ZymoGenetics Reports Fourth Quarter and Year End 2003 Financial Results; Three Proteins Advanced to Clinical Testing in 2003.Business Editors SEATTLE--(BUSINESS WIRE)--Feb. 12, 2004 ZymoGenetics, Inc. (Nasdaq:ZGEN) today reported its financial results for the fourth quarter and year ended December 31, 2003, which were consistent with expectations. For the fourth quarter of 2003, the company reported a net loss of $17.0 million and $0.33 loss per share, compared to net income of $11.0 million and earnings per share of $0.23 in the prior year period. The company's profitable 2002 fourth quarter was driven by a one-time lump sum Lump sum A large one-time payment of money. license fee earned in the settlement of a patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. lawsuit. For the year 2003, the company reported a net loss of $58.2 million and $1.23 loss per share, compared to a net loss of $30.4 million and $0.75 loss per share for the prior year. ZymoGenetics ended the year 2003 in a strong financial position, with approximately $300 million of cash, cash equivalents and short-term investments. This amount includes approximately $71 million of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). raised in a follow-on offering Follow-On Offering An offering of additional shares after a company has had an initial public offering. Notes: This sometimes means the company is strapped for cash. So they need to issue more shares to pay bills or finance a new project. of common stock, which was completed in October. "The year 2003 was one of significant progress for ZymoGenetics, with the initiation of clinical trials for three of our product candidates," stated Bruce L.A. Carter, Ph.D., President and Chief Executive Officer of ZymoGenetics. "With the anticipated start of IL-21 clinical trials in the first half of 2004, we will have moved four proteins into clinical development in less than 18 months, an impressive accomplishment for a company our size. With the money raised in the October stock offering, we have the financial strength required to move these product candidates forward aggressively over the next several years and exploit their full potential." ZymoGenetics reported 2003 revenues of $26.0 million for the full year and $5.8 million for the fourth quarter, compared to $52.8 million and $34.1 million for the prior year and quarter, respectively. The revenue decreases resulted from a one-time lump sum payment earned in the fourth quarter of 2002 for a license granted in connection with the settlement of a patent infringement lawsuit. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in 2003 totaled $91.6 million for the full year and $24.3 million for the quarter, both of which were relatively constant compared to the $90.6 million and $25.2 million reported for the prior year and fourth quarter, respectively. Although the company's product development and occupancy costs were higher in 2003, the increases were largely offset by cost reimbursements earned from Novo Nordisk Wikipedia is not the place for advertisement or self-advertising. Novo Nordisk (, NYSE: NVO) manufactures and markets pharmaceutical products and services. Founded in Denmark in 1923, the company has since become a world leader in diabetes care with the broadest related to the preclinical development of Interleukin-21 and by lower legal and consulting expenses and general cost reduction initiatives undertaken by the company. Product Development Highlights During 2003, there were significant advancements within ZymoGenetics' four designated product development programs: rFactor XIII -- Initiated and completed single and multi-dose Phase 1 clinical trials in healthy volunteers. These studies evaluated the safety and tolerability of rFactor XIII at doses producing circulating Factor XIII factor XIII n. A factor in the clotting of blood that is converted by thrombin into its active form, which cross-links subunits of the fibrin clot to form insoluble fibrin. Also called Laki-Lorand factor. levels up to nearly 300% of normal. There were no serious adverse events and no evidence of antibody formation against rFactor XIII. -- Initiated and completed a single-dose Phase 1 clinical trial phase 1 clinical trial Phase 1 study. See Phase study. in patients congenitally deficient for Factor XIII. There were no serious adverse events and all subjects treated at therapeutic doses showed normalized blood clot blood clot n. A semisolid, gelatinous mass of coagulated blood that consists of red blood cells, white blood cells, and platelets in a fibrin network. strength and stability as measured in vitro in vitro /in vi·tro/ (in ve´tro) [L.] within a glass; observable in a test tube; in an artificial environment. in vi·tro adj. In an artificial environment outside a living organism. for at least one month following administration of rFXIII, which is consistent with the established role of Factor XIII in hemostasis hemostasis /he·mo·sta·sis/ (he?mo-sta´sis) (he-mos´tah-sis) 1. the arrest of bleeding by the physiological properties of vasoconstriction and coagulation or by surgical means. 