West Coast Editor
About seven months after out-licensing to former parent Novo Nordisk A/S the rights to early stage interleukin 20, ZymoGenetics Inc. has done the same with its recombinant Factor XIII program in a deal worth up to $77 million, gaining financial elbow room for other candidates, including one in Phase II trials.
ZymoGenetics' stock (NASDAQ:ZGEN) closed Tuesday at $18.28, down 2 cents.
Novo, of Bagsvaerd, Denmark, is paying $15 million up front and $62 million in potential milestones as the drug is developed - and $40 million of that is time based, noted Bruce Carter, president and CEO of Seattle-based ZymoGenetics.
"If they haven't started Phase II trials by [a specified] date, they have to pay us," he said.
ZymoGenetics also is in line for royalties on any products that contain the blood clotting-booster recombinant Factor XIII, including combinations with Factor VIIa, which also came from ZymoGenetics and is marketed by Novo as NovoSeven.
"We saw that one made a blood clot, the other [Factor XIII] strengthened the blood clot," Carter said. "In a sense, we would have two shots on goal" by licensing the latter to Novo, which "has an option on license agreements, but this was not part of that. It was a completely separate, arm's length transaction."
The deal also gives ZymoGenetics more flexibility in working on its early stage, genomics-derived candidates, TACI-Ig and IL-21, and its recombinant human Thrombin (rhThrombin), which has reached Phase II.
"Thrombin is getting the late-stage push," Carter said. "In the short term, we must get thrombin right." ZymoGenetics is developing the product for control of bleeding associated with surgical procedures. The Phase II study is testing the drug in patients undergoing lumbar spine surgery, liver resection, lower extremity peripheral artery bypass surgery and formation of vascular access grafts for dialysis.
Only thrombin derived from bovine blood is available in the U.S. now as a stand-alone thrombin product from King Pharmaceuticals Inc., of Bristol, Tenn., and bovine-derived thrombin has been associated with the development of antibodies that might cross-react with human blood proteins, sometimes leading to serious bleeding complications.
What's more, "we know from SEC filings that [King] is supply constrained," Carter said.
Making the thrombin proposition especially enticing, of course, is the price.
"When we started out it was probably a $50 million opportunity in the U.S., and last year it sold $141 million," Carter said. Thrombin revenues for King are still growing.
"In 2000, we saw thrombin as a means to an end, to get to the genomics [drug candidates]," he said. Now it looks like much more, especially if new versions can be developed that are easier for surgeons to use.
Such as "a patch that has thrombin dried on it, in a foil pack let's say," Carter said. "You rip open the foil back and stick the patch into the bleeding surface, and the blood would reconstitute the thrombin in the patch."
Thrombin might pull major revenues for the company eventually, but the genomics-derived products "are going to be the ones that make ZymoGenetics famous."
TACI-Ig for autoimmune diseases is a soluble-fusion protein that links the extracellular portion of the TACI receptor to the Fc portion of human immunoglobulin (Ig). The drug is being developed in a deal with Geneva-based Serono SA, and is being tested in Phase Ib studies against lupus and rheumatoid arthritis. The companies plan to start clinical studies in patients with B-cell malignancies shortly.
Although early stage, TACI-Ig has captured Serono's interest, so much that the company "highlights it in all their presentations," Carter said.
Another earlier-stage, genomics-derived candidate is IL-21 for cancer, to which Novo holds commercialization rights outside of the U.S. The drug is a member of the four helical bundle cytokine family, which includes several proteins already approved for therapeutic use or in clinical trials.
IL-21 works by "jazzing up the natural-killer cells," and in animals has been found synergistic with Rituxan [rituximab] for non-Hodgkin's lymphoma from South San Francisco-based Genentech Inc. Metastatic melanoma and renal-cell carcinoma are the first indications targeted, with other solid tumors potentially to follow such as lung, colon or breast cancer.
ZymoGenetics was founded in 1981 and acquired by Novo in 1988. The company operated as Novo's research arm until Novo spun the company out in 2000.
"We have about a third of a billion dollars now [in cash], and we're spending $30 million with Abbott just making recombinant human thrombin this year and next year," Carter said. But he's convinced ZymoGenetics' shorter-term fortune lies in thrombin, and its eventual, larger success in the genomics products.
"You never know which one is going to go all the way through [to approval]," he said, but company officials "are great champions of genomics - we're actually fanatics. I'm told by the bankers not to say the word fanatic,' but we are."
Attrition as a fact of drug development life means "you have to have a lot of opportunities," Carter said, and ZymoGenetics' gene-first, disease-later approach provides them that, even if the road from laboratory to pharmacy shelf takes time to travel.
"This is a long-term business, and I'm a young man," he said.