SEATTLE - (Business Wire)
ZymoGenetics, Inc. (NASDAQ:ZGEN) today reported its financial results
for the fourth quarter and year ended December 31, 2007. The results for
2007, particularly the third and fourth quarters, reflect increased
costs associated with preparation for launch of RECOTHROM
TM
Thrombin, topical (Recombinant) (also referred to as rThrombin), which
was approved by the FDA and launched in January 2008. For the fourth
quarter of 2007, the company reported a net loss of $38.6 million, or
$0.56 per share, compared to a net loss of $37.1 million, or $0.55 per
share, for the prior year period. For the full year 2007, the company
reported a net loss of $148.1 million, or $2.17 per share, compared to a
net loss of $130.0 million, or $1.94 per share, for the prior year. The
increases in net loss reflect not only the company
’s
costs associated with preparation for the RECOTHROM
TM
launch, but also the advancement of clinical stage product candidates.
As of December 31, 2007, the company had $170.9 million of cash, cash
equivalents and short-term investments. In addition to this amount, the
company will receive a milestone payment of $40.0 million from Bayer
HealthCare in February 2008 related to the FDA approval of RECOTHROM,
which will be recognized as revenue over the five-year period in which
the company will carry out its obligations under the related Bayer
collaboration agreements.
“2007 was a pivotal year for ZymoGenetics,”
stated Bruce L.A. Carter, Ph.D., chief executive officer of
ZymoGenetics. “With the launch of RECOTHROM, we’ve
taken our first step towards becoming a profitable, product-driven
biopharmaceutical company. Our pipeline of other clinical development
candidates, including atacicept, IL-21 and PEG-interferon lambda, is
advancing and is key to achieving our long-term goals,”
added Dr. Carter.
ZymoGenetics reported substantially higher revenues in 2007 compared to
2006. Revenues were $38.5 million for the full year 2007 and $20.5
million for the fourth quarter, compared to $25.4 million and $4.4
million for the prior year and quarter, respectively. The annual and
quarterly increases were primarily the result of higher license fees and
milestone payments, partially offset by reduced royalties and option
fees. The most significant increases were revenues related to RECOTHROM,
rFactor XIII and atacicept, with the majority of these earned in the
fourth quarter. Royalties decreased in 2007 due to expiration of certain
insulin patents, which was partially offset by increased royalties from
other sources. Option fee revenue also decreased due to the November
2006 expiration of an option and license agreement with Novo Nordisk,
under which the company earned $6.5 million in 2006.
Research and development expenses for the full year 2007 were $142.3
million compared to $128.5 million in 2006, and for the fourth quarter
of 2007 these expenses were $46.0 million compared to $33.8 million in
the prior year quarter. The increases, both on an annual and quarterly
basis, resulted primarily from the manufacturing of RECOTHROM for
commercial use, which the company expensed prior to FDA approval, and
from increased clinical research and development costs primarily
associated with atacicept, IL-21 and RECOTHROM.
Selling, general and administrative expenses in 2007 totaled $46.9
million for the year and $13.5 million for the fourth quarter, which
compares to $33.2 million and $9.1 million reported for the prior year
and prior year quarter, respectively. The primary factors contributing
to these increases were the deployment of the RECOTHROM sales force
during the second half of 2007 and marketing costs associated with
RECOTHROM launch preparations, as well as increased legal expenditures.
Net other income in 2007 totaled $2.6 million for the year and $0.3
million for the fourth quarter, which compares to $6.3 million and $1.4
million reported for the prior year and prior year quarter,
respectively. These decreases primarily reflect lower investment income,
which was largely driven by lower average investment balances.
Business Highlights
In the past year, ZymoGenetics made significant progress in advancing
its business and product development programs, including the following
highlights:
RECOTHROM:
-
Received FDA approval on January 17, 2008.
-
Established medical support function, including the hiring of six
medical science liaisons, creation of continuing medical education
program and publication of Phase 3 clinical trial results.
-
Established sales and marketing function with the hiring of 48
experienced surgical sales managers, six regional business directors
and sales operations and marketing team.
-
Completed global collaboration with Bayer HealthCare providing for
development and commercialization of RECOTHROM outside the U.S. and
co-promotion support in the U.S. for three years.
-
Manufactured and released finished drug product to support launch and
built-up substantial supply of bulk drug according to long-term
production plan.
-
Shipped initial RECOTHROM orders to wholesale distributors and
hospitals in January 2008.
Atacicept:
-
Together with partner Merck Serono, made changes which have improved
the enrollment rate in an ongoing Phase 2 rheumatoid arthritis (RA)
clinical trial and initiated a second Phase 2 trial in treatment-naïve
RA patients.
-
Completed Special Protocol Assessment (SPA) agreement with FDA in
October for a Phase 2/3 clinical trial in lupus nephritis and began
treating patients in December.
-
Completed SPA agreement with FDA in January 2008 for a Phase 2/3
clinical trial in general systemic lupus erythematosus (SLE).