2. . rhThrombin -- Initiated and completed manufacture of rhThrombin product for use in Phase 1 and Phase 2 clinical trials phase 2 clinical trial Phase 2 study. See Phase study. -- Initiated and completed toxicology toxicology, study of poisons, or toxins, from the standpoint of detection, isolation, identification, and determination of their effects on the human body. Toxicology may be considered the branch of pharmacology devoted to the study of the poisonous effects of drugs. studies required for initiation of clinical trials -- Filed an IND application, gained FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. clearance and began treatment in the dose escalation part of a Phase 1/2 clinical trial in spinal surgery patients -- Entered into a long-term manufacturing agreement for the production of rhThrombin to be used in Phase 3 clinical trials phase 3 clinical trial Phase 3 study. See Phase study. and for commercial sale TACI-Ig -- Completed manufacture of TACI-Ig product for use in Phase 1 clinical trials -- Completed toxicology studies required for initiation of clinical trials -- Began a Phase 1 single-dose clinical trial in healthy volunteers to evaluate safety, pharmacokinetics and markers of B cell function Interleukin-21 -- Initiated and completed manufacture of IL-21 product for use in Phase 1 clinical trials -- Completed toxicology studies required for initiation of clinical studies showing that IL-21 is well tolerated in animal models and that support moving forward into clinical testing -- Completed other activities necessary to support IND filing and start of clinical testing in the first half of 2004 In addition, the Company strengthened its pipeline of pre-development candidates; continued to build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. its internal development capabilities with the hiring of a number of experienced personnel; and initiated a building expansion project that will include a pilot-scale protein manufacturing facility to support clinical development of future product candidates. Outlook for 2004 The Company has established a series of milestones for 2004, including the following: -- Initiate Phase 1 clinical trials of TACI-Ig in systemic lupus lupus (l  `pəs), noninfectious chronic disease in which antibodies in an individual's immune system attack the body's own substances. erythematosus (SLE SLE systemic lupus erythematosus. SLE abbr. systemic lupus erythematosus Systemic lupus erythematosus (SLE) ) and rheumatoid arthritis rheumatoid arthritis Chronic, progressive autoimmune disease causing connective-tissue inflammation, mostly in synovial joints. It can occur at any age, is more common in women, and has an unpredictable course. patients -- Initiate Phase 1 clinical trial of Interleukin-21 in metastatic Metastatic The term used to describe a secondary cancer, or one that has spread from one area of the body to another. Mentioned in: Coagulation Disorders metastatic pertaining to or of the nature of a metastasis. melanoma and renal cell carcinoma renal cell carcinoma or hypernephroma Malignant tumour of the cells that cover and line the kidney. It usually affects persons over age 50 who have vascular disorders of the kidneys. It seldom causes pain, unless it is advanced. patients -- Initiate Phase 1 clinical trial of rFactor XIII in patients undergoing cardiopulmonary bypass cardiopulmonary bypass n. A procedure to circulate and oxygenate the blood during heart surgery involving the diversion of blood from the heart and lungs through a heart-lung machine and the return of oxygenated blood to the aorta. procedures -- Initiate pivotal study of rFactor XIII in patients with congenital Factor XIII deficiency Factor XIII deficiency may occur very rarely, and can cause a severe bleeding tendency. Incidence is 1 in a million to 1 in 5 million people. Most are due to mutations in the A subunit. -- Complete Phase 2 clinical trials of rhThrombin as a topical hemostat hemostat /he·mo·stat/ (he´mo-stat) 1. a small surgical clamp for constricting blood vessels. 2. an antihemorrhagic agent. he·mo·stat n. 1. in four different surgical settings -- Designate a fifth clinical development candidate from the company's portfolio of pre-development stage proteins -- Complete construction of a pilot-scale protein manufacturing facility to be used to produce future clinical supplies "By the end of 2004, we expect to be well on our way toward the commercialization of rhThrombin and rFactor XIII, our two recombinant blood clotting blood clotting, process by which the blood coagulates to form solid masses, or clots. In minor injuries, small oval bodies called platelets, or thrombocytes, tend to collect and form plugs in blood vessel openings. proteins," commented Dr. Carter. "We also believe we will be on the verge On the Verge (or The Geography of Yearning) is a play written by Eric Overmyer. It makes extensive use of esoteric language and pop culture references from the late nineteenth century to 1955. of demonstrating the exciting medical promise of TACI-Ig and IL-21, the first two novel, proprietary proteins to emerge from our genomics-based discovery engine." 