ZymoGenetics Inc. signed on a partner for its recombinant human thrombin product and with the deal expects to get $70 million this year along with some marketing muscle as it prepares for an anticipated sales battle with Johnson & Johnson.
Bayer HealthCare AG acquired rights outside the U.S. to the product in exchange for $30 million up front and another $40 million upon FDA approval, which the partners expect by the Oct. 18 PDUFA date. ZymoGenetics also would be eligible to receive up to $128 million in development and sales milestone payments, as well as royalties on any Bayer sales outside the U.S.
As part of the deal, Bayer will contribute sales and marketing help to ZymoGenetics in the U.S. for three years following product launch. In exchange, Bayer would get a tiered commission of up to 20 percent of U.S. sales, as well as sales bonuses of up to $20 million in total.
Bruce Carter, president and CEO of Seattle-based ZymoGenetics, told BioWorld Today that the sales help from Bayer will provide a valuable supplement to the expected upcoming product launch and then for market penetration.
ZymoGenetics' recombinant thrombin product would be expected to take much of the market away from the existing bovine-derived product. The real competition, however, is expected to come from a human plasma-derived thrombin from Omrix Biopharmaceuticals Inc. that will be marketed by J&J division Ethicon Inc. That product has a PDUFA data about six weeks earlier than ZymoGenetics' recombinant thrombin.
The two new products, both expected by analysts to make it through the FDA approval process, are designed to be used to control bleeding during a range of surgery types. Both products in clinical trials demonstrated comparable hemostasis with improved immunogenicity vs. the approved bovine-derived product, Thrombin-JMI, from King Pharmaceuticals Inc. Sales of Thrombin-JMI were about $250 million in 2006.
Carter said he expects the recombinant product to fare well in the marketplace. "We think it is superior to anything from human plasma," he said. "Every time a recombinant protein comes to market, it always has displaced something from human tissue or blood."
He said the deal with Bayer "means in addition to having the superior product, we now have the largest sales force." ZymoGenetics intends to have six medical liaisons, six regional sales directors and 48 sales representatives. Leverkusen, Germany-based Bayer for the first three years will add 25 medical liaisons and 70 sales representatives to the effort, he said.
Part of the focus will be on expanding the market. Carter said the bovine product is used in more than 1 million surgeries in the U.S., or about 5 percent of the total. He said a better thrombin product could be used in about 15 percent of surgeries.
Kevin DeGeeter, an analyst with Oppenheimer & Co. who last week initiated coverage on ZymoGenetics, earlier had projected that the ZymoGenetics product three years out could have about 55 percent of the market, with up to 10 percent going to the King bovine product and the remainder for New York-based Omrix's human plasma-derived product. He said he may have to consider revising the ZymoGenetics number upward due to the added sales muscle from Bayer.
"I think it was the right deal," DeGeeter told BioWorld Today, adding that the company needed some additional U.S. sales and marketing support to establish the product and compete against J&J. "There is an argument to be made that the ZymoGenetics product" has certain commercialization advantages, for example that it's easier to manufacture and ship, he said. "There is a place on the market for both products. My model always called for ZymoGenetics to get a larger share of the market." DeGeeter estimated about $200 million in sales of recombinant thrombin three years after launch. He said the total market over that time could increase to $400 million from $250 million, given both expanded usage and premium pricing.
Hanzhong Li, a senior biotechnology analyst at Stanford Group Co., said many observers expect that sales in the soon-to-be reshaped thrombin market will come down to marketing. "The critical issue is product launch," he said, which also relates to becoming established in the marketplace. In those regards, Li said, the U.S. co-promotion deal with Bayer was a positive surprise. Li's five-year projections have the thrombin market at about $586 million in 2012, with ZymoGenetics' product capturing about $351 million of the sales, or 60 percent, close to the percentage estimate from Oppenheimer.
In addition to a tiered commission rate of up to 20 percent on U.S. sales, Bayer would be entitled to $20 million in sales-based bonuses. Carter said the $20 million potential covers the entire three-year term of the deal, and would be paid in $10 million increments as sales goals are reached. For two years after that, Bayer would get a reduced commission, subject to an annual maximum.
Carter said most of the $128 million in milestone potential to ZymoGenetics relates to sales and regulatory targets outside the U.S. Bayer now has all responsibility for ex-U.S. development, and would pay ZymoGenetics an undisclosed, tiered royalty rate.
"We believe our BLA filing will be adequate for European authorities, but we don't know that for sure," Carter said.
The deal also includes a thrombin spray formulation ZymoGenetics has in earlier-stage development, and contemplates further line extensions of the product, for which development costs would be shared, Carter said.
ZymoGenetics' stock (NASDAQ:ZGEN) gained 40 cents Tuesday to close at $15.32.