IL-21:
-
In a Phase 1/2 clinical trial in combination with Nexavar®
(sorafenib) tablets in renal cell carcinoma (RCC) patients, presented
interim data in October showing tumor shrinkage in ten of ten
evaluable patients, completed the Phase 1 part of the study and
initiated the Phase 2 part in early January 2008.
-
In metastatic melanoma patients, partner Novo Nordisk completed a
Phase 2a study and the company began a Phase 2 study at a higher dose
in collaboration with the National Cancer Institute of Canada.
-
Completed enrollment in a Phase 1 study in combination with Rituxan®
(rituximab) in patients with Non-Hodgkin’s
Lymphoma (NHL) and presented interim study results in December.
PEG-interferon lambda:
-
Completed a Phase 1a single dose study in healthy volunteers, showing
favorable tolerability profile and biologic activity.
-
Initiated a Phase 1b study in chronic genotype-1 hepatitis C patients
who have relapsed after prior therapy, to evaluate the safety and
antiviral activity of PEG-Interferon lambda administered both as a
single agent and in combination with ribavirin over a four-week
treatment period; patient dosing began in February 2008 and up to 36
patients will be treated.
Recent Workforce Changes
The company also announced that it has made certain adjustments to its
workforce that reflect the evolving focus of its business. A total of 80
positions have been eliminated through attrition, elimination of
unfilled positions and layoffs. The eliminated positions were from
multiple departments throughout the organization, but most were in
Research and, to a lesser extent, in Development.
“We have made some difficult choices to
reposition our workforce after extensive review of our business plan for
the next five years. Reducing our overall spend and focusing on a
smaller number of proprietary programs fits with our desire to create
greater value for shareholders while maintaining capacity to fill our
pipeline,” said Dr. Carter.
As a result of the eliminated positions, the company’s
ongoing annualized operating expenses are expected to be reduced by
approximately $14 million. The company will record a charge of
approximately $2.5 million for severance and related costs in the first
quarter which will partially offset the ongoing savings in 2008.
Outlook for 2008
From a commercial perspective, the company will be focused on building
the market for RECOTHROM in the U.S. The primary strategy is to target
the approximately 1,400 hospital accounts that comprise 90% of sales of
bovine thrombin. ZymoGenetics’ field team of
medical affairs and sales people, together with the field team from
Bayer Healthcare will be developing advocacy among surgeons, pharmacists
and nurses at these key accounts to gain hospital formulary approval and
convert usage to RECOTHROM.
The company’s plan for 2008 also includes the
following important clinical development and regulatory milestones:
RECOTHROM:
-
Obtain FDA approval for 20,000IU vial configuration.
-
Present data from Phase 2 spray application clinical trial in burn
patients.
-
Complete Phase 3b clinical trial designed to provide additional data
supporting favorable immunogenicity profile.
-
Initiate Phase 4 re-exposure study.
Atacicept:
-
Initiate Phase 2 clinical studies in multiple sclerosis.
-
Begin patient enrollment in Phase 2/3 clinical trial in general SLE.
-
Complete enrollment in ongoing Phase 2 clinical trials in RA.
IL-21:
-
Present data from completed clinical trials in RCC and metastatic
melanoma.
-
Complete enrollment in Phase 2 clinical study in RCC and present
interim results.
-
Present interim results from ongoing Phase 2 clinical trial in
metastatic melanoma.
PEG-Interferon lambda:
-
Report results from Part 1 (single agent administration) of Phase 1b
clinical trial in hepatitis C patients.
IL-17RC:
-
File IND application for IL-17RC, a novel protein drug candidate with
potential for treating autoimmune diseases.
“2007 was a very successful year culminated
by the FDA approval of RECOTHROM in early January 2008. The effort put
forth by our employees to complete the regulatory review process,
establish the product supply chain, build sales and marketing operations
and develop all of the supporting infrastructure was immense,”
commented Douglas E. Williams, Ph.D., president and chief
scientific officer of ZymoGenetics. “We have
much more work to do in 2008 to build the market for RECOTHROM and
continue to advance the many promising opportunities we have in research
and development.”
2008 Financial Expectations
The company expects to report a smaller net loss in 2008, which will be
driven largely by the approval and commercialization of RECOTHROM. No
specific guidance is being provided as to the amount of the expected net
loss because it will be significantly impacted by RECOTHROM sales
revenues, which cannot be reliably estimated at this time.
The company is able to provide the following specific guidance for 2008
revenues and expenses:
-
Total revenues, excluding RECOTHROM sales, are expected to be in the
range of $35-45 million, reflecting anticipated revenue from the Bayer
collaboration, certain milestone payments, royalties and option fees.
-
Cost of goods sold is expected to be approximately 10-12% of net
sales, which is lower than is expected over the longer term due to the
expensing of RECOTHROM inventory costs prior to FDA approval.
-
Research and development expense is expected to be comparable to 2007
expense at approximately $135-145 million, with the impact of
increasing clinical development costs being offset by the effects of
headcount reductions and the discontinuation of expensed RECOTHROM
inventory costs.
