ZymoGenetics Inc. priced a public offering of 7.5 million shares of common stock to raise $135 million and move its lead blood-clotting agent into a Phase III trial.
"We're delighted that we raised so much," said Susan Specht, the company's corporate communications manager. The Seattle-based company filed in July to offer 6.5 million shares, but the "demand exceeded what we anticipated," Specht told BioWorld Today.
The 7.5 million shares were priced at $18 apiece, a slight discount to Wednesday's closing stock price of $18.39. The company's stock (NASDAQ:ZGEN) dropped $1.27 cents Thursday to close at $17.12.
New York-based Merrill Lynch & Co. is acting as the lead manager for the offering, while San Francisco-based Pacific Growth Equities LLC; New York-based Bear, Stearns & Co. Inc.; and Minneapolis-based Piper Jaffray & Co. are acting as co-managers. The underwriters have an overallotment option to purchase about 1.1 million shares, which, if exercised, would bring ZymoGenetics another $20.25 million in gross proceeds.
Even though ZymoGenetics is gearing up for a Phase III trial of its lead product, recombinant human Thrombin (rhThrombin), the company did not need to conduct a financing. As of June 30, it had cash and investments of $275 million.
"The time to raise money is when you don't need it, so we found that this seemed like the opportunistic time to go out and raise cash," Specht said. "The market was favorable and we wanted to have enough money in the bank to take us through approval of rhThrombin."
That approval could occur sometime in 2007, if the company files a biologics license application by the end of 2006.
In addition to covering the Phase III and registration expenses of rhThrombin, ZymoGenetics intends to use proceeds for clinical and preclinical development of its other products, and to pursue new opportunities. Funds also will go toward capital expenditures, working capital, and other general corporate purposes.
ZymoGenetics has out-licensed several products for everything from respiratory diseases to cancer and psoriasis, but it has four internal products. The lead, rhThrombin, completed Phase II trials earlier this year in four surgical indications: spinal surgery, hepatic resection, peripheral bypass surgery and AV graft formation for dialysis access. Those trials established safety as the primary endpoint, but rhThrombin also met secondary endpoints that evaluated immunogenicity and developed point estimates of time to hemostasis. The drug is expected to move into a Phase III trial under a special protocol assessment in the second half of the year.
"We're calling it a Phase III pivotal study," Specht said. "We're in discussions with the FDA right now about the design of the trial."
ZymoGenetics hopes to establish rhThrombin as a potentially safer alternative to a currently marketed version of the blood-clotting protein. The marketed version is derived from bovine plasma, which brings with it impurities that cause the formation of antibodies that cross-react with human coagulation factors.
ZymoGenetics' other internal products, TACI-Ig and interleukin-21, resulted from the company's bioinformatics efforts. TACI-Ig, which is being developed with Geneva-based Serono SA, is a soluble fusion protein that links the extracellular part of the TACI receptor to the Fc portion of human immunoglobulin. It entered Phase Ib trials in systemic lupus erythematosus, rheumatoid arthritis and multiple myeloma in late 2004, and in non-Hodgkin's lymphoma in early 2005. Some of those studies will be completed in the second half of this year.
IL-21, a protein with applications in treating cancer, is being developed in North America by ZymoGenetics and in the rest of the world by Novo Nordisk A/S, of Bagsvaerd, Denmark. The companies have a clinical data-sharing agreement for the product. ZymoGenetics began its Phase I trial in the U.S. in June 2004, while Novo began its Phase I trial the following September in Australia.
A fourth internal product candidate, IL-29, was recently added to ZymoGenetics' pipeline. The company hopes to file an investigational new drug application in 2006 to test the product as a treatment for hepatitis C, Specht said.
ZymoGenetics' out-licensed product candidates include platelet-derived growth factor for periodontal disease and orthopedic fracture and bone defects to BioMimetic Pharmaceuticals Inc., of Franklin, Tenn.; alpha 1-antitrypsin for hereditary emphysema and other respiratory diseases to Arriva Pharmaceuticals Inc., of Alameda, Calif.; IL-20 for psoriasis and rFactor XIII for congenital Factor XIII deficiency, cardiac surgery and cancer to Novo Nordisk; and FGF-18 for cartilage repair, and IL-22 receptor for psoriasis, to Serono.
The company also has the following marketed products: Novolin and NovoRapid for diabetes; NovoSeven for hemophilia; Regranex for wound healing; GlucaGen for hypoglycemia and gastrointestinal motility inhibition; and Cleactor for myocardial infarction. Those products are out-licensed to Novo Nordisk; New Brunswick, N.J.-based Johnson & Johnson; and Tokyo-based Eisai Co. Ltd. Together, all those products register about $3 billion in annual sales, Specht said.
Following the public offering, ZymoGenetics has about 65.4 million shares outstanding.