West Coast Editor

Still riding high after its $120 million initial public offering in February, ZymoGenetics Inc. is seeing more good news as its work with platelet-derived growth factor enters pivotal studies conducted by partner BioMimetic Pharmaceuticals Inc., which is targeting bone defects resulting from periodontal disease.

Nashville, Tenn.-based BioMimetic has approval from the FDA for an investigational device exemption to test PDGF (a protein that stimulates osteoblasts in the formation of new bone) with beta tricalcium phosphate (a synthetic bone substitute that provides scaffolding for bone regeneration) in a pivotal multicenter study at 11 centers in the U.S. and one in Europe. It's expected to complete enrollment by the end of the year.

"It's a little amorphous, deciding how to value the deal," said Thomas Dietz, analyst with Pacific Growth Equities Inc. in San Francisco. "The milestone for going in is [below] a million dollars, and it's low-million dollar milestones" from that point, he added.

"Obviously, the value proposition is if [the drug] gets on the market," Dietz said. "I don't know how big the potential market is."

The companies say 10 percent to 15 percent of the U.S. population has advanced gum disease that often requires surgery or tooth extraction, with about 2 million periodontal surgeries performed annually - and more likely to occur, as affluent "baby boomers" age. BioMimetic is privately held, and focuses on developing proteins for the regeneration of bone, tissue and organs. It is developing and aiming to commercialize PDGF for periodontal disease and cranio-maxillofacial osseous defects (bone defects of the head and face) under a license agreement with ZymoGenetics, of Seattle - which gets an undisclosed milestone payment after the clinical studies begin and could get more, along with royalties.

BioMimetic has a manufacturing supply deal with Chiron Corp., of Emeryville, Calif., which makes in bulk the recombinant PDGF that BioMimetic formulates and packages with a synthetic bone matrix.

ZymoGenetics' PDGF patent portfolio has yielded a license agreement with Johnson & Johnson, of New Brunswick, N.J., for other uses of the protein, which is being sold by J&J's Ortho-McNeil Pharmaceuticals Inc. as Regranex (becaplermin) for nonhealing diabetic ulcers.

The importance of the BioMimetic deal, Dietz told BioWorld Today, lies in its demonstration of how ZymoGenetics will continue to leverage its intellectual property.

"These guys have ownership on an incredible number of proteins and uses of proteins, and we're just starting to see fruition on some of the older stuff they discovered [such as PDGF]," he said.

"They were even in discussion with Immunex, which they ended up suing over Enbrel [etanercept, approved for rheumatoid arthritis]," Dietz said. "I think the reason talks stalled out was that Immunex decided they weren't going to deal with it, and it's Amgen's problem." Seattle-based Immunex Corp. is merging with Amgen Inc., of Thousand Oaks, Calif. (See BioWorld Today, March 11, 2002.)

Charles Hart, senior director of corporate communications and investor relations for ZymoGenetics, said the Immunex lawsuit is in its early phase.

The deal with BioMimetic, he said, "will total in the low millions, with high single-digit royalties." He agreed with Dietz that, while the agreement has a financial upside, it's particularly significant as an indicator of the kinds of deals ZymoGenetics will do to fund its internal development activities.

"We intend to file an [investigational new drug application] for our first product by the end of this year," he said.

That product is recombinant human factor 13, he told BioWorld Today. Factor 13 stabilizes fibrin, which is made up of strands forming a clot.

"It's the last enzyme in the blood clotting cascade," Hart said. "We're looking at it in cases where you want to inhibit re-bleeding, such as in patients coming off heart-lung bypass surgery, where we could decrease the need for blood products."

There also is a small population of congenitally deficient people, and they will comprise the first indication sought, he added.

Late last month, ZymoGenetics and Arriva Pharmaceuticals Inc., of Alameda, Calif., signed a deal granting Arriva a worldwide license to U.S. Patent No. 5,218,091, which covers production of recombinant alpha 1-antitrypsin (rAAT) in yeast. Arriva plans to develop AAT for the treatment of hereditary emphysema and other respiratory and dermatological indications, paying ZymoGenetics an initial licensing fee, along with maintenance fees, milestones and royalties.

Founded in 1981, ZymoGenetics was bought by Novo Nordisk, of Bagsvaerd, Denmark, in 1988 and operated as a research arm for Novo until it was spun back out through a $150 million private placement in October 2000. This dropped Novo's stake in ZymoGenetics to less than 50 percent of voting shares. The company filed for its IPO late in 2001, and completed it earlier this year. (See BioWorld Today, Oct. 24, 2000; Sept. 11, 2001; and Feb. 4, 2002.)

ZymoGenetics' stock (NASDAQ:ZGEN) closed Wednesday at $9.80, down 60 cents.