-
Selling, general and administrative expense is expected to increase to
approximately $60-65 million, reflecting a full year of sales and
marketing costs related to RECOTHROM.
-
Projected expenses include noncash stock-based compensation expense of
approximately $26 million, of which approximately two-thirds is
classified as research and development and the remainder as selling,
general and administrative expense.
Besides funding its net operating loss in 2008, the company expects to
incur capital expenditures of approximately $6-8 million, and to expend
approximately $40-50 million for RECOTHROM inventory build, which it
intends to fund largely through debt financing.
Conference Call and Webcast Information
ZymoGenetics Q4 2007 Financial Results Conference Call will be held on
February 13, 2008 at 4:30 p.m. Eastern Time and may be accessed at www.zymogenetics.com
or by dialing 877-407-0782 (International: 201-689-8567). Participants
should dial in to the call approximately 10 minutes prior to the
scheduled start time to register. A live webcast of the presentation can
be accessed by going to: www.zymogenetics.com.
The webcast will be archived for 30 days.
For replay, please visit www.zymogenetics.com
or use the following information:
-
U.S. callers: 877-660-6853
-
International callers: 201-612-7415
Replay passcode account #: 286
Conference ID #: 272943
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,
including statements related to guidance regarding anticipated financial
results for 2008 and product and clinical developments. 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 product sales and marketing
capabilities, discovery strategy, manufacturing and commercialization
capabilities, preclinical and clinical development, product
safety, strategic partnering, 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 most recent Annual Report on Form 10-K for the year ended
December 31, 2006. 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.
Nexavar® (sorafenib)
tablets is a registered trademark of Bayer HealthCare Pharmaceuticals,
Inc.
Rituxan® (rituximab)
is a registered trademark of Genentech, Inc. and Biogen Idec Inc.
|
ZYMOGENETICS, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(in thousands, except per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2007
|
|
|
|
2006
|
|
|
|
2007
|
|
|
|
2006
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Royalties
|
|
$
|
1,245
|
|
|
$
|
1,558
|
|
|
$
|
6,259
|
|
|
$
|
6,851
|
|
|
Option fees
|
|
|
1,062
|
|
|
|
1,673
|
|
|
|
3,540
|
|
|
|
9,693
|
|
|
License fees and milestone payments
|
|
|
18,218
|
|
|
|
1,139
|
|
|
|
28,678
|
|
|
|
8,836
|
|
|
Total revenues
|
|
|
20,525
|
|
|
|
4,370
|
|
|
|
38,477
|
|
|
|
25,380
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
45,987
|
|
|
|
33,829
|
|
|
|
142,340
|
|
|
|
128,450
|
|
|
Selling, general and administrative
|
|
|
13,454
|
|
|
|
9,093
|
|
|
|
46,890
|
|
|
|
33,224
|
|
|
Total operating expenses
|
|
|
59,441
|
|
|
|
42,922
|
|
|
|
189,230
|
|
|
|
161,674
|
|
|
Loss from operations
|
|
|
(38,916
|
)
|
|
|
(38,552
|
)
|
|
|
(150,753
|
)
|
|
|
(136,294
|
)
|
|
Other income, net
|
|
|
349
|
|
|
|
1,403
|
|
|
|
2,609
|
|
|
|
6,292
|
|
|
Net loss
|
|
$
|
(38,567
|
)
|
|
$
|
(37,149
|
)
|
|
$
|
(148,144
|
)
|
|
$
|
(130,002
|
)
|
|
Basic and diluted net loss per share
|
|
$
|
(0.56
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(2.17
|
)
|
|
$
|
(1.94
|
)
|
|
Weighted-average number of shares used in computing net loss per
share
|
|
|
|
|
|
|
|
|
|
|
|
68,507
|
|
|
|
67,424
|
|
|
|
68,156
|
|
|
|
66,917
|
|
|
CONDENSED BALANCE SHEETS
|
|
(in thousands)
|
|
(unaudited)
|
|
|
|
December 31,
|
|
|
|
|
2007
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments
|
|
$
|
170,941
|
|
|
$
|
258,408
|
|
Other current assets
|
|
|
11,841
|
|
|
|
8,982
|
|
Property and equipment, net
|
|
|
70,701
|
|
|
|
71,542
|
|
Other assets
|
|
|
9,598
|
|
|
|
8,072
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
263,081
|
|
|
$
|
347,004
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
63,960
|
|
|
$
|
27,958
|
|
Lease obligations
|
|
|
67,044
|
|
|
|
67,087
|
|
Other non-current liabilities
|
|
|
17,247
|
|
|
|
16,275
|
|
Shareholders’ equity
|
|
|
114,830
|
|
|
|
235,684
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
263,081
|
|
|
$
|
347,004
|
Investor & Media Relations
ZymoGenetics,
Inc.
Director, Corporate Communications
Susan W. Specht, MBA,
206-442-6592
