ZymoGenetics Highlights Development Programs at Analyst & Investor Briefing; Review of Additional Indications for Development Candidates and Financial Strength.

SEATTLE -- ZymoGenetics, Inc. (Nasdaq:ZGEN) today provided updates on its research and development programs at an Analyst & Investor Briefing held earlier today in New York City. Highlights of the meeting follow. An archived webcast of today's ZymoGenetics Analyst and Investor Briefing may be accessed at www.zymogenetics.com.

"ZymoGenetics has had a very good year. We continue to move our product candidates into and through the clinic and the two significant collaborative agreements we completed this year demonstrate the strength of our pipeline and enable us to develop more of our novel protein therapeutics," said Bruce L.A. Carter, Ph.D., President and Chief Executive Officer of ZymoGenetics. "With our increasing financial strength and our lineup of proteins with multiple indications, we believe we are on our way to becoming a major biopharmaceutical company."

Briefing Highlights

Company highlights discussed at this meeting include the following:

Product Development

--ZymoGenetics' clinical studies are progressing as planned for the three product candidates in development: TACI-Ig for autoimmune diseases and B-cell malignancies; Interleukin 21 (IL-21) for cancer; and recombinant human thrombin (rhThrombin) for surgical bleeding.

--ZymoGenetics and partner Serono continue to conduct clinical trials with TACI-Ig in a number of indications. Patient enrollment is progressing with two blinded studies of TACI-Ig in systemic lupus erythematosus (SLE) and rheumatoid arthritis. The companies expect to complete the SLE and RA trials in 2005.

--Clinical studies of TACI-Ig with partner Serono will begin this quarter to evaluate the safety and pharmacokinetics of multiple doses of TACI-Ig in patients with multiple myeloma, chronic lymphocytic leukemia, and non-Hodgkin's lymphomas. The studies will take place at the Centre Hospitalier Universitaire de Montpellier, France (L'Hopital Lapeyronie), which is evaluating TACI-Ig in patients with advanced multiple myeloma, and Mayo Clinic in Rochester, Minnesota, which will conduct a trial in patients with other advanced B-cell malignancies.

--Clinical development of IL-21 as a treatment for metastatic melanoma and renal cell carcinoma continues as planned and ZymoGenetics expects the ongoing study to be completed in 2005. ZymoGenetics is exploring additional indications for IL-21 and anticipates filing an Investigational New Drug application in 2005 to test the use of IL-21 in combination with the monoclonal antibody Rituxan(R).

--Highlights were reported from the first completed study in the four-part Phase 2 clinical program for rhThrombin. In this randomized placebo-controlled trial, forty-two patients undergoing spinal surgery had a Gelfoam sponge containing either rhThrombin or normal saline (placebo) applied to a site of intraoperative bleeding. The study met its primary endpoint of safety, with no drug-related serious adverse events reported and an overall adverse event profile consistent with patients undergoing spinal surgery. The secondary endpoints of immunogenicity and point estimates of time to hemostasis were also satisfied. These results, along with forthcoming data from the other clinical trials in peripheral artery bypass, arteriovenous shunting and liver resection surgery, will guide the company in establishing parameters for its pivotal trial program, which is expected to start in the second half of 2005. ZymoGenetics is considering pursuing a Special Protocol Assessment (SPA) for the rhThrombin pivotal Phase 3 trial. The company expects to provide further guidance in early 2005 regarding pivotal trial design, size and timing and is planning for a Biologics License Application (BLA) filing in 2006.

--Company officials also discussed proteins in earlier stages of development. One of these proteins, Interleukin-29, is expected to move into development in 2005, and the company is planning to conduct toxicology studies and manufacture product supply for clinical trials in the coming year. This manufacturing will represent the first campaign in the company's new pilot scale manufacturing facility, which was completed in 2004.

