ZymoGenetics Presents PEG-Interferon Lambda Phase 1a Data.

Program to Advance to Phase 1b Study in Patients with Chronic Hepatitis C

SEATTLE -- ZymoGenetics, Inc. (NASDAQ:ZGEN), today presented data from a Phase 1a clinical trial with PEG-Interferon lambda (also known as IL-29) in healthy volunteers showing that administration of single doses of PEG-Interferon lambda was well tolerated at doses that produced anticipated pharmacologic activity, including up-regulation of interferon response markers associated with antiviral effects. No fever or hematologic effects, which are typically seen with interferon alpha, were observed at any of the dose levels tested.

"Results from this single dose Phase 1a study in healthy volunteers support moving forward into a repeat dose Phase 1b study in patients with hepatitis C," said Nicole Onetto, M.D., Senior Vice President and Chief Medical Officer. "The biologically active dose levels observed in the Phase 1a study have been used to design a Phase 1b study to evaluate the safety and antiviral effects of repeat dosing in patients with relapsed hepatitis C infection. "We're hopeful this study will confirm preclinical findings indicating PEG-Interferon lambda has antiviral activity with greater tolerability for patients."

About the Phase 1a Study

The primary objectives of this randomized, placebo-controlled, dose-escalation Phase 1a study were to characterize the safety, tolerability and pharmacokinetics of a single dose of PEG-Interferon lambda administered subcutaneously. Twenty subjects were treated with PEG-Interferon lambda at dose levels up to 7.5 mcg/kg (n=17) or placebo (n=3). Administration of a single dose of PEG-Interferon lambda was associated with dose-related pharmacokinetic and pharmacodynamic effects and was well tolerated at biologically active doses. Evidence of biological activity, including up-regulation of interferon response markers, was seen starting at doses of 1.5 mcg/kg. These results suggest that antiviral activity against hepatitis C virus (HCV) might also be seen at these dose levels.

Overall, administration of PEG-Interferon lambda was well tolerated at doses up to 5 mcg/kg. No fever or hematologic effects were observed at any of the dose levels tested. The primary safety observations consisted of dose-related increases in liver transaminases without associated increases in bilirubin in a subset of patients treated at doses of 5 mcg/kg and higher, and minor decreases in fibrinogen not associated with bleeding or changes in platelet counts, all of which were reversible.

Results of the Phase 1a study with PEG-Interferon lambda were presented at the HEP DART 2007 meeting.

About PEG-Interferon Lambda

The native human protein interferon lambda is generated by the immune system in response to viral infection. It mediates antiviral activity through a receptor that is distinct from that used by interferon alpha and is generally present on fewer cell types within the tissues of the body. Receptors for interferon lambda are present on several important sites of viral infection, most notably cells of the lung and liver. ZymoGenetics' product candidate recombinant PEG-Interferon lambda has shown in vitro anti-viral activity against several viruses, including hepatitis C.

About Hepatitis C

Chronic infection with HCV is a leading cause of cirrhosis, liver failure and hepatocellular carcinoma worldwide. In the United States, it is estimated that HCV is associated with up to 20,000 deaths per year, and is the main indication for liver transplantation. An estimated 4.1 million people in the United States have been exposed to HCV, and approximately 3.2 million have chronic HCV infection. Without effective intervention, the National Institutes of Health project that the number of deaths from chronic HCV infection may triple in the next 10-20 years.

Current Standard of Care for Hepatitis C

The current standard of care for chronic HCV infection involves treatment with interferon alpha and ribavirin. This form of HCV therapy has been associated with a number of significant side effects, including flu-like symptoms, anorexia, depression, hemolytic anemia and myelosuppression. This side-effect profile often necessitates additional medications to manage the side effects, and can lead to early discontinuation of treatment and poor adherence to prescribed therapy, leading to worsened treatment outcomes. Currently, the response rates for the most common form of HCV in the United States to standard treatment are only approximately 50%. There remains a need for better tolerated and more effective therapy for HCV infection. The development of PEG-Interferon lambda is intended to provide an alternative to interferon alpha.

About ZymoGenetics

ZymoGenetics creates novel protein drugs with the potential to significantly help patients fight their diseases. The Company is developing a diverse pipeline of product candidates that are moving into and through clinical development. These candidates 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. 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, 2006. 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.