ZymoGenetics recently presented an abstract discussing the
pharmacological activity of PEG-IFN lambda at a medical meeting in
October 2006. The company submitted an Investigational New Drug
Application to the FDA in November, and recently initiated a Phase 1a
trial with healthy volunteers.
Other:
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o In March 2006, the company appointed Judith A. Hemberger, Ph.D. to its
board of directors. Dr. Hemberger is an experienced biotech industry
executive with over 25 years of global pharmaceutical and biotech
industry experience. Dr. Hemberger filled a seat vacated by George B.
Rathmann, who retired from the company's board in February 2006. Dr.
Rathmann is continuing his relationship with the company as Chairman
Emeritus, an honorary position.
o ZymoGenetics hired Michael J. Dwyer in May 2006 as its Senior Vice
President of Sales & Marketing. Mr. Dwyer is responsible for continuing
to build ZymoGenetics' sales, marketing and operations/logistics team
in preparation for the anticipated launch of rhThrombin in late 2007.
o The company also appointed Vaughn B. Himes, Ph.D. as its Senior Vice
President of Technical Operations, with responsibility for all aspects
of the Company's manufacturing and process development activities. Dr.
Himes replaced Mark D. Young, Ph.D., who retired from the company in
April 2006.
OUTLOOK FOR 2007
The company's plan for 2007 includes the following important milestones:
o Facilitate completion of FDA review of the rhThrombin BLA filing, gain
approval and launch the product in the fourth quarter of the year;
o Complete the Phase 2 study of rhThrombin spray and initiate a Phase 3 spray
study in the second half of the year;
o Enter into an ex-US development and commercialization relationship for
rhThrombin.
o Complete patient enrollment in the Phase 2 study of atacicept in rheumatoid
arthritis before the end of the year;
o Initiate Phase 2/3 studies suitable for registration of atacicept in
systemic lupus erythematosus in the second half of the year;
o Initiate clinical testing of atacicept in multiple sclerosis late in the
year;
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ZymoGenetics 2006 Year-End Results
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o Complete and report results from the dose-escalation portion of the Phase 1b
study of atacicept in B-CLL in the first half of the year;
o Complete the Phase 1 clinical trial of IL-21 in combination with Rituxan and
report results in the second half of the year;
o Complete the Phase 1 portion of the renal cell carcinoma study of IL-21 in
combination with Nexavar and initiate the Phase 2 part of the study;
o Together with partner Novo Nordisk, complete enrollment in the Phase 2
clinical trial of IL-21 as a monotherapy for the treatment of metastatic
melanoma and initiate a higher-dose Phase 2 study in melanoma patients with
high performance status; and
o Complete Phase 1a clinical testing and initiate the Phase 1b study of
PEG-IFN lambda as a treatment for Hepatitis C infection.
"2006 was a very successful year highlighted by the completion of the rhThrombin
Phase 3 pivotal study and filing of a license application with the FDA,"
commented Douglas E. Williams, Ph.D., Executive Vice President and Chief
Scientific Officer of ZymoGenetics. "With this milestone accomplished, we have
an even more energetic agenda for 2007. We will continue to support the
development of an rhThrombin franchise with pivotal testing of a spray kit. We
will broaden and intensify our atacicept and IL-21 programs in Phase 2, and we
have already begun clinical testing of PEG-IFN lambda. We will also focus our
attention on a number of promising preclinical stage programs to feed the
clinical pipeline in the future."
2007 FINANCIAL EXPECTATIONS
The company expects to post an increased net loss in 2007, which will be driven
largely by costs related to the planned launch of rhThrombin. More specifically,
the following items are expected to be the most significant factors contributing
to 2007 expense increases:
o Manufacture of rhThrombin bulk drug and finished product inventories for
launch and commercial sale, the cost of which will be expensed prior to FDA
approval;
o Recruitment and hiring of sales representatives and related management to
support rhThrombin commercialization;
o Other launch-related sales and marketing costs for rhThrombin; o
Establishment of a medical affairs function to support the users of
rhThrombin in the medical community;
o Increased clinical trial costs for atacicept, IL-21 and PEG-IFN lambda with
the advancement into more advanced clinical testing; and
o Increased clinical development staffing to support the advancing programs.
As a result, the company believes that its total research and development
expense in 2007 will increase to approximately $135-145 million. General and
administrative expense is expected to increase to approximately $45-50 million
in 2007. The projected expenses for 2007 include noncash stock option
compensation expense of approximately $22 million, of which approximately
two-thirds is classified as research and development and the remainder as
general and administrative expense. Total revenues, excluding sales of
rhThrombin, are expected to be in the same range as those reported in 2006, with
the potential to increase by up to 30% based on the achievement of development
milestones by third-party licensees. The company estimates that its 2007 net
loss will be within the range of approximately $150-170 million, or
approximately $2.20 to $2.50 per share, including noncash stock option-related
expense. Sales of rhThrombin are not reflected in these estimates; however, it
is unlikely that sales in 2007, assuming FDA approval in mid-to-late October,
would materially affect the net loss estimates.
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Besides funding its net operating loss in 2007, the company expects to incur
capital expenditures of approximately $6-8 million. The company expects overall
net usage of cash in 2007 to be within the range of approximately $130-150
million. If the company is successful in completing an ex-U.S. partnership for
rhThrombin, cash usage could be substantially lower.
CONFERENCE CALL AND WEBCAST INFORMATION
ZymoGenetics Q4 2006 Financial Results Conference Call will be held on February
15, 2007 at 4:30 p.m. Eastern Time and may be accessed at www.zymogenetics.com
or by dialing 877-407-0782. The international dial in number is 201-689-8567.
Participants should dial in to the call approximately 10 minutes prior to the
scheduled start time to register. The webcast will be archived for 30 days.
For replay, use the following information:
o Replay number: 877-660-6853
o International replay number: 201-612-7415
Replay passcodes (required for playback): account #: 286 and
conference ID #: 230234
ABOUT ZYMOGENETICS
ZymoGenetics creates novel protein drugs with the potential to significantly
help patients fight their 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 and viral 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, 2005. 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, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
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2006 2005 2006 2005
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(unaudited) (unaudited)
Revenues:
Royalties $ 1,558 $ 1,628 $ 6,851 $ 7,510
Option fees 1,673 2,659 9,693 10,637
License fees and milestone payments 1,139 11,154 8,836 24,762
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Total revenues 4,370 15,441 25,380 42,909
Operating expenses:
Research and development 33,829 26,217 128,450 99,615
General and administrative 9,093 5,831 33,224 23,321
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Total operating expenses 42,922 32,048 161,674 122,936
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Loss from operations (38,552) (16,607) (136,294) (80,027)
Other income, net 1,403 1,521 6,292 2,000
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Net loss $ (37,149) $ (15,086) $ (130,002) $ (78,027)
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Basic and diluted net loss per share $ (0.55) $ (0.23) $ (1.94) $ (1.28)
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Weighted-average number of shares used in
computing net loss per share 67,424 65,709 66,917 60,928
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BALANCE SHEETS
(in thousands)
December 31,
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2006 2005
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(unaudited)
Cash, cash equivalents and short-term investments $ 258,408 $ 366,311
Other current assets 8,982 8,884
Property and equipment, net 71,542 71,803
Other assets 8,072 6,355
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Total assets $ 347,004 $ 453,353
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Current liabilities $ 27,958 $ 31,736
Lease obligations 67,087 66,754
Other non-current liabilities 16,275 21,200
Shareholders' equity 235,684 333,663
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Total liabilities and shareholders' equity $ 347,004 $ 453,353
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