Financial Highlights

--ZymoGenetics reviewed its strong financial condition. Receipts from the strategic alliance with Serono and license of rFactor XIII to Novo Nordisk totaling approximately $96 million will be recorded in the fourth quarter. The company expects to end the year 2004 with $320- $330 million of cash and investments. The agreements with Serono and Novo Nordisk reinforce the company's two-fold strategy of retaining U.S. rights for certain development candidates while maximizing the benefits of its strong pipeline.

Overview of Product Candidates

About TACI-Ig

ZymoGenetics is developing TACI-Ig for the treatment of autoimmune diseases. TACI-Ig is a soluble fusion protein that links the extracellular portion of the TACI receptor to the Fc portion of human immunoglobulin (Ig). TACI-Ig binds to BLyS and APRIL, TNF family cytokines that promote B-cell survival and the production of harmful autoantibodies, which cause certain autoimmune diseases such as systemic lupus erythematosus (SLE). Preclinical data indicate that levels of APRIL, as well as complexes containing both APRIL and BLyS, are elevated in rheumatoid arthritis more than BLyS levels. TACI-Ig has been shown to affect several stages of B-cell development and may inhibit the survival of cells responsible for making antibodies. ZymoGenetics is developing TACI-Ig in collaboration with Serono S.A. and is conducting Phase 1b studies in patients with SLE, rheumatoid arthritis, and in patients with B-cell malignancies.

TACI-Ig studies in patients with advanced B-cell malignancies include those with chronic lymphocytic leukemia, multiple myeloma, and B-cell non-Hodgkin's lymphoma. In the U.S., over 320,000 people are estimated to have some form of these B-cell cancers and each year, approximately 55,000 new cases and 20,000 deaths occur from these cancers. Between 80% and 85% of non-Hodgkin's lymphomas are of B-cell origin. TACI-Ig is a soluble receptor that binds to BLyS and APRIL, thus inhibiting these members of the tumor necrosis factor family that appear to enable malignant B cells to survive.

About Interleukin 21 (IL-21)

ZymoGenetics is developing IL-21 for the treatment of cancer. IL-21 is a novel member of the four helical bundle cytokine family, a protein family which includes several proteins already approved for therapeutic use or in clinical trials. IL-21 was identified using the company's genomics-based discovery platform. IL-21 has potent biological activity in regulating key classes of immune cells, including cytotoxic T cells and natural killer cells. These cell types play key roles in eliminating malignant and infected cells from the body. Based upon the ability of IL-21 to inhibit tumor growth in a number of animal models and its mechanism of action involving regulation of immune cells, metastatic melanoma and renal cell carcinoma were selected as the initial indications for clinical studies, which are now underway. Potential follow-on indications for IL-21 development include other solid tumors and non-Hodgkin's lymphoma. ZymoGenetics has retained the commercialization rights for IL-21 in North America and has licensed the commercialization rights outside of North America to Novo Nordisk A/S.

About rhThrombin

ZymoGenetics is developing rhThrombin for the control of bleeding associated with surgical procedures. Thrombin is used in over 500,000 surgeries per year in the United States. Currently, only thrombin derived from bovine blood is available in the U.S. as a stand-alone thrombin product. Bovine-derived thrombin has been associated with the development of antibodies that may cross-react with human blood proteins. In some cases, these antibodies lead to serious bleeding complications. Recombinant proteins, such as rhThrombin, can be manufactured to higher levels of purity and consistency than proteins purified from human or animal blood. Furthermore, the production of recombinant proteins is not dependent on the availability of blood from human or animal donors and can be scaled-up to meet market demands. For these reasons, ZymoGenetics believes that rhThrombin represents a potential preferred alternative to the bovine-derived product.

About ZymoGenetics

ZymoGenetics is a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic proteins for the prevention or treatment of human diseases. The Company is developing a diverse pipeline of potential proprietary product candidates that are moving into and through clinical development. These span a wide array of clinical opportunities that include bleeding, autoimmune 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. A live audio webcast of the Analyst & Investor Briefing presentation can be accessed by going to: www.zymogenetics.com. The webcast will be archived for four weeks. 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. 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 discovery strategy, preclinical and clinical development, 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 Annual Report on Form 10-K for the year ended December 31, 2003. 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.