2004 Financial Expectations The company expects that a number of factors will contribute to a significant increase in research and development expenses in 2004. These factors include: -- costs for scale-up and production of pivotal and commercial product for the rhThrombin and rFactor XIII programs; -- costs of significantly expanded clinical trial activity, particularly with respect to rhThrombin and TACI-Ig; -- increased staffing to support expanded product development efforts, particularly in the clinical, medical, regulatory and quality areas; and -- reduced cost reimbursements from Novo Nordisk with respect to development of IL-21. Based on these factors, the company believes that its total research and development expenses in 2004 will fall within the range of $100 million to $110 million, depending on the actual timing of these factors. Revenues and general and administrative expenses are both expected to increase modestly in 2004. The company estimates that its 2004 net loss will fall within the range of $85 million to $95 million, or $1.60 to $1.80 per share. Besides funding its net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in 2004, the company expects to incur net capital expenditures of approximately $6 million to $8 million, which includes the company's share of costs for ongoing facility expansion. Overall, taking into account the effect of non-cash expenses and capital expenditures, the company expects its use of cash in 2004 to approximate its net loss. If the company enters into any major new licensing or collaborative transactions, its use of cash could be lower. 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. Using a product discovery engine that combines ZymoGenetics' strengths in biology, protein chemistry, molecular and cellular biology cellular biology n. The study of the molecular or chemical interactions of biological phenomena. and bioinformatics, ZymoGenetics is developing a pipeline of potential proprietary product candidates. These span a wide array of clinical opportunities, including bleeding, autoimmune diseases Autoimmune diseases A group of diseases, like rheumatoid arthritis and systemic lupus erythematosus, in which immune cells turn on the body, attacking various tissues and organs. Mentioned in: Complement Deficiencies, Premature Menopause , cancer and cardiovascular disease Cardiovascular disease Disease that affects the heart and blood vessels. Mentioned in: Lipoproteins Test cardiovascular disease . 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 The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. This Act provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will" or the negative of those terms or comparable terminology. The forward-looking statements in this press release 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 An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2002 and its prospectus supplement filed with the Commission on October 16, 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.
ZYMOGENETICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
2003 2002 2003 2002
-------- ------- -------- --------
(unaudited)
Revenues:
Royalties $ 2,311 $ 1,613 $ 9,397 $ 7,995
Option fee 1,875 1,875 7,500 7,500
License fees, milestones and
other 1,604 30,604 9,060 37,280
-------- ------- -------- --------
Total revenues 5,790 34,092 25,957 52,775
Operating expenses:
Research and development,
excluding noncash
stock-based compensation 19,684 19,342 72,020 66,469
General and administrative,
excluding noncash
stock-based compensation 2,926 4,152 12,488 16,925
Noncash stock-based
compensation expense 1,683 1,746 7,054 7,188
-------- ------- -------- --------
Total operating expenses 24,293 25,240 91,562 90,582
-------- ------- -------- --------
Income (loss) from operations (18,503) 8,852 (65,605) (37,807)
Interest and other income 1,515 2,133 7,381 7,391
-------- ------- -------- --------
Net income (loss) (16,988) 10,985 (58,224) (30,416)
Preferred stock dividend and
accretion -- -- -- (1,718)
-------- ------- -------- --------
Net income (loss) attributable
to common shareholders $(16,988) $10,985 $(58,224) $(32,134)
======== ======= ======== ========
Basic net income (loss) per
share $ (0.33) $ 0.24 $ (1.23) $ (0.75)
======== ======= ======== ========
Weighted-average number of
shares used in computing
basic net income (loss) per
share 51,113 45,797 47,317 42,578
======== ======= ======== ========
Diluted net income (loss) per
share $ (0.33) $ 0.23 $ (1.23) $ (0.75)
======== ======= ======== ========
Weighted-average number of
shares used in computing
diluted net income (loss) per
share 51,113 47,641 47,317 42,578
======== ======= ======== ========
BALANCE SHEETS
(in thousands)
December 31,
-------------------
2003 2002
-------- --------
Cash, cash equivalents and short-term investments $299,892 $285,438
Other current assets 8,652 5,970
Property and equipment, net 28,018 17,253
Other assets 5,024 3,572
-------- --------
Total assets $341,586 $312,233
======== ========
Current liabilities $ 30,009 $ 20,131
Non-current deferred revenue and gain 17,203 19,730
Other non-current liabilities 5,185 3,104
Shareholders' equity 289,189 269,268
-------- --------
Total liabilities and shareholders' equity $341,586 $312,233
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